The term “market disruptor” is seemingly thrown around for every new technology with promise, but it will be quite prescient when it comes to energy storage and U.S. power markets.
New U.S. energy storage projects make solar power competitive against existing coal and new natural gas generation, and could soon displace these power market incumbents. Meanwhile, projects in Australia and Germany show how energy storage can completely reshape power market economics and generate revenue in unexpected ways .
In part one of this series, we discussed the three ways energy storage can tap economic opportunities in U.S. organized power markets. Now in part two of the series, let’s explore how storage will disrupt power markets as more and more capacity comes online.
New projects in Colorado and Nevada embody “market disruption”
True market disruption happens when existing or incumbent technologies can only improve their performance or costs incrementally and industries focus on achieving those incremental improvements, while an entirely new technology enters the market with capabilities incumbents can’t dream of with exponentially falling costs incumbents can’t approach.
As energy storage continues getting cheaper, it will increasingly out-compete other resources and change the mix of resources that run the grid. Recent contracts for new solar-plus-storage projects signed by Xcel Energy in Colorado and NV Energy in Nevada will allow solar production to extend past sunset and into the evening peak demand period, making it competitive against existing fossil fuel resources and new natural gas.
In fact, energy storage can increasingly replace inefficient (and often dirty) peaker plants and gas plants maintained for reliability. This trend isn’t limited to utility-scale power plants – behind the meter (i.e., small-scale or residential) energy storage surged in Q2 2018, installing more capacity than front-of-meter storage for the first time.
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