While press and overall hype on energy storage has increased notably – hardly an article on renewable energy is written without the mention of energy storage – energy storage is not an intrinsically new or novel concept. Pumped storage hydro (PSH) stations – where water is pumped up an incline to into a large reservoir or body of water when the supply of energy exceeds demand, and released through turbines when demand for energy exceeds supply – have been around since the late nineteenth-century.
Pumped Storage Hydro
The predominant issues with PSH stations are twofold:
- its economics only make sense when done at a grid-wide, utility scale; and
- in order for PSH stations to be cost competitive, they can only be developed in areas where the necessary topographical features – landscape height and availability of water – already exist.
Energy Storage Systems
As such, the ‘revolution’ in energy storage today isn’t its invention as much it is the widespread adoption of ‘micro’ energy storage systems (ESSs) without geographic limitations and/or by non-utilities: the industrial, commercial and residential sectors.
The most obvious and widely documented application of such ‘micro’ ESSs is in the continuous provision of energy generated by rooftop solar PV panels or small wind turbines. It could be said that both these forms of generating renewable energy are novelties the developed world, where grid electricity is for the most part, reliable and affordable (relative to incomes). However for many communities that lack access to grid-electricity altogether, usually for geopolitical or economic reasons, solar and/or wind-based power generation are the only cost effective means of electrification. It is in such communities where energy storage systems are both necessary and transformative in the provision of continuous electricity, one of the pillars of the modern first-world.
In parts of the world where reliable, grid-based electricity is prevalent, whether the market for ESSs shifts from utility-scale ESSs for power providers to ‘micro’ ESSs in the industrial, commercial and residential sectors remains to be seen. If the landscape for ESS products does change, two major factors are likely to cause such a shift: government policy and the stance which utilities take on innovation, be it on business model or on technology.
Take the concept of variable intra-day pricing of electricity for example: the notion that the value of electricity varies within a 24 hour day as a reflection of the ever changing relationship between supply and demand for electricity. Yet fixed-rate tariffs – often linked to prescriptive government policies – are still a pervasive (although not universal) feature across many major market segments. In implementing such price control mechanisms, the impetus to deploy energy generation or storage assets to match real time supply against demand shifts to the power providers.
If, on the other hand, the intra-day price of electricity is allowed to vary in correlation to its intrinsic value (as determined by market economics), then a case for grid-connected ESSs that are deployed by the end users themselves, may exist. Such ESSs would allow users to purchase power during off-peak periods when it is most economically favourable to do so, and consume (or even sell back to the utility operators) during peak periods, when it energy is most valuable. This process is called ‘time-shift arbitrage’. At risk of grossly oversimplifying a complex issue, the implementation of variable intra-day energy pricing in market segments where it is not already adopted is likely to be driven by government policies as a means of reducing energy consumption and the nation’s carbon footprint.
A host of technical and structural market changes are of course, required before this can be universally realised, two obvious ones being:
- an increase in the overall price of energy (either due to high commodity prices or the pricing in of the environmental impact of energy generation); and/or
- either a decrease in the cost or an increase in the finite service life of today’s ESSs.
Great strides have been made by policy makers and energy storage companies on both, although the value proposition offered by ESSs as an enabler for time-shift arbitrage is still today, limited. However if current trends are an indication, this is the exciting reality we can reasonably expect to live in the near future. One where a broad, distributed network of micro ESSs are integrated into the fabric of modern, 21st century households to ultimately provide cheaper, more reliable and more sustainable power.
Co-founder, CEO at Ampd Energy
(rebranded from QFE)