Crews work on a solar farm near Minster, Ohio.

American Renewable Energy and Power

Crews work on a solar farm near Minster, Ohio.

Energy storage growth could boost economics for Ohio renewables

Dramatic growth in energy storage could have big implications for renewable energy in Ohio, as well as place increased economic pressure on the state’s fossil fuel plants.

Energy storage deployments for the third quarter of 2015 were twice those for the same period a year earlier, according to a report issued in December by GTM Research and the Energy Storage Association.

Of the 60.3 megawatts (MW) added to total energy storage for that quarter, a majority came from the “behind-the-meter” market. Most of the “front-of-the-meter” additions for utility-scale storage were for short-term frequency regulation in the PJM market, which serves Ohio, the District of Columbia, and all or parts of a dozen other states.

The growth could have huge implications for Ohio, where growth in solar and wind energy has slowed dramatically since state lawmakers “froze” the state’s renewable energy standards in 2014.

In the short term, growth in energy storage could lead to increased competition in the fast frequency regulation market.

On a longer-term basis, energy storage could eventually help renewable energy sources provide not only intermittent power, but also some amount of base power, while providing added downward pressure on electricity prices as well.

A balancing act

Nationwide, the GTM report forecasts that deployment of energy storage resources will exceed 1 gigawatt (GW) annually by 2020. The resulting 1,349 MW annual market would be about seven times larger than it is now.

“Energy storage is a unique resource, as it is capable of acting as generation or load as the situation demands,” said Ravi Manghani, a senior research analyst for GTM Research.

That flexibility has made energy storage especially useful for frequency regulation — how the grid operator aims to balance supply and demand on a continuous basis.

“Regulation is an important ancillary service PJM uses to help balance the transmission system as it moves electricity from generating sources to customer load,” said PJM spokesperson Jason McGovern.

On the one hand, energy storage acts as a “buffer” to deal with the intermittent nature of wind energy and solar power, Manghani noted. If too much is being produced at any one moment, storage provides a place for that electricity to go.

On the other hand, if there’s too much demand, energy storage can be one way to supply enough electricity to keep everything in balance.

A power plant that runs on natural gas or another traditional generation source can also fill that kind of need, which happens in the case of peak power. But those other sources are not well suited as so-called fast-response resources, when an adjustment may be needed within less than a minute.

It can take six to ten minutes for a natural gas-fired power plant to respond to a call for increased power, and then another six to ten minutes to cut off that supply when the demand decreases, said David Dwyer, president of American Renewable Energy and Power in Columbus, Ohio.

“And it produces a lot of extra pollution,” including excess carbon dioxide emissions that contribute to climate change, he added.

In contrast, an energy storage facility with batteries can ramp up in just a few seconds without releasing emissions, Dwyer said. Other types of fast energy storage resources include water heaters and flywheels.

And PJM needs those fast-response resources for roughly one-third of its total frequency regulation needs, McGovern said. As of mid-2015, that market required about 700 MW on peak and 525 MW off-peak.

Those market needs breathed new life into a 4.3 MW solar energy project for Minster, Ohio.

Originally envisioned as a solar-only project, the array had looked economically viable until Ohio passed Senate Bill 310 in 2014. Among other things, that law “froze” any increases in the targets for the state’s renewable energy standards.

A collapse in the state’s market for solar renewable energy credits (SRECs) quickly ensued, and progress on the Minster project was also frozen.

“The investors who wanted to invest in the solar-only project could no longer factor in SRECs as an asset,” Dwyer noted.

Adding a 7 MW battery storage facility to the project’s plans made it economically worthwhile. Construction finally began last summer. “We expect the solar array to produce about 5,500 megawatt-hours (MWh) per year,” Dwyer reported.

In his view, the project will benefit his company, the project investors, and the village of Minster, which has a power purchase agreement to buy approximately 3 MW of electricity from the system.

“So what happens is that the solar array produces clean power directly for the residents and businesses in Minster, which is great,” said Dwyer. “It also provides a financial hedge for the city to buy their own generation.”

Better still, the power purchase agreement price compares favorably with going market rates. “It produces savings right away,” Dwyer stressed, adding that those savings “will continue for 25 years.”

Battling baseload?

Energy storage may not yet be able to compete against coal and nuclear power, at least at today’s market prices, Manghani noted.

“But [coal and nuclear] come with inherent challenges — environmental and minimum scale for economic deployment,” he added. “Storage, on the other hand, can be modular and help replace old/retiring capacity.”

Overall grid resilience can benefit from storage as well, Manghani said. Storage can also enable businesses and residences with distributed generation capacity to use more of the renewable energy than they might produce.

From the viewpoint of consumers and society then, energy storage can be a factor in managing electric bills and keeping demand charges low, Manghani noted.

That type of downward pressure on electricity prices seems contrary to predictions by Ohio utilities, who are seeking regulatory approval for long-term contracts that would guarantee sales for an affiliated nuclear plant and several coal plants.

Critics have called those plans a “bailout” for noncompetitive power plants.

Both FirstEnergy and American Electric Power have tried to justify the above-market prices sought for electricity from their affiliates’ power plants by arguing that electricity produced by  natural gas and other types of generation sources will eventually become or stay more expensive than coal and nuclear energy.

And both utilities are currently asking the Public Utilities Commission of Ohio (PUCO) to approve settlements that would add additional provisions beyond the original sales guarantees.

In AEP’s case, those additional terms would include battery technology, which could make solar and wind projects included under the settlement more viable from an economic perspective.

However, AEP’s proposed inclusion of battery technology is contingent upon having costs for the storage included in the rate base for distribution services.

Other investors in energy storage for generation projects in Ohio generally do not have their capital costs guaranteed.

“The way we understand the deal, it is going to be very bad for Ohio,” Dwyer said. Among other things, he believes, “AEP can have the Ohio ratepayers finance their attempt to monopolize the distributed renewable energy and insure a profit to their investors.”

 

Editor’s note: An earlier version of this story incorrectly swapped the terms “front-of-the-meter” and “behind-the-meter” in the third paragraph. This version has been corrected. 

5 thoughts on “Energy storage growth could boost economics for Ohio renewables

  1. Can you explain this sentence from the article?

    Overall grid resilience can benefit from storage as well, Manghani said. Front-of-the-meter storage can also enable businesses and residences with distributed generation capacity to use more of the renewable energy than they might produce.

    • I believe he means ‘behind the meter’ storage for those who have distributed generation.

      For example, my solar array is behind the meter. If I also have a battery storage system-also behind the meter-excess energy produced by my solar array can be stored there for later use, when the array is not producing.

      In this sense, the system owner can use more of the energy produced, but not more than it does produce.

    • Thanks for your question, Ms. Andrews. Suppose you have some on-site solar or wind generating capacity. You could feed any excess electricity into the grid for net metering credits. You could also direct some of that extra electricity to on-site batteries and draw on it as needed at other times. That would let you use more of the electricity your equipment produced and provide some increased resilience in case of a grid problem too.
      This kind of arrangement would generally appeal more to commercial and industrial users, but is also possible for residential users. Tim Niklas, featured in one of our articles last year, had batteries for a portion of his residential solar array. See our article at
      http://midwestenergynews.com/2014/10/07/green-energy-tour-spotlights-gap-between-ohio-policy-and-potential/ .

      • Ms. Kowalski,

        I think the confusion is coming from your use of the terms “behind-the-meter” in reference to utility-scale projects and “front-of-meter” in reference to C&I installations in paragraph 3. I think you have the terms mixed up, utility-scale usually associates with “front-of-meter” and C&I installs generally happen behind-the-meter.