Storage: The Solution to What Problem?

Storage: The Solution to What Problem?

To make meaningful progress on integrating storage into the grid, we need know what problems we are trying to solve and what regulatory barriers are in the way of the solutions.

Energy storage is the latest “holy grail” for the utility industry and its key stakeholders. In truth, energy storage has been with us since before electricity. We already have energy storage reservoirs in place that we make only marginal use of. If we look at the kilowatt-hours of energy stored in electric tanked water heaters on a daily basis in the U.S., we would see that it exceeds the total energy stored in all the pumped hydro storage combined. Clearly, we have some experience with storage.

If one reads the latest discussions in industry and stakeholder press, the challenges for the industry appear to be about how to make energy storage an affordable or economic solution for the grid. There is modest discussion about the long-term viability of the various technologies and even less discussion about the regulatory barriers to effective use of storage in the grid.

Beyond water heating, storage is common place throughout the world. In developing nations and developed countries where the economy is growing faster than the infrastructure, storage is a necessity. It is common in places like India, Brazil, much of Southeast Asia and islands in the Pacific and the Caribbean for businesses and individuals to have localized storage. This is driven by their reliability needs more than by a desire to make best use of conventional and intermittent resources.

If we focus on the developed world where the infrastructure and the economy are largely in synch, then the question of storage is more about achieving social objectives and optimization of resources. In some cases, it is being explored in response to the impacts on the grid from the diligent execution of policy objectives with regard to renewables. It is clear that in many jurisdictions, energy storage offers some of the best technical solutions to the impacts of high levels of intermittent resources on the grid. The modular and fast-acting nature of many of the storage technologies make it a natural technical solution that is quick to deploy and highly predictable in the results that it can and will produce.

In order to make meaningful progress on integrating storage into the grid, we need to focus on two primary questions:

1. What problems(s) are we trying to solve?

2. What are the regulatory barriers in the way of the solutions?

With respect to the “problem,” it appears that we already have technologies available that can provide effective and reliable storage to support the needs of the grid. Recent work in PJM, the Maritime Provinces in Canada and Hawaii have demonstrated that grid-controlled water heaters can provide an extremely cost-effective solution to renewable integration. This new generation of water heaters are three element heaters that have one element (and roughly one-third of the tank capacity) controlled by the grid. Unlike conventional water heaters, this new generation can be tasked with absorbing energy on demand. The grid controls can also shed the one or all of the elements on command. Using two-way communications, these water heaters are capable of being dispatched to follow specific generators, moving the load up and down in synch with the generation, thus removing the variability of the intermittent resources. The communications also provide the dispatchers with a real-time assessment of the amount of load and energy that can added or removed from the system at any time. These water heaters also have localized intelligence and can be tasked with frequency response based on what they are seeing. The cost of these water heaters is comparable to conventional water heaters. They have better round-trip efficiency than any other storage technology. While they are a customer-side resource, they are simple to install and largely transparent to the customer. The real-life testing of these devices in different applications shows that we have a straightforward solution that is based largely on technology that is familiar to both the customer and the utility. Water heaters are not the complete answer to the storage problem, but they certainly could play a large role in solving the problem and do so in an extremely cost-effective way.

With respect to the need for storage to supply electric energy back to the grid, there are number of technologies that have proven themselves reliable. The difficulty is in the apparently poor economics of those solutions. The economics of electric energy storage are driven as much by regulatory requirements as they are by technology. Which brings us to the second question.

There are a number of regulatory barriers to the wide-scale deployment of cost-effective storage.  Again, we need to take this in two parts:

1. Electric Energy Storage. In much of the country, we have moved to regulatory frameworks that cause us to look at electricity storage as having to be either a transmission asset, a distribution asset or an energy supply asset. In most cases, we are not allowed to look at the overall picture from the view of the end use customer rates (societal view).  Ignoring regulation for a minute and focusing purely on optimizing the economics of the investment, one would look at distribution connected storage and first ask what value could be delivered to the distribution system. These benefits could be feeder or substation loading relief, capital deferral, reactive power support, or back up supply to critical loads such as hospital or first responders.  (It is generally accepted that electrical storage is more dependable than standby generation for these types of facilities, at least in the first 10 to 60 minutes of an interruption).

After determining the benefit to the distribution system, one would look to the benefit that it could bring to the transmission system. This might include loading relief, capital deferral, flow control, frequency regulation and reactive power support.

Finally, one would take a look at the energy arbitrage benefits for the storage. Presumably, these would also include the GHG or other climate benefits that the use of the storage delivers.

In many, not all, cases when we are able to aggregate the value streams, the storage is cost-effective.  The difficulty comes in that the regulatory constructs limit or prohibit the aggregation of these benefits.  So in the end the customer and society lose out due to the limiting effects of the regulatory construct.  Clearly, this was not the intention of the framers of the construct, and yet we must find ways to unravel this aspect of the frameworks if we wish to begin moving forward now with greater deployments of electricity storage.

2. Thermal Storage. Unfortunately we have similar impediments in the use of thermal storage.  In many jurisdictions, regulators have begun to limit the continued use of tanked water heaters in favor of tankless, on demand water heaters. This is done in the name of energy efficiency as tankless water heaters don’t appear to suffer the same parasitic losses that are inherent with conventional tanked water heaters. While this has helped energy-efficiency efforts it has had a negative impact on demand management. On-demand water heaters do not lend themselves to time shifting of load, nor do they lend themselves to on grid-controlled energy absorption. Beyond state regulations, federal regulations have begun to place limits on the tank sizes for water heaters deployed in the U.S.

Looking at the latest generation of grid-enabled water heaters, they have superior insulation to their conventional counterparts with extremely low parasitic losses.  The round-trip efficiency of this generation of water heaters is far superior to any of their electric, mechanical, or hydro counterparts, all of which are otherwise encouraged by the same regulators that have sought to limit the use of tanked water heaters.

If we were able to take a step back and look first at what problems we are trying to solve and then at what technologies are available to solve the problems, in ways that benefit the customers and society, we would like find that the technologies are already available. While we may not have the full and complete solution at hand, we should be in a position to make significant progress with what we have.  As technologies develop further and costs continue to improve, we can deploy more and make greater progress.  In the meantime, the only barriers appear to be manmade. One potential path forward could be:

  1. Identify the problem. Clear articulation of what we are trying to solve, for the sake of what and for the sake of whom.
  2. Make objective assessments of the solutions that make economic (and technical) sense for the customer and society.
  3. Refine policy and regulatory barriers that are in conflict with the intent.  Compromise in the interest of the customer and society is probably going to be required.
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