Bulk energy storage: a modest proposal

Industry group: monetize the balancing function

Phil Carson | Apr 15, 2012



Today we hand the floor to one element of the energy storage community: the Coalition to Advance Renewable Energy Through Bulk Storage or CAREBS. 

First (as always) a few thoughts.

There's a natural tension between the innovations created by vendors and the constraints that bind their customers. Those constraints include, in no particular order, the effectiveness of the solution technically and financially, cost recovery prospects and the impact on customers, including costs. 

Second, let's keep in mind that it's difficult to generalize in these discussions because issues and conditions that exist for one utility may not apply to another. 

Nowhere are these factors more apparent than in the nuances and complexities of utility-scale energy storage, where new technologies have been developed to augment traditional pumped hydro.

We've documented the sometimes tortuous and frustrating process of determining policies for utility-scale energy storage at the California Public Utilities Commission (CPUC), charged with implementing policies that acknowledge the application-specific nature of "storage" and its myriad possible roles and valuations and attendant impacts on utility customers. 

All that said and with those caveats in mind, today I'll briefly provide a glimpse at what utility-scale storage vendors are saying through CAREBS, courtesy of a recent policy document aimed at power industry stakeholders. Included below will be a few links to past coverage on the CPUC's deliberations, individual utility policy statements and the debates that have filled our forums.

As I will only touch upon a few key statements that introduce "Getting Bulk Energy Storage Projects Built," please use the link to read the concise document itself, which spans a dozen pages with footnotes. 

Though market and policy conditions necessary for commercial bulk storage facilities are favorable, what's missing is the ability to monetize their benefits to the grid, according to CAREBS. So the organization would like to redefine the grid balancing function to identify the value streams, treat cost recovery for such projects in a regional manner similar to transmission lines as "multi-value projects" and bring transparency to all balancing technologies for evaluation by stakeholders.

The CAREBS position paper articulates its view of the "policy gap" around cost recovery or financial returns, which is affected by electricity market mechanisms. In regulated markets, storage isn't a "sanctioned" asset class like generation, transmission or distribution assets for cost recovery purposes, CAREBS notes. In de-regulated markets, "monetizing the costs of bulk storage through energy, capacity, renewable energy credits and/or ancillary services typically leaves substantial benefits unpaid for," their position paper states. 

You'll have to read for yourself the list of seven, bulleted policy proposals that CAREBS cites, all of which come from other parties or jurisdictions. But "creating markets for grid ancillary services," including frequency regulation, tops the list and somewhere down the line are mandates for minimum levels of storage procurement and developing methodologies for assigning a "resource adequacy" value to storage, which echo discussions we've heard at the CPUC.

CAREBS makes four additional policy suggestions of its own, which some may see as complementing or contradicting aspects of the preceding seven.


  • Simplify integration of renewables into grid operations without further distorting existing ratemaking or market mechanisms or sacrificing reliability;
  • Avoid picking winners and losers and protect existing or future asset classes by focusing on the grid or market functional need and not the technology or the asset;
  • Minimize government intrusion into the market while supporting core objectives of expanding access to renewables without sacrificing reliability or burdening ratepayers;
  • Leave the choice to invest to owners/operators of the grid.
See also: 


"Energy Storage and the Barriers to Adoption"

"California's Energy Storage Policies" 

"California Mulls Energy Storage Mandates"

"Energy Storage and Policy

Phil Carson
Intelligent Utility Daily







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Storage is pretty expensive

Having been involved with some battery storage project proposals, I recall battery storage costing about $1,000 per KW nameplate for one hour of storage if done on a large scale--greater than 20MW.  To add more hours costs about $650 or so per additional KWh energy without adding any KW of power.   If one pairs that with wind energy, the price per KW for a typical land-based, prime location windfarm with a 30 to 32% capacity factor and assuming one matches peak capacity to peak capacity results in a cost of roughly $153/MWh wholesale cost of energy.  By the time it hits a typical residential consumer, the bill would be about $462/MWh or $0.45/KWh.

It's About Cost and Efficiency

I've only read part of the CAREBS paper so far but there are a couple of points that seem to keep getting lost in the discussions regarding storage, so they're worth repeating.  First, most storage technologies have significantly higher capital costs than gas-fired generation.  Second, they incur losses in the process of consuming energy at one point in time and injecting it back into the grid at another point in time.  This means most storage technologies have effective fuel costs that are about equal to the fuel cost of a combustion turbine.  Third, the fact that storage is not a lossless process means either additional renewable energy production has to be built to make up the losses without burning mor natural gas, or storage actually increases emissions if the losses are am up with gas-fired generation.  Finally, organized markets are not set up to minimize the running costs of storage,whether the dispatch is managed by the market operator (ISO or RTO) or the storage owner.

Policy initiatives should focus on reducing costs and improving storage performance.

Jack Ellis, Tahoe City, CA

bulk storage

The previous comment is quite true; being involved with the licensing of a closed loop pumped storage project I understand the issue quite well. There are two things that will drive storage efforts and hopefully create a market place; one is clean air mandates and the other is curtailment of renewable energy. The question is why use combustion generation to integrate variable renewable energy that only reduces air quality issues by 60% when storage can do the same only quicker/better without putting 40% pollution back into the atmosphere? Why continue transmission buildup when storage can either defer additional transmission or eleminate curtailment issues while providing a better product?

The main issue with siting PS has been the environmental impact whe connecting to an existing water resource; this is solved by building a closed loop system separated from environmental or recreational nexus. The improvements made in pump turbine technology as well as the improvements made in stator technology make natural gas ramping and integration antique by comparision. The bottom line is - when a product can be stored, time shifted, and stablized cheaper than natural gas the market will lean that direction; at least that is what the investers are banking on.

Is this enough to drive bulk storage?

After reading the referenced CAREBS policy paper, I like the conclusions about letting bulk storage find its own market with minimal government intervention. But it's still not clear to me that this will drive the adoption of bulk storage.

As the paper points out, grids since day one have had a need for a load balancing function, and renewables only make the problem worse. The paper also points out two main features of bulk storage versus its chief competitor natural gas: One, it doesn't produce carbon which means it can back up renewables, and two, it can store energy as well as produce it.

In the current environment, there's little economic value in not producing carbon. Some states already have a minimum renewable mandate (good or bad, it's already major government involvement), but that's at best an artifical economic incentive to reduce carbon. And I would argue that from an economic viewpoint, if it were cheaper to build bulk storage charged from existing sources (renewable or otherwise) rather than build another natural gas plant that runs at full capacity only when the grid needs it, it would already be happening. But other than some pumped hydro, that's not the case. So apparently the market still does not value the energy storage function of bulk storage, especially when you have huge energy storage already available in the form of natural gas reserves. Thus to drive bulk storage there must be a renewable, carbon-free requirement. And that can only happen with major government mandates. Here I am not arguing that mandates are good or bad, just necessary to drive bulk storage.

If you want pure economics and market choices to drive big changes in any field, the advantages of the changes must be immediately large and obvious (we see this same problem with current electric cars versus gasoline-fueled ones). So far, I just don't see that in bulk storage. Even with existing renewable mandates which would seem to require bulk storage, it's not clear it can be done without increasing customer rates (which are currently based on natural gas providing most of the peak requirements). The paper pointed out some changes that would help and which should certainly be considered, but I didn't see any big drivers there.

       Milton Scritsmier

       Boulder, CO