The age of storage serving peak power has only just begun, so the size of that market is very much up for debate.
California has already halted a new gas plant in favor of deploying energy storage in its place. Elsewhere, regulators called on PG&E to acquire storage instead of paying to maintain two existing gas peaker plants. An Arizona utility recently procured asolarand battery project specifically to serve capacity for system peak hours.
These are early signs of a dramatic shift in how the grid gets electricity when demand is highest. “The amount of press written on storage as a peaker replacement has grown tremendously over the last several years,” said Paul Denholm, a researcher at the National Renewable Energy Laboratory. “My concern was, this might be exciting, but is there a real market there?”
When a new market appears and draws investment, it comes with the risk of proving shorter-lived than developers hoped. That dynamic played out in the early storage market for frequency regulation in PJM, which has mostly dried up due to oversaturation and rule changes.
Denholm and colleague Robert Margolis decided to test the market potential for storage-as-peakers, using load data and simulated solar PV production from California. Their new study suggests that peak power in California alone constitutes a massive market opportunity, which will continue to grow as solar capacity increases.
First, Denholm and Margolis established a baseline of how much storage could compete for peak capacity without any intermittent renewables to deal with. They modeled 4-hour storage, because that’s the threshold that California rewards with a full resource adequacy credit. As more batteries come online, they incrementally flatten the peak, eventually requiring longer-duration units to meet additional peak demands, as illustrated in the following chart.
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