State of the electricity utility 2021: despite a sharp drop, cost remains a major obstacle to more storage, some say

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The storage industry in the United States continued to set growth records in 2020, but some in the industry still believe the high costs could be a barrier to bringing more storage resources online.

Two-thirds of respondents to Utility Dive’s latest State of Electricity Service Survey, conducted in late 2020, identified high costs as the biggest challenge their organizations face in adding more storage on their systems. In comparison, less than a third indicated that insufficient state and federal incentives were a major obstacle, while only a quarter thought that the lack of capacity assessment and access to markets was the biggest problem.

Storage costs have fallen sharply in recent years, admitted Ryan Hledik, director of the Brattle group.

But “even though storage costs fell rapidly, they started to be very high. So it is only recently that the cost of storage has fallen to the point where it has started to be competitive with other resources,” Hledik added.

The storage market saw 3,511 MWh of resources interconnect to the grid in 2020, an increase of 214% from 2019, according to Wood Mackenzie. In the fourth quarter alone, more than 2,100 MWh of storage systems were commissioned, marking a new quarterly U.S. record for the industry, a March report from Wood Mackenzie and the US Energy Storage Association (ESA) found. And that growth path is expected to continue – the report estimated that annual deployments will increase five times in 2025 compared to 2020, largely thanks to advanced systems.

U.S. Energy Information Administration (EIA) also expects dramatic increase in battery storage deployments from approximately 1,600 MW of installed battery capacity at the end of 2020 to nearly 10,700 MW by the end of 2023, said Glenn McGrath, team leader at EIA. The EIA does not currently collect survey data on the expected energy capacity of these proposed units, although the general trend indicates significant increases in duration.

“It depends on the market”

Meanwhile, the average cost of large-scale battery storage energy capacity has fallen from $ 2,152 / kWh in 2015 to $ 625 / kWh in 2018, according to an October EIA report. Costs may vary by region and application between 2013 and 2018, the average cost of large-scale batteries in the PJM interconnect was $ 1,946 / kWh, but only $ 947 / kWh in Hawaii.

Despite these overall declines, costs still seem to be a sore point for the industry; 66% of 297 participants who answered a question about the biggest challenge organizations face in adding more storage to their systems pointed to the high costs.

“It depends on the market,” Hledik said.

In some places where building a gas unit, for example, is not feasible at this stage, storage does not need to compete with gas and is more economical. compared to a region that still produces a lot of gas that could be cheaper than a battery at today’s prices, he pointed out.


“If you’re in a restructured market and it’s a place of arbitrage, the storage isn’t going to be just a game of arbitrage.”

Jason burwen

Interim CEO, US Energy Storage Association


“There are some markets where only the fundamentals make the storage economy better than others, so you have some markets that are more advanced in terms of profitable storage, and therefore deployed in greater numbers,” added Hledik.

The Brattle Group has carried out numerous analyzes which have revealed that there are profitable opportunities to deploy storage in the fairly short term, according to Hledik. There are already signs of this on the ground there are several markets across the country where utility scale storage project deployment has increased quite significantly, and there is a huge amount of capacity in the pipeline.

And while the decline in storage costs may not necessarily continue at the rate seen historically, it is expected to continue, Hledik said.

In general, the cost of storage depends on what you’re trying to do with a resource, where and how it’s compensated, agreed Jason Burwen, acting CEO of ESA.

“If you’re in a restructured market and it’s a place that is being arbitrated, the storage isn’t going to be just a pure arbitrage game,” Burwen said.

However, if storage is offered as a resource adequacy capacity and the utility has either pure availability constraints or risk profiles associated with public policy, then energy storage “could have a lot. meaningless – and the costs have not necessarily changed between these systems, ”he continued.

In general, the industry sees and expects to continue to see the most advancements in large-scale storage, says Dan Bradley, Partner at Guidehouse this is where the impacts of lower costs and more efficient business models are concentrated, and translate into the ability to price storage at a lower price.

“When you switch to distributed energy storage and start thinking about residential storage… [it’s] there, I think, there are a ton of huge opportunities for the industry and there are definitely a number of barriers, cost being one of them, ”Bradley said.

Insufficient incentives and funding remain problems

For 31% of those surveyed, one of the biggest challenges about adding additional storage to their systems is insufficient state and federal incentives. For the moment, storage systems are only eligible for the investment tax credit (CTI) if they are coupled with other eligible resources, such as solar although federal legislation introduced by a group of lawmakers in March may change that.

Storage advocates, including ESA, have been calling for a stand-alone storage ITC for some time; In a white paper published last August, ESA identified a stand-alone storage credit as a key federal policy tool to support storage deployment.

“This would create an investment signal and facilitate a rush of capital into storage development that would match the storage demand resulting from clean energy transformation and electrification over the next decade,” notes the newspaper.

The availability of ITC has been one of the main reasons why many developers associate solar installations with large storage capacity, and given the amount of solar storage more added to the queue, this seems to be an important driver for the storage industry, says Burwen.

“On the other hand, there are many projects which are also autonomous, which have drawn [out] without necessarily relying on a federal incentive basis and this is partly because… these developers are perhaps finding the places where there is the most competitiveness, ”he added.

State policy will likely be the most important driver for the industry, according to Burwen policies such as adopting 100% clean energy commitments or implementing storage targets can be important enough to change the way a grid planner views what will be a prudent investment in the future. long term.

But at the same time, more and more utility plans are also taking off without this supportive policy, as storage resources may be able to meet system reliability needs more cost effectively today, a- he added.

Between 15% and 28% of survey respondents highlighted four other challenges they face in adding more storage to their systems: financing, lack of proper assessment and access to capacity markets, interconnection barriers and delays, and site licensing and security requirements.

These are largely challenges facing most energy technologies, McGrath pointed out. Funding, in particular, is sometimes tied to whether a developer has a power purchase contract and what proportion of their production is under contract.

“It makes it a lot easier to get funding, when you can demonstrate that you will be able to collect known income under contract,” he added.

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