Energy storage creates many winners, so who pays?

The benefits of energy storage projects are far reaching, from reduced maintenance costs at power plants to less price volatility for electricity customers.

That raises a tricky market question for pumped-hydro, compressed air and other types of energy storage projects: Who should pay for them?

Technical difficulties postponed a webinar on Friday, when backers of a recently abandoned energy storage project in Iowa planned to debrief the industry on lessons learned from the project. The group did release its final report, published by the U.S. Department of Energy’s Sandia National Laboratory.

Among its recommendations is a call for electricity grid operators to develop tariffs that would allow storage developers to collect money from others who would benefit.

RELATED: Scrapped Iowa project leaves energy storage lessons

The Iowa Stored Energy Park was to have been a 270-megawatt compressed-air energy storage facility located near Des Moines. The association of municipal utilities that was exploring the project terminated it over the summer after concluding that Iowa’s sandstone aquifers weren’t suitable for compressed air storage.

In the eight years they studied the concept, the team says they learned several lessons that might help other bulk storage developers, and most of them apply regardless of the geology or storage technology used, they say. Many of them deal with economic, legislative, and transmission issues.

Here are some highlights from the report, Lessons From Iowa:

On economics: Compressed-air energy storage facilities cost more to build than natural gas generators and have similar operation and maintenance costs. However, bulk storage facilities can be more cost-effective than conventional generators because of other “unique attributes” that can make other plants more profitable. They decrease the amount of cycling — dialing output up or down — that needs to happen at other plants, which helps those power plants run more efficiency with less wear and tear. Storage facilities also help reduce hourly price volatility in a market.

On transmission: The potential for the Iowa storage to reduce or defer transmission line investments was “disappointing,” the report says. The project offered “little or no such benefits.” The reason is that the storage facility wasn’t slated to be “collocated” next to a generation source, such as a wind farm. That means there’s potential for the energy to encounter congestion between the power plant and the storage site. “[L]ocation of the storage on the transmission system, particularly relative to generation facilities that could benefit from the storage, matters.”

Who gains, who pays: The benefits of energy storage projects spread far beyond the owner, unless the owner also owns all of the nearby generation. Lessons From Iowa suggests that electric grid operators should come up with a system of tariffs to help “commoditize” these benefits, such as reduced cycling and maintenance at power plants. The existing computer planning models used by utilities do a poor job of modeling the benefits of storage and would need to be improved.

On renewable policies: Bulk storage facilities help utilities get more value out of renewable investments. Wind tends to blow most at night, when electricity demand (and prices) are low. Being able to store energy until daytime when it is needed enables more renewable development, which is why states should allow energy storage projects to count toward their renewable energy standards, the report argues. “Legislation or other policy initiatives are necessary to enable the full benefits of storage in encouraging and supporting renewables development.”

On community relations: Energy storage developers can’t forget they need to win the support of people who will live near the facilities. Lessons From Iowa recommends being as transparent and accessible to the community as possible. The local community should be involved in where the facilities will be located, it says. “Community objections to a new project are often based on lack of information.”

On geology: This is what ultimately derailed the Iowa project. Finding an aquifer that will work as a site for compressed-air energy storage is “time-consuming and challenging.” Also: “problematic.” The economics of this project looked favorable enough, but “the geology was a negative factor.”

The Lessons From Iowa report is available for download at http://www.lessonsfromiowa.org.

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