Energy storage is about to take off
Energy storage has already proven its safety and efficacy. The barriers we need to clear away at this point are economic and policy related.
Energy storage currently walks like an unsteady toddler. Right now, the toddler needs help to balance — whether from government financial subsidies or support from municipal permitting offices — before it can stand firmly on its own feet. But at a certain point in its market development, the toddler’s improving balance and growing strength will allow it to break into a run.
Government subsidies have helped storage get on its feet. Subsidies like the federal Investment Tax Credit, when coupled with solar photovoltaics (PV), and California’s Self-Generation Incentive Program (SGIP) have helped increase demand for energy storage. This increased demand has resulted in increased production and has driven economies of scale that allow companies to drop their price per unit.
According to Bloomberg New Energy Finance, between 2014 and 2016, the cost per kilowatt-hour of energy storage fell 50%. Automotive batteries drove this trend. In 2017 alone, Tesla sold 8,000 megawatt-hours (MWh) of automotive batteries. Compare this with 500 MWh of stationary storage sold the same year.
This trend of falling prices and increasing demand will continue. Battery system sales teams have been incentivized to close as many deals as possible between 2018 and 2022. Closing deals will allow these companies to develop portfolios of commercial-scale reference projects and increase utilization rates of manufacturing lines. Basically, energy storage companies are taking near-term losses to create the market.
Energy storage developer and Peninsula Advanced Energy Community (PAEC) partner Brandon Keefe of Sovereign Energy asserts that “The rapid evolution of this industry is happening faster than people thought it would even six months ago.” Keefe expects explosive growth in utility-scale energy storage: 25 times over the next 15 years. This bodes well for the deployment of Advanced Energy Communities (AECs) and clean local energy, which will increasingly rely on energy storage for various functions.
Energy storage plays a key role in helping integrate the components of AECs: energy efficiency, renewable energy, zero net energy, and electric vehicle (EV) charging infrastructure. AECs need energy storage to bridge several gaps:
- Storage closes the gap between the peak time when solar PV generates electricity and the time of peak electricity demand.
- Storage helps smooth out voltage fluctuations that damage sensitive equipment.
- Storage provides power when demand surges and power prices spike.
- Storage can also charge EVs in commercial settings with abundant electricity from prime-time solar PV generation.
One simple battery can perform many different functions.
When energy storage stands at the ready, it can charge or discharge to provide just the right amount of energy for:
- Renewable energy
- Backup power
- Peak shaving
- Power conditioning
- Spinning reserves
- Load shifting
Storage clearly serves many useful purposes, and the simple technology is proven to work. The question at this point is whether energy storage is ready to stand on its own financially.
In certain circumstances, energy storage can be net present value positive — meaning the original investment is recouped before the end of the equipment’s expected useful life. When batteries do double duty, serving two or more of the functions in the list above at different times of day or different seasons of the year, the value to the owner increases and the payback time shortens.
While California’s SGIP and the Federal Investment Tax Credit will not be needed indefinitely, these two financial incentives along with utility demand response payments help make storage applications net present value positive. Now that we have cost-effective applications for energy storage that will become increasingly attractive financially as costs continue to fall, the next barrier we need to address is permitting.
Energy storage deployment is being hampered by inconsistent permitting requirements across various jurisdictions. Unpredictable permitting costs, timelines, and documentation requirements slow down the permitting process. Analogously, solar installers struggled with similar challenges in the last decade. As demand for solar PV increased, each jurisdiction developed its own solar permitting process.
The state of California noticed the wide variety of permitting costs, timelines, and inspections among jurisdictions and set ground rules to streamline the solar permitting process. In 2014, the California State Assembly passed Assembly Bill (AB) 2188, the Expedited Solar Permitting Act. AB 2188 required California cities and counties to adopt ordinances to create expedited permitting processes for small residential rooftop solar energy systems by September 30, 2015. Key elements included electronic submittal with electronic signatures, and a single inspection performed in a timely manner.
The PAEC team would like to see similar permit streamlining for energy storage projects. Recommendations from the PAEC report Guidelines for Permitting Energy Storage include:
- Developing a standardized list of required documents, and where possible, an over-the-counter or electronic approval process.
- Expediting permitting for solar PV carports that generate and/or have the capacity to store a certain percentage of the project’s energy needs.
- Waiving permitting and plan check fees (up to a certain amount, if desired) for solar PV carports and energy storage systems.
Standardizing required documentation, timelines, inspections, and costs will accelerate deployment of AEC components.
Energy storage has already proven its safety and efficacy. The technology is simple. A battery only does three things: charges, discharges, or does nothing. The barriers we need to clear away at this point are economic and policy related.
Energy storage will play several important roles as higher percentages of renewable energy, as well as more EVs, become integrated into the electric grid. By continuing the financial subsidies for now and also streamlining permitting, government agencies can help the industry move toward independence — ideally, more quickly than a human child can be launched into adulthood.
PAEC is a groundbreaking initiative to streamline policies and showcase projects that facilitate local renewables and other advanced energy solutions like energy efficiency, energy storage, and electric vehicle charging infrastructure. PAEC will create pathways to cost-effective clean local energy and community resilience throughout San Mateo County, the City of Palo Alto, and beyond. PAEC is a collaboration between the Clean Coalition, the California Energy Commission, Pacific Gas and Electric, and an array of municipalities, emergency response jurisdictions, schools and universities, and corporate entities. For more information, please visit www.clean-coalition.org/PAEC.