The market for energy storage in the US hit an all-time high in the second quarter of 2022. The installed capacity is only a fraction of what is possible, though.
Energy storage captures energy for use at a later time. Battery systems are one common form of energy storage. Hydro, chemical, and thermal energy storage systems are other possibilities.
Energy storage systems are especially important for renewable energy sources. As demand for green energy increases, the need for energy storage increases too.
Energy storage deployment faces several barriers, though. Learn more here about the obstacles facing this important part of the energy grid.
The complex regulatory environment is a significant barrier to energy storage deployment. For example, energy storage resources can provide services in three functional classifications:
Regulations in some markets prevent developers from getting revenue under different classifications. A developer could provide generation service and congestion relief in transmission. The same developer couldn’t recover the cost of service by providing distribution, though.
Different regulations in different markets pose another regulatory barrier. Deploying a storage system across different markets is very complicated.
Economic and market barriers are another obstacle for long-term energy storage. The structure of the energy market discourages energy storage deployment.
Problems with the Compensation Structure
Revenue compensation structures are outdated. For example, ancillary service compensation depends on the marginal costs of generation. Ancillary services are functions that help grid operators keep the system working reliably.
Energy storage devices don’t work like traditional generators. They don’t have an opportunity cost based on the energy market. This pushes compensation down to zero.
Pay-for-Performance regulations attempted to address this problem. Pay-for-Performance requires compensation for capacity and performance. It isn’t a complete solution, though.
Lack of Markets
The market for ancillary services is lacking in most regions. Most regions don’t consider that energy storage systems provide these services. This eliminates potential revenue sources for energy storage devices.
Determining market prices for ancillary services is difficult. As a result, estimating the possible value of energy storage systems is complicated. Developers are less likely to want to invest.
Many technologies for long-term energy storage are relatively new. Lithium-ion battery cells have been in use for decades. Vanadium redox flow and metal air batteries are more recent technologies, though.
Developers and utilities don’t want to invest in technology that could be risky.
The performance of energy storage systems over time isn’t well-understood. Other concerns include how energy storage devices perform under different operating conditions.
The US doesn’t have enough of the kind of transmission necessary for renewable energy. Interconnection delays mean that projects take much longer. Some projects fail as a result.
Technological developments continue to reduce the costs of energy storage. However, the costs remain high. This is a significant barrier to energy storage deployment.
Many energy storage technologies are only economically viable for large-scale applications.
Even as costs decrease, the perception of high costs is also a barrier. Developers don’t want to make what they think will be a very large investment.
Shortages of raw materials to make energy storage systems are another barrier. This situation is especially challenging in current global conditions. Supply chain disruptions make finding reliable sources of raw materials even more complicated.
Energy Storage in the Grid
Energy storage is critical for an energy grid that functions well and reliably. Energy storage deployment faces many challenges, though. Hurdles range from outdated regulations to supply chain issues.
Awareness of the situation is growing. Opportunities exist for companies looking for a long-term benefit.