Energy Storage

GAO report outlines promise, challenges of energy storage

A new report from the Government Accountability Office identifies challenges to the deployment of energy storage on the electric grid and the measures being taken to address those challenges.

The report found that energy storage can be used for a variety of purposes. For instance, energy storage can help grid operators address supply disruptions and the variability of renewable energy resources, such as solar and wind power, and it can help relieve transmission congestion and defer the need for transmission or distribution system upgrades.

Factors affecting the deployment of energy storage include technological readiness, safety concerns, cost, and challenges quantifying storage’s value. The report also noted that federal and state policymakers are making efforts to address those challenges.

The report noted that energy storage can be more challenging to integrate into the grid than renewable resources such as solar and wind power because it can both consume and discharge electricity. Energy storage’s dual nature means that it does not fit neatly into the models that grid operators use to make decisions about electric sector investments.

The report also noted that energy storage’s track record is still lacking. For instance, energy storage systems are generally expected to last for at least 10 years, but the actual rate of degradation is still largely unknown.

In addition, safety codes and standards for storage are still not fully formulated, and questions have been raised about safety risks and how to mitigate those risks. Local authorities’ unfamiliarity with energy storage systems can add more time to the permitting process.

The GAO report noted that two of the main drivers of energy storage installations are the rapid growth of renewable resources and cost declines in lithium ion battery prices.

Energy storage can be used to smooth out the variability of renewable resources such as wind and solar power. Citing Energy Information Administration data, the report noted that utility-scale solar installations grew at an average rate of 72% per year between 2010 and 2016 and that nearly half of the roughly 25 GW of new utility-scale electric generating capacity built in 2017 used renewable technologies.

As renewable resource installations continue to grow, there will be an increased need to add storage to balance the grid, particularly in states such as California and Hawaii that have aggressive renewable energy targets. Hawaii aims to have 100% renewables by 2045, and California aims to have 50% of its electric supplies come from renewables by 2030.

Despite the growing need for energy storage, in many instances the costs remain high compared to traditional resources, the report said. Lithium ion battery costs have declined in recent years, but battery costs are only one component in an energy storage system. The cost of the actual storage device represents between 25% and 50% of the total cost of an energy storage system, and according to stakeholders interviewed by the GAO for the report the cost of components needed to integrate storage with the grid – inverters, software and monitoring and control systems – are not declining as quickly as the cost of storage devices such as batteries.

When considering an energy storage installation, weighing costs against benefits is a key consideration, but assessing the potential benefits of energy storage can be “challenging,” the report said.

Benefits can be difficult to quantify, the report noted, because they depend on “the application, location, and ability to capture multiple benefits.”

The revenues available for some of the services that energy storage can provide, for example, depend on local conditions such as market rules or electricity rate structures. In addition, the value of some energy storage applications can be harder to quantify than for others, the GAO said. It may be a relatively easy exercise to determine a value for a substation upgrade deferred by an energy storage system, for instance, but much more difficult to put a value on other benefits energy storage can provide, such as improvements to operational flexibility and grid resilience.

The GAO noted that there are still regulatory barriers to the deployment of energy storage. For instance, regulations in many instances do not clearly address whether regulated utilities may own and operate energy storage assets and how, if at all, they can recover their investments. In addition, each RTO establishes their rules in a different way. Resource bidding parameters, for instance, can vary greatly among the RTOs.

Multiple efforts are under way at both the federal and state level to address these issues. For instance, the Federal Energy Regulatory Commission issued Order 841 in February 2018, which directs the operators of competitive wholesale markets to draw up rules that allow energy storage greater access to their markets.

The Department of Energy has also undertaken various initiatives to address barriers to the deployment of energy storage, but the GAO report notes that funding to continue those efforts is uncertain.

And the Department of the Treasury and the Internal Revenue Service are considering changes that could clarify the eligibility of energy storage for a tax credit.

At the state level, multiple states have taken efforts aimed at encouraging the spread of energy storage installations. California, Oregon, Massachusetts, New York and New Jersey have all either adopted energy storage targets or are in the process of finalizing those targets.

The GAO report was written in response to a request from lawmakers, specifically Representatives Chris Collins (R-NY), Mark Takano (D-CA), and Eddie Bernice Johnson, a Democrat from Texas who is the ranking member on the Committee on Science, Space, and Technology.

The GAO report drew on studies published from 2012 through 2017 and interviewed 41 stakeholders, including officials from government agencies and representatives of industry, as well as other groups.

The report is available here.