Why should the public in North and South Carolina care about energy storage?

The transition to a low carbon energy mix requires energy storage because wind, hydro, and solar resources are intermittent. Utility-scale energy storage is vital because it turns these variable resources into firm capacity that can be dispatched to meet demand at all hours of the day. In North Carolina, House Bill 951 requires utilities to reduce emissions 70 percent by 2030. A significant amount of energy storage will be necessary to maintain system reliability from the substantial renewable energy resources that are planned. The Carolinas Carbon Plan filed by Duke Energy on May 16th, 2022, calls for 2.0 GW to 4.2 GW in addition to 1.7 GW of Pumped Storage Hydropower (PSH) by 2035, depending on the portfolio. So, the Carolinas will see a lot of energy storage being developed and deployed over the next decade.

Is energy storage a proven technology or an emerging technology?

There are many types of energy storage at different stages of commercial readiness. Pumped storage hydropower (PSH) has been used across the United States since the 1930’s and currently accounts for about 93 percent of grid storage in the United States (about 22 GW). Large-scale lithium-ion batteries are newer as a grid resource but they have been proven at scale over the last decade. According to the U.S. Energy Information Administration (EIA), greater than 8.3 GWh of energy storage was added in the United States. Over 90 percent of the energy storage added were lithium-ion batteries. Other technologies, like solid state lithium-ion batteries, are still emerging.

Is storage cost effective compared with other generation and transmission? 

Energy storage can act as a generator but should not be compared directly with traditional generation unless paired with a generating resource like wind or solar. That said, solar plus storage projects are now consistently the least cost option in many markets, even in the Southeast and especially given the run-up in natural gas prices. Even without a price on carbon, we’ve seen solar plus storage projects win-out over traditional thermal resource options.

We are also starting to see storage deployed as a transmission asset for T&D upgrade deferral, and when those projects move forward, energy storage has been found to be more economic than building or upgrading transmission lines. When market rules evolve to allow energy storage to act as a transmission asset and a market participant, then we will really see storage deployed at scale as transmission assets.

What are some states that use storage effectively? Please give examples of the states and why their approach is effective.

California and Texas stand out as leveraging energy storage effectively. These states have taken completely different approaches to get storage deployed at scale. California has been a mandate-driven market because of the state’s aggressive emissions-reduction goals, whereas Texas has been market-driven. Cumulatively, California is the top state in the United States with 3.1 GW of operating battery storage, while Texas is in second place with 1.4 GW operating.

Texas has been adding storage at a fast rate because of its business-friendly rules and volatile energy prices. In California, drivers are mandates, high energy prices, and high solar penetration. In general, using storage effectively is a matter of opening markets to allow energy storage to participate, and this has been happening through state and federal (FERC) policies over the past several years. In both states, time-shifting energy and energy arbitrage are key use-cases.  

We hear a lot of people say storage is ‘only for four hours,’ and that doesn’t seem like enough. Can you explain how a four hour supply is enough? 

The average duration of energy storage projects has been steadily increasing as the asset class has expanded from simply providing ancillary services, which can effectively be done with 1-hour of energy storage, to providing other grid benefits like peak shaving. In fact, the latest data from the EIA shows that the average duration of projects is now about 3 hours. Energy storage has high value when dispatched into peak demand periods (peak shaving) because during these times utility operators call on the most expensive resources in their resource stack. In the Southeast, most utilities have the highest demand of the year on early winter mornings. These peaks only last 2-4 hours typically, and so four-hour energy storage is ideally suited as a resource for peak demand.  

How can storage help in extreme weather conditions?

Storage can be dispatched to replace other generators that may go offline during extreme weather. When attached to a solar facility, storage does not have a fuel supply chain that can be disrupted, which helps with grid resiliency. In addition, one of the multiple uses of energy storage sited at commercial and industrial facilities is providing back-up power when the grid fails. 

What’s the national outlook for storage

Currently, despite a rough first half of the year, the outlook for energy storage in the United States is very strong. At the end of 2021, there was over 420 GW of storage in development across the country, about half of that stand-alone storage projects and half hybrid projects (mostly solar plus storage). For comparison, there are about 930 GW of renewable energy projects in development on a U.S. grid that has a capacity of about 1,200 GW. Even if only 15-20 percent of these energy storage projects are built, it represents a massive buildout over the next five years. There is still a lot of work to be done, but the groundwork has been set to support this growth (current supply chain issues aside). Why now? Because the cost of energy storage is consistently below the value it provides, and capacity is becoming more valuable than energy; storage provides the firm capacity that renewable energy resources cannot do on their own. 

Another reason to be bullish: as of this conversation, the Inflation Reduction Act that has recently been introduced in the U.S. Senate includes a stand-alone energy storage investment tax credit (ITC) that would be a game-changer for the industry. Currently, energy storage must receive greater than 75 percent of its energy from solar to receive the ITC. By extending the ITC to stand-alone storage, it will allow utilities and developers to optimize the location of energy storage facilities rather than having them tethered to solar project sites. This will help energy storage deliver even more value to the grid. It’s an exciting time. 

Dr. Ron DiFelice is a long-time clean energy advocate and a leader in the field of energy storage. With over 20 years of experience with all types of energy storage technologies and markets, he is an energy storage project developer who also serves as a resource for Fortune 500 companies, policymakers, investors, utilities, high growth ventures, and other renewable energy project developers. He is co-founder and Managing Partner of Energy Intelligence Partners, a firm that consults on the energy transition and partners with solar, wind, and hydro developers to develop energy storage hybrid projects across the US. Dr. DiFelice earned a Ph.D. in Chemistry from Virginia Tech, an MBA from KenanFlagler at the University of North Carolina at Chapel Hill, and Bachelor and Master of Science degrees from the Rochester Institute of Technology.

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