Why Battery Storage Is Charging Into Utility Applications

Alex Forbes

What are the market forces that drive the use of battery storage systems?

It is only recently that battery storage has become economical enough to start playing a significant energy storage role in utility-scale power systems. The number of installations is still relatively small, but the growth rates that some analysts are predicting over the coming decade are astonishing. When you consider the range of benefits that batteries can bring to utility applications—as variable renewable energy sources multiply and distributed generation sources become increasingly embedded in electricity grids—it is not hard to see why.

Balancing Act

In managing the operation of a large electricity supply network it is essential to ensure that supply matches demand second-by-second. Without this precise load matching, key parameters such as voltage and frequency can shift beyond tolerable levels, tripping protection systems that switch off supply. That leaves customers without electricity, puts equipment at risk, and in some regions of the world, would lead to large fines from regulatory bodies set up to look after customers' interests.

What makes this tricky is that unlike utilities such as natural gas and water, electricity has historically been difficult and expensive to store. Until the rise of variable renewable energy sources, such as wind and solar power—which today are growing rapidly in most regions of the world—utilities had developed ways of load matching that included pumped-storage of water and spinning reserves. Until recently, however, batteries were simply too expensive to compete in utility-scale applications, except in special circumstances.

Look to Alaska for an example of special circumstances, where the Golden Valley Electric Association (GVEA) faced a dilemma in ensuring reliable supply to two main load centers connected with an intertie—Anchorage and Fairbanks—should generators in either center fail. Instead of investing in new generation capacity that would not be needed during times of normal supply, it spent $35 million on a 40 MW Battery Energy Storage System (BESS). When the BESS came on stream in 2003 it was the world's most powerful battery storage system, says GVEA. Even today it remains one of the most powerful.

Coming Down the Cost Curve

Now batteries are becoming economical enough to compete with traditional energy storage solutions in a much wider range of circumstances. Leading the way in such applications is the lithium-ion battery. This is thanks largely to the vast amount of research and development that has been done to come up with better batteries for our phones, laptop computers, and even hybrid/electric vehicles. The utility-scale battery installations being ordered today routinely have capacities of tens of MW and the number of installations is set to grow rapidly.

According to Navigant Research, the cost of lithium-ion batteries has plummeted from over $1,000/kWh in 2009 to around $200/kWh today, with costs still falling. Looking ahead, in a recently published report, Navigant sees global revenue from utility-scale battery storage rocketing from $232 million in 2016 to $3.6 billion by 2025, as energy capacity grows 30-fold to 43 GWh from around 1.4 GWh today.

Marrying Technologies

The fall in battery costs has been happening at the same time as the steep fall in the costs of renewable energy sources. Another concurrent trend relevant to both technologies has been the rapid advances made in technologies for the inverters, isolation transformers, and collection systems needed to tie in multiple direct-current systems into grids that operate on alternating current.

It is not surprising that we are seeing these technologies coming together in systems that allow utilities to manage the inherent variability of wind and solar power generators that can only supply electricity when the wind is blowing or the sun shining. Surplus power generated during these periods can be used to charge utility batteries, which can then supply electricity when power from the variable sources is insufficient.

In such applications, batteries are essentially acting as generators. As such, they present opportunities not just to respond to variations in demand for load matching purposes, they also present commercial opportunities if used to arbitrage prices during different periods.

Grid and Ancillary Services

Less obvious is the role that utility-scale batteries are increasingly playing in providing the ancillary services that power system operators require to control voltage, regulate frequency, and provide reactive power response. Moreover, in some applications, carefully targeted utility-scale batteries should allow utilities to defer costly investments in new network infrastructure by reducing system stresses where constraints exist.

A new concept making its debut in California is a hybrid system that brings together a 50 MW gas turbine, a 10 MW battery, and a control system that means the two can operate as a single asset. The system was ordered by power utility Southern California Edison (SCE) following a crisis at a natural gas storage facility. The aims are to reduce the gas needed, improve efficiency, and lower emissions of greenhouse gasses (GHGs) and maintenance costs.

With the turbine not running, the battery can provide 10 MVA of reactive voltage support and 10 MW of primary frequency response. If called upon to provide contingency reserve, the battery provides ramp-up power while the gas turbine starts up. Within five minutes you have 50 MW of contingency reserve.

This trend towards greater use of utility-scale batteries is nothing short of a revolution—except for the fact that these assets don't revolve.


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