Grids, Batteries, and Electricity Storage – 3/10/16

Of the obstacles to renewable energy adoption, integration into existing power grids is probably the most challenging and important. Plummeting costs of generation and government mandates on the use of intermittent power sources like wind and solar are forcing utilities to learn a new set of tricks since many have only ever dealt with base-load plants using nuclear or coal fuels.  In many ways, competition with renewable energy has disrupted the utilities sector for the better by promoting efficiency and innovation.

Unfortunately, the solar industry’s growth has accelerated so much over just the last five years that friction between new and existing interests in the energy sector are sparking new conflicts. Utilities were once relatively content with net metering programs that compensated solar system owners for their excess electricity generation on the basis of avoided cost – the cost the utility would have incurred had it supplied the power itself or obtained it from another source. Having a small portion of households on solar reduced demand during peak hours without much effort. In turn, extra money earned off of the PV systems made the case for buying one significantly more compelling.

Nowadays, enough customers are installing on-site solar panels that utilities are finally feeling threatened by the reduction in revenues. Pushing back against the rising tide of renewables, utilities argue for less generous compensation and increased connection fees saying that ratepayers with solar systems are renting less electricity from the utility and thus not paying their fair share for overall maintenance. Whether or not utilities can win their legislative battles remains to be seen but if hard costs of solar systems keep falling at double digit rates, then the war will be won by distributed generation.

In the search for alternatives to costly and contentious integration with the power grid, battery systems and minigrids are prime candidates.

Battery systems make it possible to store excess energy during peak PV generation times for usage during the night, meaning lower electricity bills without worrying about net metering rates changing. According to Bloomberg, the U.S. has about 580 MW of energy storage installed now, up from 80 megawatts in 2008, with utilities accounting for 85% of total capacity installed. The boom in battery installations may have only just begun as costs are set to fall significantly as mass production brings further economies of scale. Of course, batteries have their own set of novel legal questions.

Mini-grids or “micro grids” or “isolated grids”, are a set of electricity generators and energy storage systems connected through a distribution network serving a localized group of customers. The future of mini-grids will depend on companies’ ability to sell systems that have traditionally had prohibitively large upfront costs making financing innovations critical to mass market appeal. Unlike battery systems which tend to be more popular in countries will large amounts of capital flowing around, micro-grids do well in developing countries like India where grid expansions fall behind demand and access is often unreliable where it does exist.

Energy storage technologies may save U.K. consumers as much as 2.4 billion pounds ($3.35 billion) a year by 2030, according to a new report funded by three utilities: EON AG, SSE Plc and Scottish Power Ltd. The utilities claim that energy storage would curb the need for grid upgrades and boost use of renewable energy technologies. The paper was written by the Carbon Trust, an organization that helps companies reduce their greenhouse gas emissions.

“Energy storage has long been seen as a panacea for the low carbon energy sector in the U.K., offering a suite of services to balance the system, make electricity networks more efficient and help the U.K. to meet its carbon targets at the lowest cost,” said Andrew Lever, director of innovation at the Carbon Trust.

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