I admit it. When I was a Florida Public Service Commissioner, I was not sold on the feasibility of energy storage—electrochemical (battery) storage, in particular. In fact, we reviewed the issue in detail during a hearing concerning a small island in the Florida Keys that did not have electricity service. Storage technologies simply weren’t cost effective and did not provide the reliability required. Equally important, all of the benefits of storage solutions weren’t well documented or understood.
All of that has changed. Now as part of the Accenture Strategy team, I am working firsthand with utilities to develop and implement sustainable business strategies and operating models in preparation for the rapidly changing utility environment. This role has given me a new perspective and a front-row seat to the storage innovations that are transforming the industry. More important, the energy storage technologies—from mechanical to thermodynamic to electromagnetic to electrochemical—have all evolved dramatically. They’ve come down in price and more sophisticated controls have been developed to make them suitable for a number of applications, including peak shaving, back-up power and beyond-the-meter services. One of the most appealing potential uses is in the integration of distributed generation. According to Accenture’s Digitally Enabled Grid survey, more than half of utility executives anticipate applying energy storage technologies for that purpose. Regulators, too, are embracing the storage potential, and are slowly making it easier for utilities to justify their storage investments. In Texas, for example, storage assets are paid nodal prices similar to merchant generation. PJM has developed a market for frequency regulation and, in California, the public utility commission has mandated utilities to acquire 1.3 GW of storage by 2020.
Despite the inevitability and game-changing potential of energy storage, many utilities are still reluctant to place significant bets. A primary reason is that regulatory structures are not in place to recover the costs of energy storage. The first step to removing this barrier is to calculate the benefits of energy storage. Deferral of infrastructure, more efficient operations of base load generation and other benefits need to be determined and assessed in order to pass the prudence and business case tests. Using a strategic assessment process can help utilities develop, test and rationalize any number of storage use cases particular to their service territory, generation fleet and transmission/distribution infrastructure. Analyzing the impact on operations, load and financials can help define the appropriate strategy and roadmap toward integration of energy storage into a utility system. Along the way, there are critical questions to be answered: What level of investment is required to result in the most benefits? What level of deployment will be needed? What regulatory or other barriers must be overcome?
The efforts currently underway support our contention that energy storage will be a key component of three business models poised to dominate the market. As utilities determine whether to become low-carbon energy producers, distribution platform optimizers, or energy solution integrators, they will need the role energy storage will play. In a remarkably short period of time, storage has moved from theory to application. It is an innovation whose time has come.