Market and Policy Barriers to Energy Storage Deployment

Abstract

Electric energy storage technologies have recently been in the spotlight, discussed as essential grid assets that can provide services to increase the reliability and resiliency of the grid, including furthering the integration of variable renewable energy resources. Though they can provide numerous grid services, there are a number of factors that restrict their current deployment. The most significant barrier to deployment is high capital costs, though several recent deployments indicate that capital costs are decreasing and energy storage may be the preferred economic alternative in certain situations. However, a number of other market and regulatory barriers persist, limiting further deployment. These barriers can be categorized into regulatory barriers, market (economic) barriers, utility and developer business model barriers, cross-cutting barriers and technology barriers. This report, through interviews with stakeholders and review of regulatory filings in four regions roughly representative of the United States, identifies the key barriers restricting further energy storage development in the country. The report also includes a discussion of possible solutions to address these barriers and a review of initiatives around the country at the federal, regional and state levels that are addressing some of these issues. Energy storage could have a key role to play in the future grid, but market and regulatory issues have to be addressed to allow storage resources open market access and compensation for the services they are capable of providing. Progress has been made in this effort, but much remains to be done and will require continued engagement from regulators, policy makers, market operators, utilities, developers and manufacturers.

Installed Cost Benchmarks and Deployment Barriers for Residential Solar Photovoltaics with Energy Storage: Q1 2016

“…With respect to value, the potential for storage to provide grid services such as black start, voltage support, and transmission and distribution deferral has been well documented (Butler et al 2003, Walawalkar et al 2007, Fitzgerald et al 2015. However, the absence of actual markets for such services, in most parts of the United States, prevents full realization of the value of energy storage applications and undermines the economics of storage (Bhatnagar et al 2013, Chang et al 2014, Fitzgerald et al 2015. Where limited markets do exist, outdated revenue mechanisms tend to undervalue energy storage (Sioshansi et al 2012, Bhatnagar et al 2013, Chang et al 2014, and traditional energyvaluation metrics serve poorly for energy storage applications (Sioshansi et al 2012, Denholm et al 2013.…”

“…However, the absence of actual markets for such services, in most parts of the United States, prevents full realization of the value of energy storage applications and undermines the economics of storage (Bhatnagar et al 2013, Chang et al 2014, Fitzgerald et al 2015. Where limited markets do exist, outdated revenue mechanisms tend to undervalue energy storage (Sioshansi et al 2012, Bhatnagar et al 2013, Chang et al 2014, and traditional energyvaluation metrics serve poorly for energy storage applications (Sioshansi et al 2012, Denholm et al 2013. Furthermore, outdated regulations reduce the certainty of energy storage valuation and prevent market access (Bhatnagar et al 2013, Ecofys 2014.…”

“…The costs of lithium-ion batteries, which are common in grid-tied residential storage systems, fell by an average of 23% per year from 2010 to 2015, and continued cost reductions contribute to the projections of higher storage deployment in the future (Deloitte 2015, GTM 2016a. Still, the costs of residential storage systems remain high relative to the value proposition of these systems-in part due to regulatory and market barriers that impede deployment of storage systems (e.g., see Bhatnagar et al 2013, Fitzgerald et al 2015.…”

Valuation of Electric Power System Services and Technologies

“…Resources with high fixed costs such as energy storage do not function well in marginal cost markets. 131 Recent FERC orders have served to level the playing field for energy storage in frequency regulation markets but challenges remain for other services.…”

Financial assessment of battery energy storage systems for frequency regulation service

“…They also seek for financing from the marketplace, which can be difficult to acquire for storage systems participating in recently developed frequency regulation markets such as PJM's, where the lack of historical performance data hinders the prediction of revenue [3].…”