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June 14, 2016


Energy Storage
Nadim Maluf

I explained in this previous post how energy storage can be beneficial in the configuration of a modern electrical grid that encourages multiple forms of clean energy. Today’s post takes this explanation one step further and covers a few of the fundamental concepts that are being explored across this nascent and growing segment.

First, let’s explore in an oversimplified drawing the present structure of the electrical grid. Transmission and distribution networks (that’s the power lines and substations that are scattered throughout the country) connect power generating plants, coal-fired, gas-fired, nuclear, hydroelectric,…etc. to the end user, be it residential communities or commercial and industrial (C&I) complexes. That has been the case for many decades. Utilities historically have managed the entire system but with regulatory supervision at the state and federal levels in the US.

Solar panels, wind farms and other types of generating sources are now widely available, with many states, for example California, actively promoting such “distributed” generation sources. Distributed means not centrally located and owned by different entities; think for example the millions of solar panels on rooftops. With this new evolving grid structure, managing the demand and supply, i.e. balancing generation and consumption, becomes now a more complex task, with the “duck curve” that I introduced in the previous post being one manifestation of this complexity….hence energy storage to decouple the demand from the supply, where, for the time being, I will use the term “energy storage” loosely to represent all systems that are capable of “storing” energy, not necessarily electrical energy only, but energy in multiple forms.

In one simplified grid configuration, the energy storage system sits at the utility-level, i.e. supporting the generating plants of the electrical utility, and are thus positioned, owned and managed by the utility itself. For example, the utility may choose to pump water back up the dam to “store” this energy, or it may choose to have a very large battery, but in either case, the power levels involved here are large, very large, measured in several MW to hundreds of MW.  Examining the “duck curve” in the previous post shows that between the hours of 3pm and 9pm, utilities in California have to ramp up new additional power on the order of 13,000 MW over 3 hours. This is what utility-scale means.

By virtue of the fact that these systems sit long before the meter, such a configuration is also called “in-front of the meter.” In other words, the responsibility for this system belongs to the utility or some other intermediate agency, but does not belong to the end user, be it a residence or a C&I entity.

Now let’s examine yet an alternative grid configuration, once again keeping in mind the oversimplification needed for clarity purposes. In this case, the energy storage is “distributed.” In other words, these energy storage systems are now much smaller in capacity, perhaps a fews tens of kWs to hundreds of kWs, but geographically distributed and located closer to the end-user facilities, and most likely owned and managed by diverse entities. If these smaller distributed energy storage systems sit before the meter, then, you guessed right, are called “in-front of the meter” and are not the responsibility of the end-user. But this distributed configuration is also amenable to another arrangement where the energy storage system sits “behind the meter” and is now the responsibility of the end-user, be it a residence or a C&I entity.

In the former case, i.e. in front of the meter, the economic benefit is derived by the organization that owns and manages the energy storage system, perhaps a utility or an intermediate agency. However, in the latter case of behind-the-meter, the end-user derives the economic benefit of owning and operating the energy storage system. In other words, depending on where the energy storage system is placed, i.e., at the utility scale, in front or behind the meter, there are different economic drivers and most certainly, different economic beneficiaries. This naturally creates an evolving landscape where different companies, organizations, agencies are trying to stake claims where conflicts, present and future, are only emerging, yet all of it under the watchful eyes of various regulatory bodies that are trying to adapt to new technologies and many incoming players.

For the case of utility-scale, the beneficiary is more often than not the utility itself that needs to redefine its role in the future grid. In the case of behind-the-meter, the beneficiary might be the residence owner; for example, the resident may purchase a Tesla PowerWall to play the arbitrage between daytime and nighttime pricing of electricity — though I doubt this business model makes a lot of sense. It also might be a small industrial complex that wants to limit its peak power usage (its maximum wattage demand) and reduce the peak demand fees it pays its local utility. Hopefully, by now you are beginning to see the diverse and complex economic factors that are coming into play including fundamental questions on future business models.

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