In 2002 the California energy crisis saw a major spike in average power prices. Consumers were shocked as their costs jumped by over 30% from what they had been only two years before. Surprisingly, many people are not aware that energy prices in California are now well above the abnormal highs of the 2002 crisis. Similar trends are in place all across the United States.
Energy costs have largely been a function of underlying fuel price, such as natural gas or coal. However as renewables such as solar and wind, began to grow some customers expected prices to ratchet downward–even as fuel prices drop–since there is no cost associated with the underlying renewable fuels of wind and sun.
One chief reason this has not happened as much as expected is the intermittency in renewables. System operators are still bearing the cost of dispatchable assets–coal and gas plants–which are kept on standby to provide power in every occasion that renewable output fails to meet the power needs of customers. This is where batteries have come to play an increasingly important role. You might say that batteries are today where solar was ten years ago, a promising technology but not always financially viable due to the high upfront cost.
A few years ago California lawmakers decided to push the market forward by requiring utilities to install over 1,000 MWh of grid storage. Here at the Solar Roadmap we are taking a close look at what this might mean for the storage market overall. It’s likely that as we track competition in storage manufacturing there will be a decline in battery prices. Add to that competing storage options, such as flywheels hydrogen generation, and the deployment of on-site storage is headed in the direction of becoming a widespread phenomenon.
Also aiding the move toward storage are changes in the way utilities charge for power, with emphasis shifting away from usage (kWh) based charges and toward demand (kW) and other fixed charges. Offsetting demand charges requires generation that can be dispatched more reliably.
Currently large lithium-ion and zinc flow battery systems are available for direct purchase or through energy savings contracts similar to the familiar solar power purchase agreement (PPA). System integrators have the option to install and maintain a battery bank at the customer’s facility in exchange for a percentage of the customer’s utility bill savings. These systems are currently financially targeted to peak shaving applications where the battery acts only over a short period to prevent the customer’s meter from spiking into a higher demand–capacity reservation–charge which will be locked in for the remainder of the billing cycle.