Your pension plan and bond funds just took a hit when Barclays downgraded U.S. electric utility bonds. Renewables and energy storage are disrupting the market and those risks need to be in the bond prices according to Barclays.

Wall Street may bet against utilities that are highly dependent on older centralized power plants, but investors and forward looking utility executives see increased opportunities in renewables, energy storage, energy efficiency, demand management, and other areas of innovation.

Enough sunlight reaches the earth each day to meet all of our energy needs for one year including powering all transportation from electric cars to high-speed rail. Globally, over 140GW of solar PV is installed and over 320GW of wind energy. Solar power has grown over 30 percent annually since the 1970s, as technology improvements and manufacturing volume have lowered its cost to one percent of 35 years ago. In the past five years, the U.S. has added more renewable energy than coal and nuclear power.

The rate of continued growth will depend on the ability to store renewable energy. Depending on location and time of year, solar often generates significant electricity from noon until 3 pm, and wind only when the wind blows, but we live in a 24/7 world. Brian Carey, Managing Principal at PwC sees grid storage growing from $3 billion annually in 2012 to $160 billion in 2017. Jim Eyer with Strategen sees major opportunities related to storage including subsystems, power electronics, semiconductors, inverters, sensors, communications, controls, and software. Financing and services add billions to the storage opportunity.

Storage

Energy storage is increasingly used at every point in the grid. Utilities use pumped hydro to dispatch power-plant scale energy during peak hours. Massive batteries and ultracapacitors smooth loads near substations, wind farms and utility-scale solar. Lithium batteries are used from data centers to net-zero buildings. Vehicle-to-grid pilots are underway.  This article outlines three categories of electricity storage that are successfully running:

1. Centralized – Utility-scale bulk power
2. Supportive – Grid support and load leveling mid-sized power
3. Distributed – Energy storage behind the meter

Centralized

Today, the most cost effective way to store MW of electricity is mechanical – water is pumped uphill at night when demand for electricity is low, and released to fall at peak hours when electricity is most valued. Gravity works.

Utilities manage pumped-hydro storage, and then deliver electricity during peak hours, in the right location at less than dirty peaker plants. 130GW of pumped hydro was used globally for energy storage in 2012, according to the EIA, with over 22GW in the U.S.

Centralized storage is valuable for a utility with older coal, nuclear, and natural gas plants that run 24/7, including at night when energy demand is low. Large-scale wind farms are also increasing the demand for bulk power storage. Pumped hydro allows energy to be stored until needed at peak hours.

Pumped hydro is starting to see competition for large-scale utility-managed storage.  New York State Electric & Gas may lead in using an existing salt cavern for 150 MW of compressed air storage (CAES). The project will be designed with an innovative smart grid control system to improve grid reliability and enable the integration of wind and other intermittent renewable energy sources.

Supportive

The Barlays report states, “Over the next few years… we believe that a confluence of declining cost trends in distributed solar photovoltaic (PV) power generation and residential-scale power storage is likely to disrupt the status quo. Based on our analysis, the cost of solar + storage for residential consumers of electricity is already competitive with the price of utility grid power in Hawaii. Of the other major markets, California could follow in 2017, New York and Arizona in 2018, and many other states soon after.”

On the mainland, low-cost natural gas is a challenge for renewables, but there is no low-cost way to transport natural gas, or even coal, to Hawaii. Oil is used in many power plants. To meet its need for clean energy, Hawaii has a renewable portfolio standard (RPS) requiring 40% renewables by 2030

Several islands, including Oahu, Maui, Kauai, Molokai, and Lanai, have installed megawatts of Xtreme Power’s integrated power management and energy storage systems, branded as Dynamic Power Resources (DPR).

Since 2009, Maui has used a one MWh DPR when the wind stops blowing to deliver electricity to the grid while a generator is brought online. Now Maui is adding 21MW of wind power and a 10 MW Xtreme Power system.

Xtreme solar project on the island of Kauai, 3MW of solar generation is supported with a 1MWh Xtreme DPR to control the variability of the solar PV generation and act as a source of spinning reserves, while providing frequency and voltage ancillary services. The configurable control system allows utility KIUC to change desired ramp rates and service priorities in real-time.

On the island of Oahu, a 10MWh energy storage system supports 15 MW of wind generation. The storage system is one-third of the cost of installing new transmission lines. However, a recent fire at the facility raises questions about the safety of Xtreme’s dry cell system. A competitor NGK experienced an explosion in Japan of its sodium-sulfur battery. These incidents raise questions about the safety of megawatt-scale batteries.

Although, Xtreme power had received over $50 million of venture investments, years of losses took it into bankruptcy. Younicos, a German company, recently purchased the company’s assets. Another grid storage emerging star, A123, is now part of NEC Corporation, a Japanese company.

Grid support and load levelingapplications, such as in Hawaii, are steadily growing as utilities pay a premium from spinning reserves and as the price of lithium and other battery technology falls. Prices will fall faster once Tesla’s $5 billion giga-battery factory is built and producing. Tesla has expanded beyond electric-car battery production, to offer lithium batteries for grid storage, especially for solar power.

According to a recent report from Navigant Research, the annual energy capacity of advanced batteries for utility-scale energy storage applications will grow from 412 megawatt-hours (MWh) in 2014 to more than 51,200 MWh in 2023, at a compound annual growth rate of 71 percent. The primary battery chemistry currently used for applications that require advanced batteries is lithium ion (Li-ion).  Next-generation chemistries, including ultracapacitors, lithium sulfur, solid electrolyte, magnesium ion, next-generation flow, and metal-air batteries, offer a combination of higher density and lower price points. According to a new report from Navigant Research, worldwide revenue from next-generation advanced batteries will grow from $182 million in 2014 to more than $9.4 billion in 2023.

While battery storage gets the most press coverage, thermal storage is often more cost effective.  Software leader SAP at its LEED Platinum Newtown Square campus uses thermal storage. Beneath a main building is an ice storage unit featuring 16 Calmac containers that create 3,500 tons of ice each night and then melt down during the day.

Distributed

Power quality behind the meteris used in residential and commercial operations. As I type this article, my computer is protected from surges and power outages with a UPS. The article is then stored in data centers that use batteries and sometimes flywheels to provide redundant back-up.

Reliability justifies other forms of storage. If a data center is down, it can cost millions of dollars per hour. On Wall Street, the cost can be millions per minute. Although lithium batteries cannot be justified for many mundane applications, data centers increasingly cannot afford less than 99.999% uptime.

The energy stored in 50 million electric cars could equal our daily use of electricity. Vehicle-to-grid (V2G) pilots have occurred in 20 states. Recycling electric vehicle batteries into less demanding storage is another alternative. V2G and V2H article.

Residential storage will see strong growth, often as part of a solar power installation. Twenty years ago, most solar included battery storage. In the years ahead, most solar may again include storage. Solar City, Solar Grid Storage, SunPower and others are offering customers storage options with solar installations.  According to a new report from Navigant Research, worldwide revenue from all forms of residential distributed generation and energy storage will grow from $52.7 billion annually in 2014 to $71.6 billion in 2023.

Emerging forms of storage must add value to justify the investment: high-priced regulatory services, avoidance of other costs such as transmission lines, emission avoidance, avoidance of alternative costs to improve reliability. In the United States, aging generation, transmission, and distribution has failed to meet new demands for reliability and distributed generation.

Traditionally, the electricity grid has functioned mostly without any stored resources.  Today, however, the rapid expansion of distributed, renewable energy resources is increasing demand for energy storage on the grid even as technological advances in electrochemistry are enabling advanced batteries to play an increasingly important role in grid management.

Energy storage promises to make our electricity more reliable, cost effective, and increasingly renewable. Thousands of energy storage systems exist at the centralized, supportive and distributed levels using a variety of technologies including pumped-hydro, battery and thermal.