Making Sense of Energy Storage

America must shift away from fossil fuels and towards clean, renewable sources of energy in order to protect our air, water and land, and to avoid the worst consequences of global warming. Renewable energy sources, such as wind and solar power, are virtually unlimited and produce little to no pollution. With renewable energy technology improving and costs plummeting, it is now possible to imagine a future in which all of America’s energy comes from clean, renewable sources.

The availability of wind and solar power, however, varies by the hour, day and season. To repower our economy with clean energy, we need an electric grid that is capable of incorporating large volumes of variable renewable resources.

Energy storage technologies can be an important part of that electric grid of the future, helping to assure reliable access to electricity while supporting America’s transition to 100 percent renewable energy. To get the most benefit out of energy storage, however, policy-makers and the general public need to understand how energy storage works, where and when it is necessary, and how to structure public policy to support the appropriate introduction of energy storage.

Energy storage can make a valuable contribution to our energy system.

• Energy storage can capture renewable energy produced in excess of the grid’s immediate needs for later use. In California, solar and wind energy plants were forced to halt production more than one-fifth of the time during 2016 because the power they produced was not needed at that moment.[1]
• Energy storage can help utilities to meet peak demand, potentially replacing expensive peaking plants.
• Energy storage can extend the service lifetime of existing transmission and distribution infrastructure and reduce congestion in these systems by providing power locally at times of high demand.
• Energy storage can improve community resilience, providing backup power in case of emergency, or even allowing people to live “off the grid,” relying entirely on clean energy they produce themselves.
• Energy storage can provide needed ancillary services that help the grid function more efficiently and reliably.

Energy storage is likely to be most effective when used as part of a suite of tools and strategies to address the variability of renewable energy.

Other strategies include:

• Widespread integration of renewable energy into the grid: Increasing the number and geographic spread of renewable generators significantly reduces their collective variability by making it likely that a temporary shortage of generation in one area will be balanced by solar or wind energy production elsewhere.
• Weather forecasting: Having advance knowledge of when wind and solar availability is likely to rise or fall allows energy providers to plan effectively. New England’s Independent System Operator (ISO) lists having access to detailed wind speed forecasts five minutes ahead as one of three requirements for making wind energy entirely dispatchable throughout the region.[2]
• Energy efficiency: Using less energy, particularly during times of greatest mismatch of renewable energy supply and demand, can reduce the need for backup energy sources. The American Council for an Energy-Efficient Economy has found that if a utility reduces electricity consumption by 15 percent, peak demand will be reduced by approximately 10 percent.[3]
• Demand response: Systems that give energy companies the ability to temporarily cut power from heaters, thermostats and industrial machinery when demand peaks – and provide financial incentives for consumers who volunteer to have their power curtailed – can reduce the risks posed by variability.[4] Studies have found that demand response can maintain the reliability of highly intermittent 100 percent renewable energy systems, often at a fraction of the cost of batteries.[5]
• Building for peak demand: Much like grid operators have done with conventional combustion power plants, it may make sense to build more renewable energy capacity than is typically needed in order to meet energy needs during times of highest demand. One research study found that the most affordable way to meet 99.9 percent of demand with renewable sources involved generating 2.9 times more electricity than average demand, while having just enough storage to run the grid for nine to 72 hours.[6]

A number of researchers have outlined ways that the U.S. can be mostly or entirely powered by renewable energy. Energy storage figures into these different scenarios in a variety of ways. (See Table ES-1.) 

Table ES-1. The Role of Energy Storage in Various High Renewable Energy Blueprints

• Thermal storage stores energy in very hot or very cold materials. These systems can be used directly for heating or cooling, or the stored thermal energy can be released and used to power a generator and produce electricity. Even pre-heating hot water during periods of high renewable energy production or low demand can be considered a form of thermal storage.
• Utility-scale batteries can be located along the electricity distribution or transmission system, providing power during times of peak demand, aiding with frequency regulation on the grid, and absorbing excess renewable energy for later use.
• Residential and commercial batteries located “behind-the-meter” can provide backup power during power outages, and have the potential to be aggregated into a larger network and controlled by a utility to support the reliability of the grid. Electric vehicle batteries could also someday be integrated into the grid, charging at times when renewables are available and powering homes and businesses at times when demand is high.
• Pumped-storage hydropower, currently the most common and highest capacity form of grid-connected energy storage, works by pumping water from a lower reservoir, such as a river, to a higher reservoir where it is stored. When electricity is needed, the water in the higher reservoir is released to spin turbines and generate electricity.
• Compressed air energy storage works by compressing air and storing it in underground reservoirs, such as salt caverns. When electricity is needed, the air is released into an expansion turbine, which drives a generator.
• Flywheels use excess electricity to start a rotor spinning in a very low-friction environment and then use the spinning rotor to power a generator and produce electricity when needed. These systems have a variety of advantages – they require little maintenance, last for a long time and have little impact on the environment – but have limited power capacity.
• Developing technologies, including hydrogen and synthetic natural gas, have the potential to offer unique benefits and may become important tools in the future for energy needs that are currently difficult to serve with electricity.

Energy storage has been growing rapidly in recent years and that growth is projected to continue.

• There is six times more energy storage capacity (excluding pumped-storage hydropower) in 2017 than in 2007 (see Figure ES-1).[13]
• GTM Research, an electricity industry analysis firm, predicts that the energy storage market will be 11 times larger in 2022 than it was in 2016.[14]

Figure ES-1. Total Stacked Capacity of Operational U.S. Energy Storage Projects over Time, Excluding Hydropower[15]

• Falling costs: The cost of energy storage has been declining rapidly, and this trend is expected to continue. Over the next five years, average costs are projected to fall 19 to 49 percent for batteries, and 23 to 37 percent for flywheels.[16]
• Increasing renewable energy adoption: The U.S. Energy Information Agency (EIA) expects that solar and wind capacity will increase by almost 20 percent increase in the two-year period from 2017 to 2018.[17]
• New grid service markets: Utilities are starting to recognize the value that energy storage can offer for purposes other than renewable energy integration.
• Public policies: The federal Investment Tax Credit for residential solar system can be applied to energy storage installed at the same time, and a new bill introduced in the Senate would create a tax credit for standalone storage as well.[18] A number of state policies supporting energy storage have been adopted in recent years: California, Oregon and Massachusetts have all passed laws setting energy storage targets, and similar proposals were passed by state legislatures in New York and Nevada in 2017.[19]

Smart policies will be key to allowing the energy storage market to continue to grow and support the nation’s transition to a clean energy future. Policymakers should:

• Clarify existing grid connection and permitting policies to remove barriers to installation and deployment of energy storage;
• Design energy markets to capture the full value of energy storage and all the services these technologies can provide;
• Incentivize homes and businesses to adopt storage, which can increase resilience and provide benefits to the grid as a whole;
• Set storage benchmarks and encourage utilities to build and utilize energy storage throughout their system.