Energy storage is often touted for its versatility and ability to be a true multi-purpose utility asset. The dramatic maturation of energy storage solutions over the last several years has increased both the number and the range of proven applications for storage on utility distribution grids. These developments could not come at a better time for utilities needing multi-purpose assets to extract every dollar of value from their scarce investment dollars. The Business Council for Sustainable Energy has reported utility capital budgets for smart grid infrastructure spending have decreased by nearly 50% since beginning of this decade, and National Energy Technology Lab (NETL) has reported that maintaining the electric grid will require utility infrastructure investment in the range of $500B during the twenty-year period between 2010 and 2030. Establishing the business case for energy storage draws parallels to the investment cases made for metering and communications infrastructure over the last two decades. They both require systems to be designed and sited to monetize multiple value streams to make the cut in this constrained budget environment.
A key challenge for energy storage is the value streams a distribution utility can directly monetize are limited. According to the Rocky Mountain Institute, the classic poles-and-wires distribution utility can only justify an investment of energy storage take advantage of avoided cost streams related to maintaining resource adequacy, deferring transmission and/or distribution upgrades, and avoiding transmission congestions charges. Frequently, utilities can identify one or two of these streams for a particular project, but not find the value to make a prudent storage investment. It is no surprise then, that in nearly every industry survey where storage industry leaders are polled on the barriers to storage entry, the need for regulatory changes to open markets for energy storage boil to the top. These issues are exacerbated by a current regulatory environment in which incentives for energy storage are limited.
On the other hand, the opportunity for energy storage does not have to be limited to creating value for the utility alone. Third-party ownership models, where energy storage devices sited at the customer premise serve both the end-customer and the utility, have already begun to open up new opportunities. Stacking customer value streams with those of the utility are often complementary, meaning use of the asset by one stakeholder does not cannibalize the value of the other, and vice versa. Furthermore, as the relationship between the utility and its customer evolves, asset sharing partnerships through an intervening third party may turn out to be a means to strengthen the customer-utility relationship. Southern California Edison’s procurement of over 150MW of capacity contracts for C&I-sited energy storage for its 2014 Local Capacity Requirement is a good example of a utility doing this at scale.
To take full advantage of the tangible progress over the past several years in the storage industry, the utilities and their trusted technology delivery partners need to collaborate on business models that allow multiple grid stakeholders to benefit from the same shared storage asset. Distributed storage that is shared between the utility and the end-use customer can monetize multiple value streams, enhance customer engagement, and enable a more efficient and flexible electric grid. These multi-purpose assets will help utilities to maximize the use of their capital investments to fortify the grid and enhance the quality of the electric service they provide their customers. Visit the Landis+Gyr Energy Storage website to learn more about how we can support your energy storage journey.