Energy Storage: The New Cost Cutter – 10/6/16

Businesses and state governments are starting to embrace energy storage as a way to cut costs, increase efficiency, and meet regulatory mandates.

In Southern California, J.C. Penney has used lithium-ion batteries, made by Panasonic, to cut its electric bills in 6 stores by drawing power from the grid at night. By charging up at off-hours and using the stored energy during peak hours, Penney is avoids competing — and paying extra — for electricity needed to run AC units and avoids fees like demand charges. The batteries are expected to save each store at least $6,000 a year and Penney plans to install batteries at 3 additional stores this year and 14 more next year.

While still relatively expensive, energy storage installations in the form of lithium-ion battery packs has soared as costs have dropped dramatically. In 2015, more than 64.1 MW-hours of capacity were installed, up from 12.2 MW-hours in 2014, according to GTM Research. Installations are expected to reach 140 MW-hours in 2016.

Tesla Motors has played a major role in the drop in battery prices.

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Since batteries make up a large portion of the cost of an electric car, Tesla has been making aggressive moves to reduce the cost of its electric vehicles through economies of scale, including the opening of its Gigafactory in Nevada. The output of the battery factory is projected to be 35 GW-hours by 2018, equivalent to the entire world’s production in 2014 with battery costs cut as much as 50%.

Leveraging its successful opening of the factory, Tesla will supply 80 MW-hours of energy storage to Southern California Edison, the car maker said in a blog post on Thursday. The contract comes in the wake of a natural gas leak at Aliso Canyon that released thousands of tons of methane into the surrounding area. In the backlash from the incident, grid-storage projects are being fast-tracked.

“The storage is being procured in a record time frame,” months instead of years, according to Yayoi Sekine, a battery analyst at Bloomberg New Energy Finance.

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Providing further proof that states are taking an interest in energy storage, a study co-funded by the Massachusetts Department of Energy Resources (DOER) and Massachusetts Clean Energy Center (MassCEC)Massachusetts titled “State of Chargewas recently released.

The 200-page report lays out a road map for the state to expand energy storage deployment to save money, integrate intermittent power sources, and address climate change.

DOER will decide by the end of this year whether to establish an energy storage procurement mandate. In the case they do, Massachusetts would become the third state to create a storage mandate following California and Oregon.

The study focuses heavily on inefficiencies in the states electricity consumption citing two major issues including: the grid must be balanced by the ramping up and down of fossil fuel generators that only run 2-7% of the time and grid infrastructure issues resulting in “highly variable” electricity prices where the top 10% of hours during 2013-2015, on average, “accounted for 40 percent of annual electricity spend, over $3 billion.”

The study recommendations include grant and rebate programs, adding storage as an eligible technology within the existing incentive programs, and having the state clarify the regulatory treatment of utility storage.

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