Rocky Mountain Institute
[RMI Outlet] …In our new report, The Economics of Battery Energy Storage, we asked some important fundamental questions:
- What services can batteries provide to the grid?
- Where on the grid can batteries deliver each service?
- How much value can batteries generate when they are highly utilized and services are stacked?
- What regulatory barriers currently prevent single energy storage systems or aggregated fleets of systems from providing multiple, stacked services to the grid?
Our research indicates that batteries, when placed behind the meters of residential, commercial, or industrial customers, can deliver 13 services to the electricity system at large.
This finding, though important, doesn’t tell us how much net value batteries can deliver to the electricity system. To estimate this, we developed an energy storage dispatch model to understand the economics of energy storage in four potential real-world scenarios.
Our results were surprising. Batteries deployed behind the meter are “in the money” right now, under prevailing cost structures, without subsidy. This finding comes with two major caveats:
- Batteries must be well utilized and deliver multiple services to customers and the grid in order to be cost effective. The prevailing energy storage business model in the U.S., using a battery to reduce a commercial customer’s demand charge, delivers a single service to a single stakeholder and typically underutilizes the battery—sometimes dramatically so. Batteries deployed for demand charge reduction are only used for 5–50 percent of their useful life. That means those same batteries could be re-dispatched to deliver other services to other stakeholders, like utilities and independent system operators/regional transmission organizations, and get paid for them, dramatically changing the economics of energy storage.
- Our modeling results assume no regulatory barriers to aggregated, behind-the-meter market participation or revenue generation. As we’ll cover in a moment, a number of regulatory prohibitions currently prevent batteries deployed behind the meter from delivering and getting paid for these services. Our modeling results artificially remove these regulatory barriers in order to understand the economics of energy storage without regulatory restrictions…