• Energy Storage
  • DER
  • The Energy Cloud
  • Energy Storage Systems

Strategic Electrification Will Drive Energy Storage Demand for both Customers and Utilities

Alex Eller
Nov 29, 2018

Storage

The concept of strategic (or beneficial) electrification has long been regarded as a necessary tool to combat climate change by reducing the use of fossil fuels in buildings and vehicles. By bringing new sources of electricity consumption onto the grid, strategic electrification is seen as a boon for electric utilities. Navigant Research explores this topic, including business models and challenges, in detail in its recent report, Strategic Electrification Offers Load Growth and Carbon Reduction Opportunities. Electrification of systems previously powered by fossil fuels will present significant opportunities for new technologies to be deployed by both utilities and their customers to reduce costs and optimize grid operations.

Coordination Needed to Capture Benefits

Several technologies are seeing a push toward full electrification or hybridization. Water and space heating, industrial processes, and EVs are expected to have the most significant impact. Of these technologies, EVs have received the most attention, and rightfully so. While sales of EVs have been slow to date, massive growth is expected globally, which will significantly affect the electrical needs on the distribution grid. If not managed effectively EV charging can stress grid equipment and increase costs as infrastructure upgrades are required to meet higher peak demand. The coordination of EV charging patterns is required to limit the need for upgrades and the higher costs that come with them. Time-of-use pricing and demand charges have been a focus in this effort; however, alone they have a limited effect. Technologies that can enable the shifting of energy consumption too off-peak periods, most notably energy storage, will be key tools to capture the benefits of strategic electrification.

Opportunities for Energy Storage

As strategic electrification takes off, both customers and utilities can benefit from the use of energy storage systems (ESSs). An ESS, especially when combined with onsite solar PV, allows customers to store low cost energy for use during high price periods and reduce consumption from the grid at specified times. Battery energy storage receives much of the attention in the industry, yet thermal ESSs may have a more effective role to enable the vision of strategic electrification. For residential and commercial and industrial (C&I) customers, thermal energy storage paired with air conditioning, or electric water and space heating, can allow those systems to respond directly to grid signals. They can either increase or reduce electricity consumption without effecting the comfort of customers. Navigant Research’s recent report, Thermal Energy Storage, takes a closer look at these technologies and their potential impact. Residential and C&I thermal storage deployments are expected to grow rapidly by 2027, at compound annual growth rates of 25.3% and 44.9%, respectively.

Strategic electrification can provide increased customer demand and revenue for utilities. However, this new demand will also result in higher and often more carbon-intensive peak demand, and the need to upgrade grid equipment to handle it. New rate structures and the coordination of customers’ distributed energy resources (DER) can help, but only to an extent. Energy storage will be a critical tool on the utility-side of the meter to effectively support new electrification as a fully controllable and reliable source of peak capacity to defer or entirely avoid the need to upgrade transmission and distribution infrastructure.

As the electric power industry shifts from centralized generation toward cleaner DER and smart grid solutions, known as the Energy Cloud, new opportunities will emerge for electrified technologies to reduce the use of fossil fuels and harmful emissions. All available tools are needed to achieve this vision, ranging from rate structures and new business models, to advanced grid management software, and energy storage.