Battery Power on the Grid

On Tuesday, February 13, 2017, the Wall St. Journal Business and Finance Section featured an article entitled “Sun + Batteries = Peak Power.”  The article pointed out that utilities are large buyers of lithium-ion batteries.  One of the uses of these batteries is indeed to store power produced by solar and wind energy sources.

However, these giant batteries are also beginning to take the place of standby power plants known as “peakers” that are generally called into service by utilities at brief intervals of peak demand.  Rather than producing power by running their ‘peakers,’ utilities are having good success in drawing power off of very large lithium-ion batteries that they have charged-up via the grid during off peak hours, thereby obviating the need for these expensive redundant power generation facilities.

The photo above is instructive because this is actually the ‘look’ of industrial sized batteries.  It is not unusual that these batteries are grouped into sizes such that they can reside in and be transported by truck container (those large metal boxes on 18- wheel trucks and rail cars.)  The photo is also instructive because the batteries are attached to the grid itself and not to wind or solar generation sources.

In addition to being less expensive, battery power provides a much faster, more flexible, more accurate, and more efficient alternative to calling on a conventional power generation sources to address disruptive demand events on the grid.  Ordinarily, a utility can access its battery system virtually instantaneously through the use of computer software signals in a manner that is seamless to both the utility and the end-users.

A good overview of the state of the big battery industry can be had by visiting the website of The Energy Storage Association (the “ESA”).  This is a trade group in Washington, DC whose members are the ‘Who’s Who’ of the global electric power utility and engineering world.  The group’s mission has been to implement the goal of utilizing energy storage (i.e., batteries) by providing advocacy and leadership on coordinating national and international policies.

According to the ESA

  • The global energy storage market is growing exponentially to an annual installation size of 6 gigawatts (GW) in 2017 and over 40 GW by 2022 — from an initial base of only 0.34 GW installed in 2012 and 2013.
  • Flywheel and battery energy storage systems are operating today in the competitive ancillary services power market – providing a 10x faster and more accurate response to a power dispatcher’s signals compared to power turbine generators.
  • Over 60 million Americans in 13 mid-Atlantic states plus the District of Columbia are saving money and receiving highest quality service thanks to energy storage systems operating in that region.
  • PJM Interconnection projects that just a 10-20% reduction in its frequency regulation capacity procurement – made possible by additional storage projects – could result in $25-50 million in savings to residential, commercial and industrial consumers.
  • The California Public Utilities Commission (CPUC) approved a target requiring the state’s three largest investor-owned utilities, aggregators, and other energy service providers to procure 1.3 gigawatts of energy storage by 2020.

While the use of batteries on the grid itself has been growing, private industry also (especially manufacturing) has taken to using giant batteries to accomplish what is called ‘peak power shaving.’

A utility will ordinarily set its customer’s rate depending on the highest point of the user’s demand on the grid.  For example, if a manufacturer ordinarily runs its plant to its fullest capacity at 2:00PM on Tuesday afternoon, that peak demand point will determine the cost of that plant’s electricity.

If that plant were to implement a system where it could draw upon giant batteries at 2:00PM on Tuesday and draw less power from the grid, that plant could achieve what is known as “peak power shaving.”  This means that its highest point of peak demand on the grid will now not coincide with its actual use of electricity and the rate it is charged by the utility for all of its electricity will be lower.

Battery power is proving to be more suitable for heavy industry than the automobile industry for several important reasons.  The first of the these is size.  An automobile is narrowly constrained with respect to the space in which it can carry barriers.  As the photo above demonstrates, heavy industry has virtually no constraints with respect to space.  If the power plant in the photo wanted additional battery power, it could simply wheel in a few more containers of batteries.

The second issue is recharging.  An automobile battery is designed to travel and when it needs to be recharged, it must sit idle near the recharging source.  Batteries in heavy industry are stationary and continuously connected to the grid and are accessed, de-accessed and recharged virtually instantaneously by computer program.

Other important issues are expense and technical ability of the end user.  Industrial users of batteries implement battery power through professional engineering staffs as part of mission-critical infrastructure.  Automobiles for consumers are sold around a single price point to end consumers who are assumed to have the barest minimum of interest in how their vehicle actually works.



About Chris Donnelly

Christopher J. Donnelly, is an experienced attorney, bond analyst and fixed income strategist, with years of experience in structured finance, distressed bonds and bond related litigation in a variety of industries and the emerging markets. He is a graduate of Rutgers University (BA), The University of Pennsylvania (JD) and New York University, (LLM in Taxation). Chris is a Managing Director of Straacom, LLC and can be contacted at Straacom provides strategic research, analysis and communications for publication and on assignment for private clients.

Leave a Reply

Your email address will not be published. Required fields are marked *