The booming U.S. battery storage market is showing no signs of slowing down, and a new government-funded report says its prospects could be even bigger than previously thought.
"The Potential for Battery Energy Storage to Provide Peaking Capacity in the United States," published last month by the National Renewable Energy Laboratory (NREL), concluded that every region across the country offers the potential for peaking capacity needs to be met by short-duration, four-hour battery storage systems.
"The results show significant potential for energy storage to replace peaking capacity, and that this potential grows as a function of [solar] deployment," the report said. NREL's findings show, however, that at current conditions energy storage would only be able to replace a fraction of total peaking capacity in the U.S.
NREL's analysis demonstrated that roughly 28 GW of peaking capacity in the U.S. offers the practical potential to be converted to four-hour energy storage, given current gird conditions and demand patterns. An increase in solar deployment, which NREL expects could be enabled by the deployment of storage for peaking capacity, pushes the practical potential for four-hour storage to 50 GW of peaking capacity or beyond nationally. This figure is based on the assumption that solar meets 10% of the nation's electricity demand, the report said.
To put that into perspective, the U.S. had a total generating capacity of 1,187 GW as of 2017, 261 GW of which was fossil-fueled peaking capacity.
While battery deployment opportunities for peaking capacity are expected to vary from region to region, the NREL analysis made clear that they exist today, even in areas that have not been traditionally thought of as hotbeds for utility-scale energy storage.
"There are opportunities for four-hour storage everywhere," Paul Denholm, principal energy analyst at NREL and a co-author of the report, told Utility Dive. "Even in places that are cold or have winter peaking systems, like New York and New England, you still do have an opportunity for four-hour storage."
The study is a "big moment" for the U.S. storage sector, Ray Hohenstein, market applications director at energy storage provider Fluence, told Utility Dive. He said the study is giving credibility to a phenomenon that has been known within the industry for a long time: Shorter duration energy storage holds tremendous value for the grid.
"What the NREL report really shows is that there are gigawatts of capacity value in every wholesale market in every region of the United States," Hohenstein said. "In other words, there's a lot of room for storage to be deployed before we run up against the situation where we have to really look for longer duration than four hours."
Does this mean that utilities and wholesale markets across the country will forego gas-fired peaker plants and solely invest in battery storage? The answer is not necessarily.
"This study should not be confused or misinterpreted as being that final detailed reliability analysis," Denholm said. "It's really important that each region does its own. This was an approximation of the more detailed studies that are needed. I think this is a very encouraging sign that there'll be opportunities for four-hour storage in most of the U.S."
The high upfront cost of battery storage remains one of the biggest hurdles when compared to conventional gas-fired peakers, but energy storage is often cheaper on a lifecycle cost basis, he said.
NREL highlighted in its report several potentially limiting factors related to the deployment of energy storage on the U.S. power grid, including costs, performance, material availability and geographic constraints for technology.
Despite these remaining challenges, Hohenstein says NREL's findings will boost confidence among wholesale market regulators to consider four-hour storage as a credible alternative.
"The biggest challenge we're facing is really a mindset shift in the industry," he said. "Only in the last couple of years have we entered this new reality where energy storage is cost effective against traditional gas peakers, and it requires new procurement teams at utilities to open up procurements."
For Fluence and AES, this shift occurred as far back as 2014, when the companies got a contract for an energy storage peak demand project in Southern California.
Last month, AES broke ground on its 100 MW/400 MWh Alamitos battery storage project in Long Beach, California, procured to provide peaking capacity under a 20-year power purchase agreement with Southern California Edison.
"Alamitos energy storage will stand as the first of a new generation of energy storage procured as stand-alone alternatives to new gas plants," John Zahurancik, chief operating officer for Fluence, said in a statement. "Its size, flexibility and long duration stand as a benchmark, and showcase energy storage as a mainstream option for peaking power and grid support."
Hohenstein described the Alamitos project as a turning point in proving that energy storage can compete with traditional gas peakers in the market place. Since then, larger peak demand projects featuring energy storage have been approved.
"I'm hopeful that there will be even greater consensus on what is good for the environment is good for business and America," he said.
The NREL study did not consider several elements that could affect the potential of storage to provide peaking capacity, including demographic shifts, climate and electric vehicles.
According to the study, 150 GW of peak capacity in the U.S. are expected to retire over the next 20 years.
"The fraction of this capacity that could potentially be replaced with storage of various durations is determined in part by the ability of storage to actually serve peak demand," according to the report.
Longer duration potential
By including the prospects for six and eight-hour storage as well, the report found there is a total potential for storage to replace about 70 GW of peaking capacity in the United States. However, that figure would still account for less than a third of the total installed peaking capacity (261 GW) and represents less than half of the anticipated 150 GW in peaking capacity that will be retired over the next two decades.
But faster growth in renewables could change the prospects for storage.
"These values do not account for the large increase in potential that results from the impact of renewable energy on net load shapes," NREL said.
A state that has been leading the push for battery storage to provide peak capacity is New York. The Department of Public Services (DPS) recently identified at least 275 MW of peaking units, or about 6% of the total rated capacity of New York's peaking fleet, as potential candidates for replacement with six‐hour energy storage. That increases to over 500 MW when using eight‐hour storage.
The DPS peaker replacement study also showed that when considering the ability of storage to hybridize, or install energy storage at an existing conventional peaker unit, standalone four‐hour storage has the ability to bring 864 MW of peaking units into compliance with the state's proposed new air pollution limits.