Navigant Research Blog

Thermal Energy Storage Solutions Are Heating Up

— June 16, 2017

While the new generation of battery energy storage systems have captured the attention of the global electric industry and media, more traditional forms of energy storage have been quietly operating for decades. Thermal energy storage is already a well-established technology that has been utilized in large buildings to reduce energy expenses by freezing water overnight and using lower priced off-peak electricity to offset air conditioning (AC) compressor needs during daytime peak demand periods. These systems allow building owners to generate significant savings on their utility bills with no effect on comfort or daily operations.

Despite limited media attention, thermal energy storage theoretically has many advantages over battery-based storage systems, including generally lower costs (both on an upfront and total cost of ownership basis), longer system life expectancy, non-toxic designs and materials, and ease of recycling at the end of a project’s life. These advantages and the maturity of the technology have allowed thermal storage to play a critical role in district heating and cooling systems around the world. However, in recent years, new thermal storage solutions have been commercialized, targeting new markets and providing competition for lithium ion and other battery technologies.

Thermal Storage Solutions Expanding

In late 2014, utility Southern California Edison (SCE) announced awards for a landmark procurement of energy storage capacity to optimize grid reliability, support renewable energy integration, and fulfill local capacity requirements. While most contracts were awarded to battery energy storage providers, up and coming thermal energy storage provider Ice Energy won a contract to provide 25.6 MW of capacity. Although Ice Energy’s technology operates similar to many other thermal storage systems, its approach to the market—targeting utilities with peak demand reduction solutions—provided SCE with a cost-effective way to reliably reduce customer demand and strain on its distribution system. The key to Ice Energy’s offering is the ability to virtually aggregate its distributed systems and give utilities control, providing a reliable, location-specific form of peak load reduction. Ice Energy continues to land contracts with utility customers, and it has expanded its product line to target residential customers in addition to commercial and industrial buildings.

Thermal storage solutions are expanding from an early focus on managing AC loads to target other building systems that require large amounts of cooling power. One of the more successful innovators in this market to date has been Axiom Energy. The company’s refrigeration batteries are being installed by major retailers, including Walmart, and through a partnership with New York utility Con Edison. Axiom Energy’s technology works on a similar principle as AC-based storage systems and can be installed on existing refrigeration systems without major modifications or reprogramming. These systems offer both utilities and customers a reliable, non-disruptive way to reduce their peak power consumption and the associated expenses.

Best of Both

The recent advances made in thermal energy storage technologies are heating up the debate over the merits of these systems versus battery storage. Both technologies have certain advantages and disadvantages, and both should play important roles in the modernization of building energy management and power grid operations. However, battery storage continues to grow in popularity and market share in the storage industry. The ability of battery systems to provide both peak demand reduction and backup power in a more compact physical footprint is a key advantage over thermal storage. As the industry progresses, there will likely be increasing opportunities for both technologies. In fact, for many customers, the best approach may be to utilize both thermal and battery storage, taking advantage of the best of both to maximize their potential savings.

 

Distributed Energy and Community Choice Making Big Gains with Small Utilities

— May 2, 2017

The falling costs and improving economics of solar, wind, energy storage, and other distributed energy resources (DER) are driving a growing movement toward community-based energy systems around the world. The concept of community power has been around for centuries and is characterized by local ownership, local decision-making, and the local distribution of economic and social benefits. Over the past decade, island nations have emerged as pioneers of new community power models given their high electricity prices and natural requirement for local energy systems. The falling costs for DER, along with regulatory changes, are now laying the foundation for growing community power movements in larger and more traditional power markets. The first World Community Power Conference was held in Fukushima, Japan last November. The location of this event was no coincidence, with the city’s recent history highlighting the disadvantages and potential dangers of traditional, centralized energy systems.

Community energy movements could be a driving force in the reshaping of America’s energy systems and the growing DER industries. North America already has a strong tradition of community-based energy with thousands of cooperative and municipal utilities, in addition to the growing number of community choice aggregation programs around the country. However, many of these organizations have been locked into long-term contracts to buy nearly all their energy from a single provider. This dynamic has limited local renewable energy development, as power providers can charge these customers a fee for any lost revenue through the self-generation caps in contracts. A major breakthrough for these small utilities came when the Federal Energy Regulatory Commission (FERC) prohibited these self-generation fees in a ruling last year. This ruling freed cooperatives to begin local solar and other DER developments in their own communities, now a viable alternative to conventional sources. Cooperatives in the United States now own nearly 1.3 GW of renewable capacity and plan to add 2 GW more over the next 5 years.

Falling Costs Generate Increase in New DER Projects

Community power organizations are increasingly interested in renewables and local energy sources due to their falling costs and the potential to stimulate significant local economic development. DER also allow organizations to add generation capacity on a much more incremental and flexible basis, as opposed to contracting energy for a decade or longer. Since the FERC’s ruling last year, the number of cooperatives with new DER projects has grown significantly.

In early 2017, Texas Electrical Cooperatives Inc. (TEC) announced a partnership with energy solutions provider Advanced Microgrid Solutions (AMS) to develop distributed energy storage systems and provide DER management software for its members. The cooperatives will receive discounts on AMS’ products and services that help maximize the use of local generation resources and lower costs. One of TEC’s most ambitious members, the Pedernales Electric Cooperative, recently announced that it is developing 15 MW of local solar generation capacity at numerous sites in its territory. Elsewhere in the American Southwest, the Kit Carson Electric Cooperative in Northern New Mexico recently announced a solar and energy storage development plan to achieve summer solar independence by 2022. This plan includes the development of over 30 MW of solar generation along with energy storage that is expected to save ratepayers more than $50 million over the next 10 years alone.

With so much of the industry’s focus on large projects and the activities of major utilities, the numerous opportunities with cooperatives are often overlooked. In many ways, the community power movement and the efforts of these cooperatives are the epitome of the global energy transition and the shift to a grid centered around renewables and DER.

 

Innovative Pumped Storage Proposals Reveal Complex Costs and Benefits

— April 14, 2017

A number of new pumped hydro energy storage projects have been announced over the past several months that aim to use abandoned mine shafts and tunnels to store vast amounts of energy. Newly proposed projects in both Virginia and Germany now join projects being developed in New York and Wales, with the goal of being the first to reuse decommissioned mining sites. Ranging in capacity from 100 MW to 250 MW, these projects are relatively small compared to many existing pumped storage plants and require more creative design and engineering to capitalize on the existing mine infrastructure. While there are several potential benefits to using existing mine facilities, these projects all face significant challenges and risks.

Seeking Advantages

The most widely deployed form of energy storage globally, pumped storage is a mature technology capable of providing massive amounts of energy storage capacity on the grid. However, the development of new projects has remained challenging due to the need for specific sites with the correct geological and geographic characteristics, lengthy and complex development processes, and environmental impact concerns. By using existing mine shafts rather than building new reservoirs, developers hope to overcome many of these issues.

Projects using abandoned mines do not need to find suitable locations for development, as much of the infrastructure needed for the project—namely mine shafts that can serve as reservoirs and grid connections—may already be in place. This should also help developers avoid permitting and land use issues, as well as opposition from local residential areas that is common with new greenfield pumped storage proposals. Overall, developers believe that the cost to build these projects will be considerably lower than that for traditional pumped storage facilities as a result of the reduced need for major construction and fewer permitting hurdles. Furthermore, developers claim that these projects can significantly boost the economy in surrounding communities, a particularly important consideration in rural areas where mines have closed and reduced employment.

Challenges to Overcome

As with all pumped storage projects, these new proposals face significant challenges. In addition to concerns around the environmental impact of such large projects, the length of time required to commission these systems and the related complexity have been major issues. This is partially due to the need for financial arrangements covering the cost to build, own, and operate such large and costly systems. There are additional challenges facing projects at existing mine facilities specifically, such as the potential for large amounts of iron or other minerals to contaminate water used in the system and damage turbines and other equipment. However, likely the most significant challenge to overcome will be the fact that no facilities of this type have been built before. There will always be the possibility for unforeseen engineering and construction challenges to delay development. For example, the mine reuse project currently furthest along, the Glyn Rhonwy facility in Wales, has been planned since 2006 and is now under construction, but likely will not be operational until 2019.

Although these mine reuse projects hold significant potential for large quantities of low cost energy storage, the challenges may be difficult for some projects to overcome. These challenges will only become more prominent over the coming years as costs for battery storage projects continue their rapid decline. We have already seen massive battery storage projects announced that rival the size of some pumped storage facilities. With battery system costs falling at an average of over 8% per year … will these new pumped storage facilities still be economical after even 5 years of development and construction?

 

Can Virtual Marketplaces Unlock the Potential of Distributed Energy Resources?

— March 28, 2017

In previous posts, I have explored innovative business models that aim to maximize the value of solar plus energy storage systems in Australia. The country has quickly become a leading market for these technologies—as well as the advanced business models and platforms necessary to unlock their full potential.

Navigant Research tracks the rapidly growing Australian market through its new Energy Storage Projects Data Service, which provides unique insights into the dynamics of markets around the world. As shown below, the majority of storage systems in Australia are being used to integrate new solar projects and maximize their value for both customers and the grid.

While the Australian market for both solar and energy storage has grown exponentially in recent years, these technologies will only be an economical investment for select customers given current business models and regulations. A new program being launched by software provider GreenSync hopes to change this situation by opening new opportunities for customers to benefit from its distributed energy resources (DER).

Navigant Research Data Services

(Source: Navigant Research)

Making Connections

GreenSync’s software-based marketplace, known as the Decentralized Energy Exchange (deX), aims to provide an avenue for distributed solar PV and energy storage system owners to trade their system’s services with local network operators in exchange for payments. Initially, the primary goal of the exchange will be to help operators manage both peak demand and variable solar generation on the grid. The opening launch of the marketplace will focus on trials with two utilities. ActewAGL, in Australia’s Capital Territory, hopes to understand how market-integrated batteries can alleviate constraints in certain parts of the grid, particularly those struggling to handle high levels of solar PV. United Energy in the Melbourne area is piloting the deX marketplace to reduce grid congestion where summer peak demand is straining existing infrastructure.

These utilities join a number of others in Australia that are working to understand how networks of DER can be utilized to provide services for grid operators in addition to the customers who own them. Utilities like AGL Energy, SA Power Networks, and Ergon Energy are working with various vendors to maximize the value inherent in energy storage systems and other flexible DER to improve the efficiency of the grid while allowing for greater amounts of solar PV to be added by customers.

Coordination Is Key

For DER providers to reach the most customers and realize the full potential of their technologies, these types of virtual aggregation platforms will be essential. Without proper coordination, the growing number of DER on the grid can result in significant systemwide inefficiencies, and their benefits may only be accessible to select electricity customers. Collaboration and coordination among DER stakeholders on the grid are key themes explored in Navigant Research’s recent white paper, Navigating the Energy Transformation.

The ability to effectively aggregate and coordinate distributed systems will be crucial for both utilities and vendors to capitalize on all the values these systems can provide. Vendors with a narrow focus on only providing cost savings and backup power for customers will significantly limit their addressable market, as their solutions may be too costly for many customers. They also risk missing out on the opportunity to play a foundational role in the development of the next-generation transactive energy system that will transform the industry.

 

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