IEEE Power & Energy Magazine - November/December 2017 - 34

Energy storage, if suitably deployed, gives system operators
a flexible and fast response resource to effectively
manage variability in generation and load.
will have to incorporate advances in power electronics and
power conversion systems, sensors, software, and control
systems. While the energy components (Li-ion battery cells)
are becoming commoditized (due, in part, to advances in
electric vehicle manufacturing), the power component of
battery energy storage systems still needs to scale.
Most battery installations have a custom or semicustom balance of plant. While the underlying technologies, such as
inverters, may be mature, full integration and controls are still
in their infancy, causing battery energy storage balance-of-plant
costs to be high relative to solar technology. In addition, there is
greater opportunity to reduce soft costs through improved plant
layouts, system-level standardization, and streamlined permitting processes and lower construction and startup costs. Greater
deployment and operational experience will help achieve continued improvements in the safety, reliability, and operational
performance of energy storage systems. This will lead to predictable maintenance schedules and improved operational performance, further enabling greater adoption of energy storage
by utilities and grid operators.
There is an opportunity for storage to have a greater role
in the grid infrastructure. However, the current cost structure does not allow for implementation of storage at the
scale needed. Most large-scale deployments have been limited to select markets, in which the ancillary services storage has been adequately monetized or state policies mandate minimum storage deployment. For example, storage
has found application for regulation services where market
mechanisms exist that pay for the faster response that storage
assets can provide. Since 2011, when storage was allowed
to compete in the PJM regulation market, over 300 MW
of new energy storage systems have been deployed. This
saturation contributed to a fourfold decrease in the cost
of regulation services and created challenges regarding
the future economics of new energy storage for regulation
in PJM.
There are numerous services for which energy storage can provide faster or better performance than conventional resources; however, market mechanisms may not be
in place or clearly monetized. Unlike frequency regulation,
bulk applications for other services such as infrastructure
deferrals or generation optimization and resiliency are not
now economically viable, with the cost of current battery
technology being relatively high. However, as wind and
solar integration increases and conventional thermal generators are retired, these services will need to be provided
by new technologies and operating practices. This creates a
34

ieee power & energy magazine

new opportunity for energy storage, but markets and utility
planning must continue to adapt to monetize many of these
services. Niche applications having favorable economics
exist today, and these applications are expected to broaden
as capital costs continue to decline and renewable penetration increases.

The Multiple Value Streams
of Energy Storage
Costs Are Coming Down,
But Where Are the Markets?
As the cost and performance of batteries and other emerging
technologies continue to improve, they will fulfill a variety of
roles and enter a variety of markets. The historic high prices
of battery energy capacity largely limited deployment to
short-duration devices (less than 1 h of stored energy)-with
a particular emphasis on the frequency regulation market,
which typically has the highest clearing price of the ancillary
service markets in the United States. The total market for
frequency regulation among U.S. independent system operators and regional transmission organizations (which serve
about two-thirds of U.S. demand) is approximately 2.5 GW.
Storage will face increasing competition in this market from
demand response, curtailed wind and solar, and other flexible resources, so storage developers are looking beyond this
limited market.
Other applications that can utilize short-duration storage
include spinning contingency reserves and fast frequency
response. While fast frequency response is not yet an established market in most regions, there are several active proposals and pilot projects being undertaken by systems like
those in Ireland and Hawaii, as well as the Electric Reliability
Council of Texas (ERCOT) and the California Independent
System Operator. While short-duration storage has a small
market potential compared to the power system as a whole,
these early deployments will help drive down both the power
and energy cost components of storage. They will also allow
utilities and system operators to gain valuable experience
with storage technologies that will allow them to play an even
greater role in the overall generation portfolio.
Beyond applications for short-duration storage is the much
larger potential role of storage acting as a capacity resource.
Even without load growth, older peaking capacity will need to
be replaced, and there is more than 100 GW of peaking capacity over 40 years old in the United States alone. Batteries with
several hours of capacity could act as a replacement for some
november/december 2017

Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - November/December 2017