Energy storage is surging across America. Total installed capacity passed 1,000 megawatt-hours (MWh) during a record-setting 2017, and the U.S. market is forecast to nearly double by adding more than 1,000 MWh new capacity in 2018 – adding as much capacity in one year as it did in the previous four.
However, this exponential growth has mainly been limited to vertically integrated utilities operating outside of the country’s organized power markets, which serve two-thirdsof all U.S. electricity consumers. So how can energy storage plug into these markets?
In a word, revenue.
Energy storage can collect revenue in America’s organized power markets three ways: platforms, products, and pay-days. However, different projects will tap these potential revenue streams in different ways, and investors should seek nimble developers who can navigate a complex and evolving regulatory and market landscape.
In part two of this series, we’ll explore how storage will disrupt power markets as more and more capacity comes online, but first let’s cover the three ways it can tap the U.S. organized market opportunity.
Platforms: The Best Laid Plans…
Independent system operators (ISOs) go through a planning process where they identify opportunities for new transmission to improve reliability or market efficiency. Similarly, it’s normal to think about energy storage as a reliability asset, and it can become integrated as a lower-cost, non-transmission alternative to boost reliability.
Here’s an example: A relatively isolated area on the grid must plan for losing a transmission line or local generator during peak demand. Rather than adding new transmission or local generation, building a storage project can carry a local grid through an emergency. If the economics add up, the project will then be built, and paid on a cost-of-service basis financed through transmissions charges.
If storage in this example plays the same role as transmission for so-called “reliability transmission expansion”, it should also enjoy an analog to “economic transmission” – transmission built to move surplus energy to constrained areas to create benefits for market buyers and sellers. But to date, only one such project exists within the U.S. independent system operators (ISOs), located near Baltimore on the PJM grid.
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