The Energy Storage Hand Gets More Interesting

The cards dealt to the energy storage industry are looking better now than in the past.  Here are three of them, all played because of the growing presence of Smart Grid technologies that enable solutions and policies that encourage energy storage markets. There’s also a wild card that could have significant influence over the speed, distribution, and value of energy storage deployments in the Smart Grid.

1. A recent UN report titled “Global Trends in Renewable Energy Investment 2011” highlighted $211 billion spent worldwide in renewable energy sources that included solar, wind, hydro, geothermal, and waste-to-energy.  Developing countries actually outspent developed countries in investments.  China alone spent $48.9B in wind farms.  Africa also saw significant investment in renewables, which reflects a similar historic arc to telecom buildouts – the lack of a centralized power grid infrastructure frees them to go directly to highly distributed generation and avoid investments in transmission infrastructure.  Rooftop solar in developed countries soared to $60B, further proving the value of distributed generation.  However, renewables like wind and solar are intermittent in nature, and development of these resources should automatically include co-located energy storage to “ride out” interruptions in generation that occur when the wind may subside or a cloud passes over a solar array.

2. The recent Federal Energy Regulatory Commission (FERC) decision defines regional planning processes, outlines rules for fair cost allocation, and delivers market certainty for transmission companies and renewables developers that will speed renewables integration and concomitant energy storage deployment. It requires that transmission planning processes include regional policy considerations such as state renewable portfolio standards and Environmental Protection Agency (EPA) standards.  This decision also removed the “right of first refusal”, which discouraged cost-competitive transmission facilities development.  Utility-scale renewable projects such as wind farms and large solar deployments are often far from the points of consumption, and transmission lines will need to be built.  Energy storage should be a natural component of wind and solar projects to ensure firm power to the grid and the ability to participate in new markets.

3. The Electric Power Research Institute (EPRI) released a recent study to help utilities develop functional requirements for energy storage to aid in integration of renewable energy sources as well as energy storage at substations and within the electrical distribution networks.  Current work is now focused on similar recommendations for energy storage on the customer side of the meter – micro-scale energy storage that can be coupled with rooftop solar generation.  This means that utilities are taking serious looks at moving from current “always-on” forms of generation to time-shifted generation supported by energy storage, and considering that intermittent renewables like wind and solar can be coupled with energy storage technologies.

The wild card that will soon be played is the mounting concern about fracking and the impacts to water and air quality and the true costs of these environmental externalities.  Texas, known for its casual attitude toward environmental protection, became the first state through passage of HB3328 to require that drilling companies that engage in hydraulic fracturing or fracking must disclose all “intentionally-used” chemicals that are introduced into the ground as part of their extraction processes.  Of course, the disclosure of incidental, accidental or unknown ingredients is not required, but it’s a significant step that will put a much needed spotlight on industry practices.  The cheap price point of natural gas may not look so attractive if it comes at the expense of potable water, which is in finite and stressed supply on this planet.  If natural gas loses some of its appeal, that will increase the demand for renewable sources of generation, and the need for energy storage to firm up those renewables that are intermittent – wind and solar.

Energy storage is finally getting the attention it so richly deserves in the Smart Grid, and it will become a widely deployed technology in many form factors across the entire electricity supply chain of generation, transmission, distribution, and consumption.  To strengthen this hand, we need state legislative and regulatory policies that encourage utilities and independent renewable power producers to invest in energy storage.  California has taken an important step towards this with the passage of AB 2514 in September 2010 that directs the California Public Utilities Commission (CPUC) to determine if targets for energy storage should be set for the regulated electric utilities.  Just like state renewables portfolio standards can accelerate renewables deployments, energy storage portfolio standards could have a similar stimulative effect by providing the market certainty to commit investments.

Christine Hertzog, Managing Director of the Smart Grid Library, is a consultant, author, and professional explainer with over 20 years of experience managing successful introductions of disruptive innovations in new technologies, services, and business models and processes for partners and clients. A veteran of the telecommunications industry, she is well versed in the influences of market trends, regulations and standards, and corporate cultures on the success or failure of emerging technologies and services.  She serves as a consultant and advisor to Smart Grid startups, private equity firms, investor groups, and utilities. The Smart Grid Library delivers transformational consulting services and information services that help clients achieve success in the Smart Grid ecosystem. The firm provides strategic insights, business development guidance, project roadmaps, and customized information through consulting services, benchmarking, reports, and publications. Clients include Smart Grid technology and service startups, established industry vendors, utilities, and investment firms.