Deployment of energy storage, especially batteries, will increase substantially in the next few years.
Three underlying trends in the energy markets will drive the growth. They are favorable federal and state regulations on energy storage, falling costs for batteries due to advances in technologies, and an improved ability by energy storage owners to tap into multiple revenue streams.
However, as with any novel technology, the array of opportunities for storage brings new types of risks. Project developers and investors need to understand the risks so that they can plan for contingencies and mitigate risks.
This article describes changes in the market that are driving deployment and improving the economics of storage and then identifies unique risks for storage projects and how participants in such projects can mitigate the risks.
Regulatory drivers
The storage market is poised for exponential growth. By 2022, Greentech Media is projecting an annual market of 2,600 megawatts, which is nearly 12 times the size of the 2016 market.
New market rules will enable owners of energy storage systems to earn revenue from a growing number of sources, such as deferred transmission and distribution upgrades, integration of intermittent resources, reduced demand or increased generating capacity to address peak load, the provision of ancillary services, and enhanced grid reliability and resiliency.
Until recently, storage was a square peg jammed into the round hole of historic regulation.
The existing federal regulation of wholesale power sales and transmission in interstate commerce was designed for a world largely devoid of any significant energy storage. Although pumped-storage hydroelectricity has been around for a long time, it has very different characteristics from modern storage technologies such as batteries, flywheels or thermal energy storage projects.
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