RESEARCH REPORT

In brief

In brief

  • Our study explores how the energy transition is unfolding in the western United States and the role of storage to help provide grid flexibility.
  • Collaborating with the University of California, Berkeley’s Renewable & Appropriate Energy Laboratory (RAEL), we assessed four scenarios to net zero.
  • We found that scenarios relying on significant renewables were most cost effective, and that energy storage has a critical role to play.
  • We identified three imperatives that can help break down barriers and further the adoption of energy storage, plus recommendations for stakeholders.


The path to net zero

The transition to a low-carbon sustainable future is underway. In the United States, specifically in the Western region, more states and utilities are setting ambitious clean energy and electricity targets. The shape the transition will take has yet to be determined. Energy storage has been tapped as one critical enabler, given its ability to level the variability of electricity production, which in turn can increase grid reliability and stability.

In collaboration with the University of California, Berkeley’s Renewable & Appropriate Energy Laboratory’s (RAEL), we conducted a study to understand how the transition is unfolding in the Western U.S. region and, more specifically, the role of energy storage in providing flexibility to the grid.

We caught up with Professor Daniel Kammen, Director of Renewable and Appropriate Energy Laboratory (RAEL) at the University of California, Berkeley to explore the findings from the report.

We used RAEL’s utility-sector operation and capacity expansion modeling capability (SWITCH), alongside our own research and energy storage experience, and assessed four scenarios to net zero in the Western Electricity Coordinating Council (WECC) region.

1. Reference scenario: Business as usual (BAU costs) to achieve zero emissions by 2050.

2. Sunshot scenario: Low-cost solar to achieve zero emissions by 2050.

3. Accelerated Sunshot scenario: Low-cost solar and an accelerated pathway achieving zero emissions by 2040.

4. Sunshot + Low-cost Batteries scenario: Low-cost solar and low-cost battery storage to achieve zero emissions by 2050.

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We found that not only are the scenarios that rely on significant renewables penetration the most cost effective, but also that there is a critical role for energy storage to play across these scenarios.

While positive steps have been taken to encourage energy storage adoption through regulatory policy and market incentives, barriers still remain.

To date, much of the focus has been on short-duration batteries of up to four hours, with more research and development (R&D) needed to support commercialization of longer-duration storage options. In addition, capturing revenue from battery deployment has been limited to participation in the energy and ancillary services market. This makes the business case for batteries challenging to achieve and limits implementation.

Current situation: California and CAISO

To realize what the power sector can do to support energy storage’s key role in aiding the path to net zero, we need to understand the current situation in the U.S. Western region.

The California ISO, the only independent western U.S. grid operator, handles more than a third of the West’s load, including 80% of California and parts of Nevada. CAISO has been a leader in incorporating renewables into the grid in support of California’s renewable portfolio standards. The growth of renewables in CAISO’s footprint has caused several operational issues. Most notably: the energy load “duck curve,” a graph showing the difference in electricity demand and amount of solar energy available through the course of the day. The duck curve is a result of mid-day generation oversupply from high amounts of solar energy, leading to market supply/demand imbalances, depressing market prices and impacting grid reliability.

Due to renewables oversupply and the variability of solar, it’s been difficult for CAISO operators to effectively balance energy supply and demand. What’s needed: additional generation resources to meet peak demand requirements and the associated ramp that poses a risk to grid stability. As more solar comes online, the grid changes from one that managed central synchronous generation to one with more distributed power electronics-based solar, increasing the need for regulation services.



Even with substantial investment in procuring renewable resources, CAISO imports more than a quarter of its electricity needs from surrounding states. This reliance poses a risk during summer months, when extreme hot weather conditions can limit the ISO’s ability to draw power from the other regions. CAISO’s approach to overcoming these challenges and integrating renewables has included system operation changes, expansion of the EIM, more flexible load and baseload generation management and the use of storage to counteract variability. The hallmark of its actions has centered on energy storage.

CAISO’s progressive effort in developing policies and market design changes to incorporate the unique capabilities of energy storage resources while providing fair compensation is an important factor for why CAISO is such an attractive environment for storage deployment.

Driving commercial and asset optimization of storage

In terms of energy storage to date, batteries have dominated the market. They offer unmatched flexibility to address the additional variability inherent in renewables, helping maintain grid stability. Their capability of acting as both a generation resource and point of energy demand, and the speed at which they can respond to operational signals, allows them to provide a wide range of services including peak load shaving, load shifting, demand response, capacity reserve/resource adequacy and ancillary services.

The figure below visualizes the key services that can be provided by battery storage and stacked together to provide multi-value streams for battery storage systems: energy and capacity, ancillary services, transmission infrastructure services, distribution services, and end-use/customer management services.

Energy and Capacity Services, Ancillary Services, Transmission Services, Distribution Services, End-use Services

Battery storage value pools

The ability to deploy battery storage either at solar or wind farms enhances revenue opportunities of each asset, while deploying storage at brownfield asset sites significantly lowers interconnection-related costs. Battery storage is also being deployed as transmission system assets to address grid inefficiencies or localized pockets of congestion that would otherwise require costly infrastructure investments.

To date, however, capturing this opportunity has been limited to participation in wholesale markets, and more specifically to energy and ancillary service participation. The main areas of opportunity include:

  • Energy time-shift arbitrage.
  • Ancillary services (primarily regulation services and secondarily reserve services).
  • Energy vs. ancillary services arbitrage.
  • Market settlement arbitrage (day-ahead vs real-time).

Enabling the path to net zero

The starting point describes the limited role storage currently plays across the WECC, highlighting a significant gap against the potential of storage to support the path to net zero. We have identified three imperatives for the power sector to bridge this gap.

  1. Re-examine regulatory and market structures to better support and incentivize deployment.
  2. Invest in digital capabilities to optimize storage.
  3. Integrate storage into a broader system framework to accelerate the path to net zero.

Implications for market participants

Recommendations for regulators

Effective policy is critical to achieving net zero within the timeframes needed to avoid irreversible climate impacts. While regulators should avoid choosing “winners,” they should seek to understand where they are on the path to net zero, the levers with the most impact and where to invest. Continued investment in R&D should follow, as well as continued dialogue with system operators, utilities and asset owners to understand ongoing challenges and enact supporting policy.

They should look for ways to create additional flexibility for different types of assets, including storage, to participate in the market and work to simplify and standardize permitting and deployment regulations. Such efforts could significantly boost creating the appropriate supporting conditions to accelerate storage adoption and deployment.

Recommendations for system operators

System operators will need to redesign for a variable energy system with greater resilience. They should be clear about their vision for the future grid and the architectural implications. Storage has an important role here and system operators and regulators should work together to create flexibility for a range of assets to participate in the market. Looking beyond storage and given the levers system operators will need to achieve net zero, they should also come up with comprehensive digital strategies to support system optimization at the lowest cost.

Recommendations for utilities and asset owners

Utilities and asset owners are on the frontlines of storage deployment. They should continue exploring new opportunities and business cases for storage to fulfill its technological potential and share these learnings as they emerge. These successes, lessons learned, and ongoing challenges would create a source of industry case studies from which regulators, system operators and other utilities or asset owners could learn to accelerate the pace of change.

To enhance revenue of their deployments, digital technologies will be key, empowering utilities and asset owners to enhance individual market participation strategies and integrated asset strategies.



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