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CERAWeek: Making the business case for battery storage

08 March 2021 Kevin Adler

If one word could describe the argument for battery storage as a complement to renewable power, it would likely be "reliability" or "resilience." Both express the idea that batteries provide power for customers when renewables are operating at less than peak capacity, or not operating at all.

But as more batteries make their way onto the grid, costing less to install, and coming in a wider array of capacities, "flexibility" is another term energy producers and users are using increasingly when they consider the benefits of batteries.

Panelists at a 4 March CERAWeek by IHS Markit session explained how the use of storage is rapidly evolving to "customized" solutions to meet different needs for different customers, and how this can strengthen the business case for battery storage.

"Most of our utility customers have embedded in their plans vast amounts of energy storage," said Leonardo Moreno, president, AES Clean Energy. "In California, utilities intend to install dozens of gigawatts (GW) each over time."

This will help to power record installations in 2021, according to IHS Markit forecasts, after a record 2020, said session moderator Sam Huntington, IHS Markit associate director, gas, power, and electric.

AES has the largest installed energy storage base (batteries and other technology) in the world today, about 2.4 GW as of the end of 2020, and Moreno said that "even the most conservative estimate is there will be 200 GW by 2030 … so we see the long-term trend as irreversible."

Different customers, different needs

What AES has learned is that different customers have different needs, Moreno said. Some need stored power for peak needs; others want fast-response service; and still others want to play an arbitrage game of storing power and selling it at a high price.

"Storage is so flexible that very large utility-scale projects are becoming customized," Moreno said. "When we design a project for a customer, it's usually a mix of technologies and functionality. We announced a 140-MW project in 2020 in Kauai, Hawaii — it is pumped hydro, reservoir hydro, solar, and energy storage in the same project. The … customer requires a mix of technologies that exactly matches their load, [and the coordinated system] generates it at exactly the hours the customer wants…. It's a 24/7 project and 100% renewable."

Tailoring storage

Flexibility can be offered to customers far below the utility level, such as at a single manufacturing plant, explained Mark Feasel, president, smart grid North America operations, for Schneider Electric. In devising energy management systems for its clients, the company considers customers' needs across three "vectors," he said:

  • What do storage and electricity cost, and what are the implications of the variation of that cost over time?
  • What does "sustainability" mean in the context of power use?
  • How important is resilience, and what would be the impact of a power outage?

With more data available than ever before, customers can tailor their decisions to those factors, while also comparing them with the benefits of investing in energy efficiency and distributed power generation, he said. "A common scenario is you deploy a battery at an energy consumer's site, and then later connect to a new solar array that comes in," he said. "That changes the dynamic of the system. In a decentralized world, in which we are adding assets on the supply side and demand side, and the regulatory landscape changing, this is [the type of] modular solution that is scalable."

In other cases, said AES' Moreno, storage can be used to change how utilities think about producing and contracting for power. As an example, Moreno described an auction for power supply in California that AES won with a bid for four hours of 100 MW of battery-stored power, a project for which bids had been expected only from natural gas-fired power units. "When we asked what they were using the gas for, it was a four-hour peak, and we bid and we won the auction," he said. "And now in that market, they're already running storage-only auctions."

As another example, AES and sPower, an independent power producer it purchased in February 2021, are building a 400-MW project in Lancaster, California, for Pacific Gas & Electric (PG&E). The utility will keep the choice of when to dispatch the power under its control, enabling PG&E to optimize the value on a day-ahead basis, Moreno said.

Weather impacts

With climate change affecting weather patterns, companies should consider how power storage can mitigate those risks, too, said Michael Webber, chief science and technology officer for Engie, a global power company that uses battery storage, pumped hydro, and gas storage caverns. "We store grain in solos, we store water in reservoirs, why wouldn't we store energy as well?" he said.

Because batteries offer a fast response, they are effective at balancing supply to demand quickly, and that speed opens up the door to provide ancillary services that enables Engie and its customers to hedge differences in prices or power availability, he said.

Drilling down further, Webber said: "There's already so much variability on the grid, primarily from demand variability. But as we get more solar and wind, now there's more variability on the supply side. Storage is great physical way to bridge the gap between the two."

Variability in supply comes during the day (solar not operating at night, for example), but variability in demand is most prominent seasonally. Batteries are probably best for handling the short-term needs of a day or a few days during peak seasons, Webber said. "The ability to ramp up, ramp down, fast response … these are market opportunities," he said.

As storage becomes more available and affordable, he said that creative thinking can expand its uses. "The energy crisis [in February] would not have been as bad in Texas if we had more storage or different storage," he said, referring to the outages of nearly a week that occurred in the Lone Star State during an abnormally cold period for that part of the US. "The crisis reminds us that if we rely on energy from far away, and it fails, having energy close by can help."

Engie operates gas storage caverns in Texas, but Webber said it could not access the gas because the controls for the system relied on electricity, which was out. Having those systems on backup electric batteries would have been very valuable, he said. And it would be much cheaper than building enough pumped hydro power to provide backup for the need that emerged of about 40 GW of power for five days. "A fraction of that [through batteries] could have helped at the worst moments, when power plants were tripping offline, and the whole system came within seconds or a minute of collapse. Even hundreds of megawatts of batteries would have made a difference," he said.

Looked at through the lens of a single homeowner, Webber detailed his experience during the Texas outages. His home has a heat pump, with gas heat backup. But the gas backup didn't run because his power was out, so the blower didn't operate. With battery backup, he could have run the blower, lights, and computers.

That type of situation is only going to become more common, said Schneider Electric's Feasel, given that everyone is so much more connected today than they were 10 years ago. "We're all dependent on cloud-based systems, dependent on Google Maps … even some healthcare has moved to the home," he said.

Posted 08 March 2021 by Kevin Adler, Editor, Climate & Sustainability Group, IHS Markit

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