[Interview] Grid Storage Economics and Policy 101

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.

1. Why storage is a power play and not about energy
2. The basics of how to sell storage. Note: It’s not what you might think, especially if you have a solar background.
3. Why utilities would not adopt storage right now even it was FREE
4. 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:

1. 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.
2. Policymakers, utilities, and regulators.

The full interview

What you’ll learn in this interview

Here’s what we talked about during the interview.

1. Why storage is a capacity and not energy play. Here’s a link to an energy vs. power explanation that Jim likes to use.
2. 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.
3. How to NOT think about storage economics.
4. 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.
5. An example of how you can use storage to defer upgrades to other aspects of the grid.
6. Why utilities cannot offer storage as a current solution for problems within the grid.
7. Why “benefit-adjusted cost” is the basis for comparing storage as an option for solving grid problems.
8. How storage can be paired with solar when a solar installation required upgrades to the grid.
9. What can be included in the definition of “benefit adjusted costs.”
10. Why storage is not currently being included in the utilities’ rule books for standard solutions.
11. What policy must be changed in order to allow utilities to use storage as a standard solution for grid problems.
12. 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.
13. 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.
14. 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.
15. 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.
16. The two things that will need to happen to open up a storage market from a policy perspective.

Releasing New Course — Get Access and Limited Discounts First

We plan to offer a course on grid-scale storage economics in the near future. If you want to get an early view and discount on the course, enter your email here and we’ll connect with you when the course outline is posted.