There has been a huge amount of buzz about storage lately with more press hitting every week. SCE signed 250MW worth of contracts, Sandia is investing in battery reliability studies, the Navy is investing in micro-grids, Texas is evaluating storage, and New Jersey has issued an RFQ for a grid-scale energy storage solution.
I wanted to connect with an expert to get a sense for what is driving the grid storage market and if there’s any opportunity behind the industry buzz.
Jim Eyer is currently a Senior Advisor at the California Energy Store Alliance, a Senior Analyst at the Distributed Utility Associates, and has published numerous research papers on storage economics with Sandia National Laboratories.
Jim and I spoke for 30 minutes and it was an eye-opening interview. Jim framed the storage debate nicely and shared many insights that I had not heard before. If you’re curious about what drives the economics of grid storage projects, where the opportunity exists today, and what policy changes need to happen to create more opportunity, you should listen to the interview.
Here are a few highlights of the interview. For a full list of what we talked about, please skim down below the interview.
- Why storage is a power play and not about energy
- The basics of how to sell storage. Note: It’s not what you might think, especially if you have a solar background.
- Why utilities would not adopt storage right now even it was FREE
- The two simple policy changes that need to happen to open up the storage market and allow utilities to start adopting it.
Intended Audience
This interview is primarily for two parties:
- Private companies that have seen the buzz about storage and are curious if they need to start focusing on it within their own business and practices.
- Policymakers, utilities, and regulators.
The full interview
What you’ll learn in this interview
Here’s what we talked about during the interview.
- Why storage is a capacity and not energy play. Here’s a link to an energy vs. power explanation that Jim likes to use.
- Why the economics of storage is driven by a CapEx and not an Opex cost comparison. It’s critical to think of storage as a piece of equipment that completes tasks more cost effectively than other devices, rather than as an energy device.
- How to NOT think about storage economics.
- Why the multi-benefit aspects of storage need to be accounted for in order to make the economics work. Storage equipment can perform services that typically require many other pieces of equipment, so you need to calculate the CapEx and maintenance costs of those other pieces of equipment.
- An example of how you can use storage to defer upgrades to other aspects of the grid.
- Why utilities cannot offer storage as a current solution for problems within the grid.
- Why “benefit-adjusted cost” is the basis for comparing storage as an option for solving grid problems.
- How storage can be paired with solar when a solar installation required upgrades to the grid.
- What can be included in the definition of “benefit adjusted costs.”
- Why storage is not currently being included in the utilities’ rule books for standard solutions.
- What policy must be changed in order to allow utilities to use storage as a standard solution for grid problems.
- Why a standardized cost and benefit metric needs to be established when comparing storage to other CapEx solutions for a specific problem on the grid.
- Why the largest question in storage economics is defining the “benefit-adjusted costs” of the technology and why this will vary depending on the utility and the region.
- Why the customer side of the meter is currently the BEST place for implementing storage. Here you can run the prices and see whether storage makes sense. This is the only segment of the industry where you can figure out all of the variables and run the numbers the same as you’d do on other projects.
- Why utilities would not use storage right now even if it was free. Hint, it’s not in their standard solution mix list, they don’t know how to assess the benefits, they’re not allowed to install it, and they’re more comfortable with other things.
- The two things that will need to happen to open up a storage market from a policy perspective.
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Interesting talk.
In Alberta we have deregulated the power industry but not the wire service industry. My electrical bill has a fee for electricity (8 c/kWh) an administration charge ($10) a line charge ($30) and a capacity charge ($40) The capacity charge is based on the size breaker I have at the pole. Recently I down graded the breaker from 50A to 35A, and cut my bill by about 35 dollars a month.
While nominally this restricts me to about 7 kW, I’ve yet to manage to trip that breaker. I suspect that it is a very slow trip so that it doesn’t flip on the transients when the well pump starts up.
Unfortunately 35A is their smallest breaker. I’d be tempted to try a 25.
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I love the idea of a smart grid and floating rates.. For most residences the only two dispatchable loads are water heating and air conditioning. The water heater already is a store. If all you care about is having hot water to do the dishes at night, and a hot shower in the morning, then you could program your water heater to do things like:
“I will pay 3 c/kWh at 3 a.m. 5 c/kWh at 5 a.m. and 11 c/kWh at 6 a.m. The power company broadcasts a rate updating every x minutes for consumers. Buy a gadget that displays the rate, App on your phone that shows the rate.
For airconditioning, the approach is different. Ideally instead of chilling air, you chill water. Cheaper to store So your air conditioner has two components: One component chills a thousand gallons of water to a temp cold enough to supply cool for the day. This unit could run at night, when the AC is far more efficient. The other part circulates cold water to a fan unit to cool the house. This one probably doesn’t have to be dispatchable since power use in hot countries peaks during the day.
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Two things about the talk puzzled me:
1. I still don’t understand why they wouldn’t put in storage even if it were free.
2. The speaker commented that storage would be in use only a few hundred hours a year.
That puzzled me. I would expect that storage would be used approximately 50% of the time. E.g. If I have a 1 GW power plant, that on a daily cycle is running at capacity for 8 hours a day, and is running at 2/3 of capacity for the other 16, then in principle I have 5.3 GWh per day I can store. So I could supply an overall demand of 1.14GW peak, (assuming the new load splits the same way) and still have a small reserve. without building new capacity.
So if storage was free, this would be a win.
But low cost storage has a different win: Install it at the use site.
A: The example of the two lines into a load zone no longer holds. You recommend to everyone that they store 24 hours of normal power usage, 72 hours of reduced usage. Now you don’t care about circumstances that can’t be fixed in 24 hours.
B: The entire network can run more efficiently. If storage is cheap, you keep enough for your 24 hour reserve, and enough to average out your power usage to a constant wattage. The ulltimate peak shaving.
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Low cost storage will make the death spiral that much faster.
Suppose I can get PV on my roof for $1000/kW Here in Alberta 1 kW installed PV capacity gives me 1300 kWh/year. So at 10 years I’m down to my present 8 c/kWh electrical charge.
If I go off grid, tell the power company to padlock my meter, I save an additional $60/month on line and service fees.
Comes January. While my 1 kW array generates 1300 kWh/year, in December it only generates 20. Ouch.
So now instead of having to store 10 kWh during the day to use at night, I have to store 3 months of power during the fall to use in winter. Storage has to be a LOT cheaper to make this practical.
Or I have to put up a wind turbine too.
Or I buy pick up the most efficient diesel generator I can afford, and use it as needed to charge my storage. The big advantage there: My min PV production is well correlated with the coldest time of the year, so my generator can be set up to cogen — heat the house too.
Hey Sherwood,
Thanks for this detailed comment. I’ll try to respond in an orderly fashion.
For water heater controllers you mentioned, check this out: http://sunnovations.com/
Here are my answers to your other questions.
Two things about the talk puzzled me:
1. I still don’t understand why they wouldn’t put in storage even if it were free.
Answer: Because they are not allowed to in their own regulations.
2. The speaker commented that storage would be in use only a few hundred hours a year.
Answer: He mentioned that this is true for most of the applications of storage. I.e when it’s being used like a capacitor, etc.
Let me know if you have any other questions!