Transatlantic Perspectives on Energy Storage: Technology, Policy and Finance

by Maximilian Blaschke and Fiona Paine on Sunday October 23, 2016

“Energy storage could be the solution for nearly every problem we face today.”

Energy storage will play a critical role in enabling the transition to low-carbon electricity systems, providing capacity, energy, and ancillary benefits to help secure a stable and reliable power supply. But even as the technology horizon evolves, the value of different storage technologies remains uncertain, as do suitable market and policy frameworks to promote their efficient deployment. On October 21, therefore, the MIT Center for Energy and Environmental Policy Research (CEEPR) and the Technical University of Munich (TUM) Center for Energy Markets (CEM) convened a group of researchers, policy makers and industry leaders for a full-day symposium on energy storage and its technology, policy and business implications.

Yet-Ming Chiang, Professor of Materials Science and Engineering at MIT, kicked off the symposium by discussing energy storage technology. Lithium-ion batteries are currently favored as the dominant storage system for transportation and grid applications, he explained, but the price of lithium-ion technology has not decreased as much as predicted. One approach to lessen battery costs is to reduce the amount of non-energy-storing materials used to thicken the battery electrodes, and he proceeded to describe work underway at 24M, a company he helped establish, to bring storage costs below 100$/kWh.

Marcus Müller, a Project Manager and Ph.D. Candidate at TUM , proceeded to highlight the adaptability of lithium-battery technology for different uses. He and his team decided to simulate a variety of applications, system configurations, and aging processes to calculate the value of energy storage in different scenarios, finding that stacking of battery applications does not necessarily harm their performance metrics, but can yield additional economic value through an increase in utilization.

Michael Aziz, Professor of Materials and Energy Technologies at Harvard University, presented organic aqueous flow batteries as an alternative technology option. Replacing metal components with organic quinones shows promise for large-scale electrical storage, although research is ongoing and a wide range of battery chemistries remains to be explored. A second discussant, Stefan Andreas Meyer of Kreisel Electric, closed the first session by highlighting the opportunities for innovative packing of battery solutions in transportation environments.

Introducing the second session on the business implications of energy storage, Kristin Brief of Ambri provided an introduction to her startup’s design for liquid metal battery storage. The technology was originally developed at MIT and is based on three separated layers of liquid metal operating in high temperature environments. These batteries exhibit negligible capacity losses even after a high number of charging cycles and an ability to hold their charge for exceptionally long periods.

She was followed by Sandeep Dudhwewala of National Grid, an electric utility, who acknowledged that storage will play a key role in facilitating the broader trend towards decarbonization and decentralization across the electricity sector. New technologies will create challenges as well as opportunities, and storage may eventually become a standard option for utilities. Before it is implemented at a large scale, however, costs must fall further, market rules have to be clarified, and regulations need to be adopted or improved. National Grid has taken steps to evaluate the business viability and potential of storage in a range of different applications and locations, from generation and transmission to distribution and end use.

A third panelist, Archan Padmanabhan of Tesla, offered additional insights into energy storage applications. Tesla has used its knowledge of energy storage from automotive and transportation applications to address grid and home level storage. Their current approach is a modular battery design that utilizes different chemistries for different applications. Batteries still face the challenge of high costs, but improvements are underway to increase the economic viability of battery storage technology.

During lunch, Massachusetts Energy Commissioner Judith F. Judson reported on current projects and policy strategies for energy storage systems in her state. New clean energy legislation signed in August 2016 requires utilities to solicit and procure long-term contracts for clean energy generation, and authorizes the state to explore an energy storage procurement mandate. Future steps for the state of Massachusetts include funding demonstration projects and clarifying the regulatory status of energy storage.

David Wozabal, professor at the Technical University of Munich, introduced the following session on the economics of energy by focusing on how energy storage could become profitable in Germany. Currently, he explained, storage capacity in Germany is largely centered around pumped hydro facilities. Other systems, such as grid-integrated vehicles, would be unable to provide significant revenues within the current market design and regulatory framework. Based on his research, grid-integrated vehicles do not appear to be a promising storage option because they require additional investment and involve uncertainties – such as driving patterns – that will affect revenue flows.

Jesse Jenkins, a Ph.D. candidate at MIT, continued by breaking down the various applications of energy storage and assessing their value. First, supply and demand in the grid must be balanced in nearly real time, and storage has the greatest accuracy and fastest response times for attendant frequency regulation. While the regulation market is a high-value market, it is small and quickly saturated. Second, energy storage can be of use in network capacity deferral. A small reduction in peak demand could avoid exceeding distribution network constraints and allow a moderate increase in load without requiring network improvements. However, the “peakiest” load hours could also be addressed at lower cost by demand or price response. Third, energy storage may be useful under a CO2 limitation scenario, acting as a substitute for peaking power plants, but it still appears to be a weak substitute for nuclear and other base resources.

Thomas Greve of the University of Cambridge highlighted uncertainties and information asymmetries in the energy system, and reminded the audience of the usefulness of markets. He discussed current auction designs as an option to price storage in a way that allows it to become a viable service. In addition, futures and risk markets could allow energy price hedging.

Continuing the discussion of energy storage, Ted Loch-Temzelides, a Professor of Economics at Rice University, discussed variables to consider when implementing energy storage systems, including location, supply variability, and interaction of storage with nuclear energy. Energy storage across time scales is also an issue. Seasonal fluctuations of energy supply from wind and solar may necessitate energy storage over months, not just minutes or days. In the specific case of Texas, with a substantial installed wind power capacity, storage systems have to fulfill different use-cases to help meet demand. Transmission lines used to transport energy to the location of storage systems will only be used 25-30% of the time, since windless periods prevent higher utilization and therefore require storage systems to also bridge demand during these periods.

In the final session of the day, focused on the policy needs and implications of energy storage, Stephen Pike of the Massachusetts Clean Energy Center discussed funding for energy storage and various market discovery efforts. Christopher Parent of the regional transmission system operator ISO New England followed with a presentation of how new storage is integrated into the grid, and the conditions that apply. Jason Burwen of the Energy Storage Association (ESA) discussed alternative market design considerations for energy storage, followed by his counterpart Helena Teschner of the German Bundesverband Energiespeicher, who addressed market design and the regulatory framework in Germany.

The lively discussions throughout the day highlighted that, while energy storage has been rapidly growing as an area of interest, vast unfulfilled potential remains and many challenges have yet to be solved.