There is a fundamental disconnect between electricity generation and consumption. This makes the market inefficient. Moreover, electricity is a perishable good which magnifies this inefficiency.
Currently, generation is aligned with consumption. It also happens that consumption is not particularly smooth – meaning that depending on the time of the day, the weather, and the location, one area may have a moderate consumption profile and another will have spikes that are difficult to predict. This means that generation is increased and decreased in line with consumption – which is itself volatile. It’s no wonder electricity prices are rising and some utilities and grid operators are facing increasing challenges to deliver electrons where they are needed.
In practice, base load generation assets, peak generation assets, intermittent assets and energy storage assets (where available) are manipulated to deliver the right amount of electricity to the grid at each moment. However, at every turn, there are opportunities to maximize the efficiency of generation: base load assets such as geothermal, coal and gas-fired power plants, nuclear power plants and the like, can be optimized for efficiency instead of being cycled up and down to accommodate consumption. Peak generation assets such as natural gas peakers are well-known to grid operators, but are expensive to operate. The benefit of peakers is that they are a proven technology that can provide energy when the grid needs it most. Intermittent assets such as wind and solar contribute to generation, but their benefit is limited by their inherent intermittency. Finally, energy storage assets (limited in deployment) are mostly limited to pumped storage, compressed air energy storage, and batteries of different types – are the key to maximizing all generation assets.
Energy storage provides a storehouse or depot for storing energy between the time it is generated and the time it is consumed. This makes the market more efficient in several ways:
- Generation assets can be optimized and maximized
- Generation can be distributed
- Generation can be intermittent (as with some renewables)
- Consumption can be managed (as in grid congestion)
- Consumption can be smoothed (as with load-side storage)
Of course, only a few technologies have had wide-spread success serving the energy storage market. And wide-spread success is a relative term. Although there are approximately 100 GW of pumped storage, for instance, countries such as India and China are increasing energy consumption at a voracious clip. And who can blame them? Energy is a substitute for work and is the key to engineering economic growth for export-driven economies. Hopefully, middle income and even high income countries will understand the benefit of storage in making the energy market more efficient.