Storage Is An Industry Game Changer
During my 37-year career in the utility industry, one constant has always been that electricity must be generated as consumed because you can’t store electricity. Commodities such as natural gas can be stored in pipelines, storage facilities, liquified natural gas facilities, etc., however, electricity has always been viewed as a real-time, use it or lose it commodity. You can store energy produced by electricity in other forms such as water in a pumped storage or impoundment that can generate electricity, however, it is not truly electricity being stored. The new battery storage systems can actually store electricity.
Conventional wisdom has been that large centralized generating stations with high voltage transmission systems and lower voltage distribution systems would result in lowest price electricity. This philosophy has held true from the mid-seventies through mid-2018. With the improvement in battery technology, inversion improvements, sophisticated control and monitoring systems and most importantly the drop in storage prices. The traditional centralized model may soon become obsolete by the point of service/ microgrid model.
A huge difference in the acceptability of todays battery energy storage system (BESS) is they can be adapted to individual needs. Some customers use BESS for peak demand management which requires a certain amount of energy for a short period time, while others need storage systems to provide firm service when their renewable energy source is not generating. The emerging need is to design a BESS that can perform dynamically to discharge and recharge quickly to meet market arbitrage activity. Where traditional electric generators have significant ramp up and down constraints, BESS systems can react with almost immediate response which will enable electricity market participants to benefit and possibly capture market value fluctuations on a real-time basis which is not currently possible.
The most promising area of growth for BESS is the ability to improve the value and economics of renewable energy resources. We have seen the value of energy from wind generation drop to negative value because it produces when customer load drops. BESS systems can capture what would otherwise be zero or even negative value and discharge the electricity when the market value is significantly higher. This ability to improve value from renewables will provide an avenue to increase renewable generation development.
The entire country is consumed by the fear of cyber attacks on the electric grid. Billions of dollars have been mandated to utilities to spend to improve cybersecurity protection to ensure critical infrastructure can perform and ensure electric power will reliably serve entities considered part of our national security. The development of storage allows each critical entity to self-supply electric energy and reduce dependency on the electric grid. In short, distributed generation and storage can help protect our critical functions in the country by being able to detach from the grid and still function. During my career, every commercial and residential entity had to be connected to the grid to receive economic electricity. With the improvement of BESS, a successful entity can choose to be connected to the grid or not. It can choose to locate based on other factors and because it can still operate off-grid means a more secure and sustainable future.
Michael W. Henderson is executive vice president and chief financial officer of Arkansas Electric Cooperative Corp. (AECC) and Arkansas Electric Cooperatives, Inc., (AECI) and President of Today’s Power, Inc. (TPI). Previously, he served as manager of treasury for AECC. He has been employed by AECC since 1984. Before joining AECC, he worked for Associated Natural Gas Co. and the Arkansas Public Service Commission.