How Utilities are Taking Advantage of Customer-Owned Energy Storage and Demand Flexibility
Energy storage is one of the hottest topics in the electricity industry today. As battery costs decline, many actors are recognizing the huge potential of storage to lower the cost of the grid and become a booming, multibillion dollar market. But although Tesla and its competitors capture all the headlines, it’s always worth noting that energy storage can come from multiple sources—not just batteries—and there are many ways to bring the technology to market.
Now, a promising new initiative launched by a coalition of industry stakeholders aims to promote the concept of “community storage” in utilities across the U.S. Community storage programs let utilities aggregate customer-owned, behind-the-meter resources like water heaters, electric vehicles, and batteries to provide services to the grid. In doing so, these programs help reduce the cost of maintaining and upgrading the grid, and help lower customers’ bills.
Energy storage can provide many sources of value
Distributed energy-storage resources used in community storage programs can provide many services to customers, utilities, and the grid as a whole. In RMI’s 2015 report The Economics of Battery Energy Storage, we catalogued 13 different sources of value that storage can provide, including backup power for a single family home, reducing peak load at the utility level, and helping balance energy supply and demand at the regional scale.
These services must be provided with some kind of infrastructure, whether it’s batteries or traditional assets like power plants, transmission lines, and distribution substations. But regardless of how you do it, maintaining the grid costs money. Utilities in the United States make investments on the order of $100 billion per year on new grid infrastructure and system upgrades in order to improve reliability and meet growing peak loads. But as battery cost declines continue, utilities and energy-storage companies are increasingly interested in using storage to offset some of that traditional-infrastructure spending, because they recognize that storage can be a cost-effective alternative.
There are many ways to store energy
Batteries may be the most versatile way to store energy, and their costs have come down dramatically, but they still cost thousands of dollars and require time to secure the necessary permits and to install and commission them.
However, there are other lower-cost ways to store energy that don’t rely on a dedicated battery system. As RMI explored in our report The Economics of Demand Flexibility, it’s possible to change the timing of when existing loads draw power from the grid without disrupting the service that those loads provide to customers. By doing so, loads like water heaters, air conditioners, and electric vehicles can provide virtual energy storage at very low cost and at very large scale.
How large a scale? Take residential water heaters as an example. Approximately 47 million American homes use electric water heaters (as of 2009, the latest data available). Assuming the average storage-tank size is 40 gallons and the heater raises water temperature by 60° F, Americans’ water heaters represent a 270 gigawatt-hour (GWh) storage resource. In other words, the U.S. residential water-heater storage resource is over 150 times larger than the current U.S. battery market, which has deployed or announced about 1.5 GWh of battery storage capacity as of early 2016. In addition, storage in water heaters can be tapped at very low cost; based on our research, it takes only a few dollars in parts, installed at the factory, to allow a water heater to communicate with, and be controlled by, grid operators.
“Community storage” can help bring demand flexibility to scale
Recognizing the scale of resources like water heaters and the range of services they can provide to the grid, utilities are increasingly interested in tapping that value and bringing this resource to scale. To do so, a diverse group of industry stakeholders formed the Community Storage Initiative earlier this year.
The Community Storage Initiative is focused on building the case for demand flexibility-like programs for cooperative utilities, or co-ops. Co-ops are owned by their members, meaning that utility cost reductions are passed directly to customers. In addition, co-ops serve rural areas, which tend to have a higher concentration of electric water heaters suitable for grid control (natural gas is usually not available in rural areas). For co-ops in the Midwest and Western region of the U.S., utility-sponsored programs for behind-the-meter storage can make a lot of sense, since organized energy markets—which successfully promote storage in other regions of the country—don’t serve these regions.
The fact that this initiative is being championed by such a diverse group of interests speaks to the broad appeal of community storage. The sponsors include:
Focus on community benefits
Just as utilities are leveraging community-scale solar to bring clean energy to their customers at the local level, utilities can similarly help deliver the benefits of energy storage to their customers.
By taking advantage of behind-the-meter storage technology and demand flexibility, utilities can reduce the cost of the grid, save their customers money, and reduce carbon emissions (mainly by helping integrate variable resources such as wind and solar into the grid). For cooperative utilities in particular, these benefits accrue directly to customers, ensuring that the value of storage is shared with the broader community.
Image courtesy of iStock.