Most people don’t really think about their electricity except when they pay their bill, or when the power goes out. Utility companies think about it all the time.
Utilities need to make sure they can provide continuous electricity to their customers at an affordable rate, while also managing their bottom line. This means planning for a mix of energy resources that maximize reliability and flexibility while minimizing costs and risks.
A recent assessment by PNNL energy experts evaluated how and to what extent utilities included energy storage technologies, particularly grid-scale batteries, in their integrated resource planning (IRP) process. In these periodic analyses, utilities forecast future needs and then model the costs and benefits of various resource types to build an optimal portfolio of resources for meeting those needs.
The PNNL assessment, prepared for the Department of Energy’s Office of Electricity, showed that while some utilities took steps to improve their models—and identified cost-effective storage investments as a result—most utilities were still unsure how to model the costs and benefits of energy storage. The assessment also showed that many utilities still consider grid-scale batteries a research project, not a resource option.
In their report, “Energy Storage in Integrated Resource Plans”, the team concluded that two primary factors kept utilities from accurately assessing the value of energy storage batteries in resource planning: lack of both reliable cost data and established industry modeling and planning practices. Jeremy Twitchell, a PNNL energy analyst and one of the report’s authors, said he’s not that surprised by the findings.
“It’s complicated,” said Twitchell. “The technology and policy around new energy technologies are changing so rapidly, utilities have a hard time nailing down concrete values for their planning forecasts.”
Traditional utility resource planning models are not designed to evaluate the unique flexibility and grid service benefits that energy storage can provide. This means that energy storage technologies will be undervalued unless utilities update their modeling practices to account for those benefits.
Changing the resource modeling process is expensive and time consuming, and some utilities have more resources than others. But, Twitchell said, utilities that considered energy storage in their resource planning found that in some cases, it’s the least cost way to meet customer and business needs.
“There’s a narrative out there that energy storage technologies need to come down further in costs and that we need to understand them better before they can be a viable resource option,” Twitchell said. “But research shows that storage has reached that point of inflection.”
As more systems appear across the grid, their operating characteristics, construction timeframes, and costs evolve. That information sheds light on long-term costs, cycling requirements, methods for optimized operations, system siting, and component lifespans.
But in the meantime, utilities may be missing out.
By the Numbers: Batteries versus Pumped Storage
To take industry’s pulse related to energy storage as part of their energy mix, the team reviewed 21 recent IRPs from a cross section of utilities representing a range of service territories, sizes, and ownership structures. While some plans considered compressed air energy storage, batteries and pumped storage hydro (PSH) were the most widely analyzed forms of energy storage. Based on the prevalence of these two technologies, the team’s report focused on battery and PSH resources. The two technologies vary widely in their maturity.
Pumped storage generates electricity by moving water through reservoirs at different elevations. It is the dominant form of electric energy storage in the United States, accounting for about 170 gigawatts, or 97 percent, of bulk energy storage. Most of the pumped storage fleet was constructed over 30 years ago and is owned by public and private utilities. Costs and performance characteristics are established and relatively stable.
By contrast, grid-scale batteries provide about two gigawatts, or one percent, of the country’s energy storage capacity. Even so, they have emerged over the past decade as a scalable, flexible option for balancing energy from intermittent energy resources, like wind and solar, as well as other distributed resources. But energy storage is fundamentally different than traditional grid resources. Storage both takes energy from and returns energy to the grid, and it can respond to grid signals in seconds. In addition, energy storage batteries provide a range of grid services that aren’t yet included in traditional resource planning models.
As illuminated by the team’s report, traditional utility planning models aren’t designed to recognize the grid flexibility benefits of energy storage. Merely plugging storage into standard planning models results in an apples-to-oranges comparison that fails to account for many benefits of energy storage. And even among utilities that did model the benefits of energy storage, it wasn’t always clear how they did so.
Additional key findings from the assessment include:
- Despite the relative stability of pumped storage, the IRP analyses included batteries more frequently than PSH. Utilities generally identified three primary factors—siting flexibility, construction time, and environmental permitting concerns—as barriers to including or selecting PSH.
- Of the 15 utilities that included battery storage in their IRP, four selected it in their preferred portfolio, while two selected it in their alternate portfolio. These scenarios indicate that battery storage is expected to be or may be a part of the utility’s future investment plans, respectively.
- For the 10 utilities that included PSH as a resource option, two selected it as a preferred option as part of existing facility expansions. One utility selected a new PSH resource in an alternate portfolio.
- Twelve utilities have plans for an energy storage pilot project to better understand the technology.
- None of the 12 utilities that included two or fewer energy storage services selected storage, while one of the four utilities (25 percent) that included three or four services selected storage, and three of the five utilities (60 percent) that included six or more services selected storage.
A New Planning Paradigm
The report showed that as utilities include more energy storage benefits in the planning process, they are more likely to select energy storage as part of their portfolio. As this transition occurs, planning practices will shift from the current paradigm, which ensures grid reliability by building reserve generation resources with sizable reserve margins, to a new paradigm that supports grid reliability by optimizing grid services.
“In traditional planning practice, utilities oversize the system to account for uncertainty,” said Twitchell. “With energy storage, they can optimize instead of oversize.”
In addition to Twitchell, the PNNL authors included Alan Cooke and Rebecca O’Neil. The team plans to conduct a follow-up project to identify emerging best practices and planning standards from the utilities that developed processes for modeling storage.