How storage can help solve the distributed energy ‘death spiral’ RSS Feed

How storage can help solve the distributed energy ‘death spiral’

It’s a statistic that could startle an entire industry: Cost effective distributed energy resources (DERs) are expected to displace 320 GW of centralized generation from 2014-2023, according to Navigant Research.

As early as 2018, the firm expects DERs could be outpace centralized generation in annual capacity additions. That trend, Navigant notes, is seen by many as “the supreme threat to incumbent distribution utilities, echoing the much-ballyhooed utility death spiral storyline.”

Those predictions have been public since late 2014, helping stoke worries that DER proliferation would combine with stagnant load growth to undermine utility finances across the nation.

Those concerns are especially significant for municipal electricity providers, whose small size and elected governing boards can make it more difficult to raise rates to cover expenses. But in a new report, the research and consulting firm notes the distributed energy trend can also help munis “reinvent” themselves with digital economy business strategies that create “two-way and mutually beneficial relationships with customers.”

Software-managed energy storage can do that and create “win-win scenarios” that deliver benefits to consumers, the utility, and the grid at large, according to the new report “Making Sense of New Public Power DER Business Models; The Business Case for Energy Storage.” These benefits can impose order on the potential “chaos” of the emerging DER-dominated bi-directional electron flow, Navigant argues, and can be applied to munis, cooperative utilities, and investor-owned power providers alike.

Nanogrids, microgrids and virtual power plants

Commissioned by battery energy storage provider Sunverge Energy, the paper describes storage applications in nanogrid, microgrid, and virtual power plant deployments that can help public power providers take advantage of the DER transition.

The Navigant definitions of nanogrid, microgrid, and virtual power plant (VPP) are somewhat imprecise, said report author Peter Asmus, but they are derived from U.S. Department of Energy definitions.

A microgrid, the best-known of the three technologies, “is a distribution network that incorporates a variety of possible DER that can be optimized and aggregated into a single system that can balance loads and generation with or without energy storage and is capable of islanding whether connected or not connected to a traditional utility power grid,” according to the report.

While microgrids typically include many DERs, it can be more difficult to distinguish nanogrids, their smaller counterparts, from a single distributed energy installation.

“A nanogrid is a small microgrid, perhaps only a building with a solar system of no more than 100 kW and a battery,” Asmus said. In the report, Navigant identifies it as a small electric domain limited to a single electric demand source or “network of off-grid loads not exceeding 5kW,” with devices “capable of islanding and/or energy self-sufficiency through some level of intelligent DER management or controls.”

A virtual power plant, by contrast, is the largest version, which “relies upon software and a smart grid to remotely and automatically dispatch and optimize DER via an aggregation and optimization platform linking retail to wholesale markets.”

“The keys to the VPP concept, and it is at present mainly a concept without a real market presence, is that services are managed in real time and delivered upstream so there is value to either the utility or the grid operator,” Asmus added.

Storage blurs the boundaries

One of the purposes of the paper, Asmus said, is to use case studies to show how energy storage systems are allowing the three network concepts to “merge.”

“It is becoming difficult to say whether an installation is a nanogrid, a microgrid or a VPP,” he said. “The lines are blurring because storage is a bridging technology.”

In the last year, energy storage has begun following solar PV down the cost curve, the paper reports. The biggest impact is now on nanogrids, but it is also improving the business case for microgrids and is expected to impact VPPs.

By 2025, a 5 kW solar array is expected to be $2,250/kW in U.S. markets, according to Navigant. By 2024 an advanced lithium-ion energy storage system is expected to be $2,500/kW in global markets. Together, those price points are likely to strongly advance the use of all three network concepts.

Navigant forecasts the 2025 North American market for residential solar PV plus energy storage nanogrids to be over 1.8 GW, with 30% to 40% of those nanogrids aggregated into VPPs. The use of solar and storage together in nanogrids is expected to continue expanding, leading to “new organized markets for ancillary services and efforts by utilities and grid operators alike to manage increased DER portfolios in ways that capture value upstream.”

Read full article at Utility Dive