By Michael Kuser

CARROLL, N.H. — Energy storage technology is still moving faster than state regulators and the markets can accommodate, speakers told the 70th Annual Symposium of the New England Conference of Public Utilities Commissioners (NECPUC) on Tuesday.

“Markets are moving at the pace of entrepreneurs, while states are moving at the pace of bureaucracy,” said Richard Fioravanti of energy consultancy Exponent.

The technology is changing so fast that CAISO recently had trouble qualifying a new lithium-ion battery storage project for California’s ancillary services market.

“You may think of some complicated reason why, but it was actually very simple,” said Jason Allen, vice president of operations and power for AltaGas Services U.S. The company’s 20-MW, 80-MWh facility in Pomona, Calif., holds 12,240 lithium-ion batteries. “We were ramping so fast they couldn’t” get an accurate data reading.

CAISO needs three data points to qualify a project during an ancillary services test: a starting point, one point on the ramp portion of the curve and an end-point.

“I can go from 20-MW charge and 20-MW discharge every 100 milliseconds, or 10 times a second,” said Allen. “It took [almost] two months working with them to get that simple issue worked out. And instead of the 10,000-MW/minute ramp rate, we actually detuned the system to 100 MW/minute and qualified for 36 MW [per minute], which is physically where we’re sitting right now in the market.”

Allen emphasized that his dealings with CAISO were not adversarial. “They have worked very closely with us to resolve the issues,” he said.

Speed isn’t Everything

“If you can ramp to your full load in much quicker than five minutes, it’s interesting but not necessarily valued,” said the director of market design and policy at FirstLight Power Resources, Tom Kaslow, who also serves as chair of the New England Power Pool’s Participants Committee. “As a practical matter, participation in the energy market, it really matters what you can do in five minutes — and if you can do it consistently, when the system operator needs it.”

There is a disconnect between the performance capability of new technologies and the market need for that level of performance, Kaslow said. “As a practical matter, while some of these new technologies bring a really interesting résumé to the table, their capabilities may actually exceed their ability to be valued, at least in the wholesale ISO market.”

Kaslow said battery storage can also present a challenge to RTOs’ operation of regulation markets. “I was on a panel last week where [PJM officials] were indicating that they [were] having problems, because achieving the neutral state of charge while on regulation is actually yielding periods where the charging is working in the opposite direction of their actual regulation needs in that particular interval. So there are things that need to be dealt with in respect to that much smaller market.”

He explained afterward that PJM had implemented a solution in January: PJM is placing a limit on the charging function when the regulating capability is needed to manage the area control error in a direction opposite to charging. Kaslow said it is unclear whether New England will face a similar problem.

Moderator Ned Bartlett, Massachusetts undersecretary of energy and environmental affairs, said storage is a small portion of the Massachusetts electric supply compared to other commodity supply chains. Storage of “food, water, gasoline, even oil [and] natural gas distillates [is] often close to 10%” of the daily consumption of each of these commodities, he said. “In Massachusetts right now … approximately 1% of our electricity used on a daily basis [is] in a storage capacity.”

Cheap and Cheaper

Jesse Jenkins, a Ph.D. candidate at the Massachusetts Institute of Technology, said his research indicates energy storage costs must fall 60 to 85% to be competitive with gas peaking plants and that the value of storage drops with its volume.

“The first gigawatt of storage that you might stick in the New England system has a very high value. It displaces our most costly resources that are used most infrequently,” Jenkins said. “And as we deploy more and more storage, the challenge of displacing additional capacity increases and the marginal value steadily falls.”

But assessing the total value of storage means looking at the long-term value of the assets, according to Allen, who explained the economics of the Pomona storage facility.

“Yes, the up-front cost is more, but you look at the operating costs,” Allen said. “Right now it’s about $5/kWh on an ongoing [operations and maintenance] basis. There’s no fuel, very little maintenance. Our technicians who used to [work] 24/7, for now they’re on day shift to do minor maintenance. … You also need to consider what it’s doing to your other assets. I’ve got a couple [cogeneration] units that I use right now that are dispatched for about 300 starts a year. We are just destroying those units; maintenance has gone through the roof. Getting the storage in place can really help dampen those curves and control our costs.”

More Interest Pushes Grid and Regulators

Christopher Parent, ISO-NE director of market development, said the RTO is seeing increasing interest by storage developers. “The market is maybe starting to support [storage], and people are starting to look out at what the future is and the revenue opportunities and that in certain cases, now it is economic,” he said.

The message for policymakers? “For most storage stakeholders, what they really want to see is just the markets opening up, access opening up,” Fioravanti said. “Don’t try to predict where the business cases are going, where the technologies are going. Let the markets drive that.”

Why is storage complicated? he asked. Why all the questions when there is increasing deployment, with about 2.6 GW predicted to come online by 2022?

“The reason is because … it can go everywhere and do many things,” Fioravanti said. “This becomes problematic when people look to make policy off it because … we have it on the transmission side, it works on the distribution side, we’re putting it on the customer side. All of these create issues.”

Electric Utilities and More

The Pomona storage site, formerly a paper mill, illustrates the fast changes taking place in the storage business, according to Allen. Gas-fired boilers served the paper mill, he said. “In the early ‘80s they put in a cogen unit; they innovated lower cost electric. Paper mill went away, that got torn down; the cogen unit went into the deregulated California market. We now built this battery storage facility inside the warehouse that was there. The cogen unit is still there, still in the market [but] hasn’t run for a year.”

The storage facility won a contract in the request for proposals issued in mid-2016 to counter the potential loss of the Aliso Canyon storage facility.

“The big concern there was the potential loss of gas, loss of [natural gas supply for] peaking units,” Allen said. “The mandate of that arm of the [power purchase agreement] was that we could provide four hours of [reliability assurance] service with the battery, hence the 80-MWh structure. We were awarded this in June, actually started construction in early August and it went online on Dec. 31, 2016. [Southern California Edison] said it was the fastest generating asset they’ve ever had go from groundbreaking to in-service.”

Fioravanti reminded the audience of the ubiquity of batteries, saying the industry now manufactures about 5 billion a year of the type that most people have in their laptops.

“That’s going to go up, probably double, when the [Tesla] Gigafactory fully comes online,” Fioravanti said. “Of all the batteries out there — how [storage] has penetrated into our vehicle, transportation world, our aircraft world, our shipping world and all of our everyday devices — to think that we’re going to draw the line at the utility world and say it’s going to stop here, I think can be almost a little silly.”