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Editor's note: This is the second installment in a three-part series. Part III, on microgrids, will be published June 26. Part I can be viewed HERE.

While energy storage has been hailed as the "holy grail" of the smart grid, based on the traditional use-it-or-lose-it nature of electron flows, it also faces a number of hurdles en route to implementation.

The benefits of stored power are easy to enumerate. It can serve as supplementary or backup power when the grid fails, it can store power when it's cheap and release it when it's more valuable, and it can assist grid operators with issues such as frequency regulation, to name a few advantages.

Yet the power industry’s traditional approaches to the centralized grid create a bit of a cat’s cradle of stakeholder concerns when it comes to energy storage. What are storage’s most effective applications for the grid? Who should own it? Who should pay for it? Who benefits? What are those benefits? Where does regulatory reform fit in?

For simplicity’s sake, let’s address energy storage primarily at the distribution level, as that’s where smart grid is focused and where storage arguably has the most value.

A recent survey of smart grid executives sponsored by IEEE Smart Grid and performed by market research firm Zpryme found 69% of the respondents believe that energy storage is “very important” to increasing smart grid development. Although the survey highlighted optimistic expectations for storage, it rightly provided cautionary remarks about achieving those expectations.

Among the survey’s findings are the following:

- Lithium-ion batteries are currently favored by the market, but fuel-cell-based technologies stand to make gains.

- Costs must fall by perhaps 50% in order for the storage market to achieve its potential.

- Return on investment (ROI) will take longer for storage than other emerging technologies.

- Adoption of grid-scale energy storage will drive uptake for advanced energy management systems and distribution management systems.

- The primary use of grid-scale storage will be for load shaping.

Based on recent conversations with colleagues who are performing storage-related work in the field, I’d add a few drivers, use cases and caveats to these survey responses. Let’s begin by exploring ways to think about storage, both conceptually and in terms of implementation challenges.

Thinking about storage
I spoke recently with Ali Nourai, an executive consultant at DNV KEMA Inc., considered by many as the “father” of distributed/community energy storage. Nourai suggested that one useful approach is to focus on universal characteristics of storage:

- Storage decouples generation from load by time-shifting energy, whether that’s measured in seconds, minutes or hours.

- Cost-effective use of storage is possible by bundling or stacking multiple benefit streams, such as load shaping, backup power, voltage control and frequency regulation.

- The value of storage applications often increases as they get closer to the grid’s edge.

- Multiple applications and benefit streams imply multiple stakeholders that need to benefit from their investment in storage, and regulatory policy must address this fact.

“When it comes to the economics of storage, it is almost mandatory to have storage serve multiple applications either simultaneously or in a coordinated manner,” Nourai told me. “‘Bundling applications’ is another way to say it. And without that, it’s very difficult to move forward with business cases.

“The challenge is providing user-friendly controls to the end user,” Nourai added. “Some good control logic has yet to be developed so the end user can confidently put storage to multiple uses.”

Rick Fioravanti, vice president of storage applications at DNV KEMA Inc., suggested that consideration of how storage can aid advanced systems that promote the grid’s overall efficiency and reliability can help tie together storage’s multiple applications and benefit streams. A system-wide approach to storage should trump thinking of it as a discreet technology.

“The further to the edge of the grid you push the technology, the more benefits start accruing to you,” agreed Fioravanti. “The further out you get, the more likely storage can assist with peak shaving, reliability, capital deferral and voltage control, and in some cases, it’s capable of doing all of them. The challenge is to capture all of them.”

This fits well with my own thinking about smart grid in general: rather than view it as a collection of discreet technologies, we need to focus on the complete picture and determine the fundamental challenges we’re trying to solve. Then we can implement the necessary pieces.

With the foregoing thoughts in mind, let’s examine the drivers cited by the IEEE Smart Grid survey’s respondents.


Meeting peak demand, increasing reliability
Let’s group two expected drivers together - meeting peak demand and increasing reliability - based on the notion that energy storage can and should address several applications.

Capacity-constrained utilities will naturally look to storage to see if it can expand capacity and/or reduce load. The benefit would be that expensive peaking plants or costly peak energy purchases could be deferred, if not avoided altogether.

But those peaks, occurring as they typically do less than 1% of the 8,760 hours in a year, are not enough to sustain a business model.

On the reliability side, at least two other applications for energy storage can be included here: as backup power and as a means to address the vagaries of intermittent renewable energy generation. On the power-quality side, the more consistent need for frequency regulation suggests a third application.

Clearly, using energy storage for backup power and for frequency regulation might require significantly different characteristics when it comes to the speed and duration of response.

The variety of energy storage media - particularly in electrochemical storage, represented by batteries - exhibit a range of characteristics that need to be matched to a client’s needs. The varied drivers of service reliability, infrastructure (and thus capital), deferral and efficiency/economic dispatch converge on a sweet spot referred to as “dynamic dispatch” - that is, the client or utility’s ability to deploy a battery’s charge either as power (kilowatts) or energy (kilowatt-hours).

Li-ion batteries, considered the leading technology this instance, can serve energy needs in durations of minutes to hours in that sweet spot of dynamic dispatch. This points to Li-ion batteries - at least currently - as the likeliest storage medium to provide the variety of benefits that would constitute a bundle of applications for a positive business case.  

Reducing costs
The IEEE Smart Grid survey cited “reduced costs” as a major driver, and this notion also requires a bit of parsing. As Fioravanti pointed out to me, “It’s hard to see how implementing storage actually reduces costs but rather is looked at as a better solution to solving potential issues on the grid.”

Let’s examine a benefit better known as a “deferral opportunity.” The capital and operations and maintenance (O&M) costs of energy storage, which can be substantial, can be set against, say, the cost of building peaking plants or paying for expensive peak energy on the wholesale market. Serving as backup power at a substation, feeder or neighborhood level, the cost of energy storage for reliability can be favorably set against the alternative cost of expanding substation and/or feeder capacity.

‘Deployability’ and standards
Because respondents in the IEEE Smart Grid survey on energy storage cited “deployability” as a hurdle to adoption, I asked my colleagues about that important aspect of market uptake. According to Nourai, this hurdle has received attention, but remains an area of concern.


“In the mid-2000s, when I began working on community energy storage for AEP, every storage technology that I was aware of at the time had to be taken onsite and put together piece by piece,” Nourai told me. “That challenged deployment, making it slow and expensive. Nowadays, units are delivered in trailers [and] shipping containers. We’re a little bit closer to ‘plug and play.’ The standardization effort has to continue. We still have to move toward ‘plug and play’ to make deployment easier, more reliable and, of course, less expensive.”

Fioravanti took a different tack. Some of the delay and expense in the deployment phase can be attributed to some storage vendors’ lack of experience deploying technologies into electricity grids. They may not have as much experience with the protection and switchgear in use by grid operators, he said.

“In particular, working with manufacturers that are new to the industry or new to the type of installations that are happening on a utility grid, it appears that they may simply be unaware of some of these issues,” Fioravanti told me. “How do you prevent a discharge? Should there be some type of switch that automatically prevents that from happening?

“These issues aren’t really vetted with some of these new technologies because they’re not being driven by a utility,” Fioravanti added. “In some cases, it’s being driven by a manufacturer trying to introduce a new technology or a developer trying to connect something to the grid. And in many cases they’re just unfamiliar with some of the requirements, some of the safety protocols or devices, which need to be put into place.”

Next steps
So what does the power utility industry and/or the energy storage vendor community need to do to advance the role of energy storage, which many agree could play several crucial roles in bolstering grid efficiency and reliability?

“Promote business compatibility among stakeholders,” according to Nourai. Change regulations that disallow multiple benefits, including cost recovery for utilities. Focusing on aggregation of many relatively smaller-scale batteries will create the large unit sales that result in economies of scale and, ultimately, commodity pricing.

“There must be business compatibility between multiple stakeholders, and that business compatibility, unfortunately, is low today because old rules discourage it,” Nourai said. “Current regulations do not allow multiple parties to benefit and pay for the benefits they get.”

Power utilities historically are risk averse, perhaps better to say their charter is focused more on providing safe, reliable electricity than on introducing new technologies, Fioravanti noted. In the case of energy storage, utilities lack performance data that could bolster their confidence in implementing this technology. That creates a chicken-or-the-egg dilemma. Thus, mandates to explore storage, rather than implement it, could provide the impetus for gaining performance data that would better inform actual implementations.

“The lack of performance history adds an element of risk that creates a hurdle to adoption,” Fioravanti told me. “That risk is only going to be overcome by getting storage units into the field and obtaining data on how well they’re performing.”

The “sweet spot,” Fioravanti suggested, is an inexpensive battery with 90% efficiency capable of many charge/discharge cycles with a two- to four-hour discharge. Standardized designs, in his view, could cut costs by 50%.

“Whoever gets there first is going to be the winner,” Fioravanti said.

Meanwhile, from the foregoing discussion, I’d suggest that stakeholders have much to discuss in turning expectations about energy storage into a market reality.

John D. McDonald is an IEEE Smart Grid technical expert, as well as director of technical strategy and policy development at GE Digital Energy. He is also past president of the IEEE Power & Energy Society (PES), an IEEE PES distinguished lecturer, board chair of the Smart Grid Consumer Collaborative and board chair of the Smart Grid Interoperability Panel 2.0 Inc., among other affiliations.

McDonald wrote this series to further analyze the results of a recent survey sponsored by IEEE Smart Grid and performed by market research firm Zpryme. The report, titled “Power Systems of the Future: The Case for Energy Storage, Distributed Generation and Microgrids,” can be found HERE.

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