The energy industry is being reshaped by major forces, including decentralization, digitization, shifting demand and prices and greater sustainability as a public policy issue. As the risks shift, so too do the opportunities. In March in Dubai, Christoph Frei, secretary general of the World Energy Council, spoke at Marsh’s Energy Industry Conference. Brock Meeks caught up with Frei after the conference.

Tom Carver: First of all, what risks to innovation do you see in the energy sector?

Christoph Frei: There are several key risk areas regarding innovation in the energy industry.

One of the main ones is decarbonization. If you look back over the past 45 years, we’ve managed to decarbonize gross domestic product by, on average, 1 percent per annum. If we want to achieve a change of 2 degrees Celsius, we must accelerate this from 1 percent to 6 percent per annum. The challenge of decarbonization is massive. We have a factor of 2.8 times more CO2 in our resources — coal, oil, gas — than we are allowed to emit.

Another challenge is innovation around electrification, decentralization and digitization. The one thing above everything else that is keeping energy leaders awake at night is the impact of digitization on the future of the energy system. New business models and digitization will define momentum on a path of innovation, which will change the way we produce and use energy in industrialized and developing worlds.

Carver: What is the industry saying about its key risk concerns?

Frei: We have an issues map where we look at about 40 risk issues in the energy sector through interviews with 300 energy leaders in more than 90 countries. Over the past five years, this has shown us a very dynamic market. The risks that have heightened in importance most dramatically are decentralized systems, digitization, electric storage, market design and renewable energies.

Issues such as carbon capture and storage have been cooling down — people just do not believe they will deliver on its promise. Unconventional, or renewable, energy is seen as less of a risk for the industry. Consider that 18 months ago, solar was being sold in Chile for 2.9 cents per megawatt. I recently spoke to several sources who said that this year they were probably looking at 2 cents per megawatt. That tells a story of continued crashing of prices.

The global grid-connected battery energy storage systems (BESS) market witnessed a market volume of 3.8 gigawatts (GW) for projects installed up to 2017, which is expected to reach 23.4GW for projects installed up to 2022. According to GlobalData’s latest report Grid-Connected Battery Energy Storage Systems, Update 2018 – Global Market Size, Competitive Landscape, Key Country Analysis, and Forecast to 2022, the top five countries in the global market were the US, South Korea, China, Japan, and Australia for projects commissioned up to 2017, with the US having a 28% market share and leading the global BESS market.

The top five countries represented over 80% of the global market in terms of cumulative installed capacity in 2017. In 2017, the Asia-Pacific region led the global market by holding a 54.1% market share, followed by the Americas with 32.8%, and Europe, Middle East, and Africa (EMEA) with 13.1% for installations up to 2017. With respect to technology, lithium-ion has been the preferred choice to date and shared approximately over 75% of the global market with respect to BESS installations up to 2017. It is expected that lithium-ion will be the key technology throughout the study period.

In the Asia-Pacific region, South Korea led the regional market with a share of 31.3% with respect to projects installed up to 2017. South Korea is expected to show promising growth in the forecast period. This is because the South Korean government has earmarked KRW40 trillion ($35.7 billion) for the renewable energy sector over the next five years, as it unveiled a plan to reward solar plant operators for installing energy storage facilities. The country is attempting to reduce its reliance on fossil fuels. It plans to shut down 10 obsolete coal-powered plants in the country during the period, and supplement their closures by delivering 6% of total power from green energy sources by 2020. The Korean Electric Power Corporation (KEPCO) is working already with Korean battery provider Kokam to provide more than 500 megawatts (MW) of battery storage for frequency regulation.

The US led the Americas region with a regional market share of 87.4% with respect to projects installed up to 2017. Among the regional markets in the US, California had the largest deployment of energy storage capacity. The Aliso Canyon gas leak pushed California toward the construction of energy storage pipeline projects and development of new projects, representing an installed capacity of over 200MW in 2016. In terms of applications, ancillary services remained the leading application sector for energy storage in the US.

The collaboration between Cleanergy and Masen in Concentrated Solar Power (CSP) and Thermal Energy Storage (TES) solutions is taking a big step towards commercialization. Through the agreement, Masen will take a place in Cleanergy’s board of directors and fund a substantial part of the company’s Thermal Energy Storage R&D, industrialisation and business development.

Masen adds valuable knowledge of the solar market to Cleanergy’s strategy, but also grants access to a vast network of established partners and stakeholders in the CSP industry, as well as to new suppliers for local sourcing and production. Masen’s R&D Platform in Ouarzazate, one of the biggest worldwide, will help test the solutions in optimal solar conditions.

Masen’s team of engineers will contribute to the evaluation and design of the TES system, land and grid connection for complete system testing in Morocco, as well as introduction and demonstration for prospective customers on the African continent.

“Masen has a strong R&D strategy, which actively evaluates and promotes disruptive and competitive technologies. The co-development of innovative TES systems is an important step forward for CSP technologies. Cleanergy’s storage demonstrator will be installed on our R&D Platform in Ouarzazate, which will help accelerate its commercialization.“, says Mr Bakkoury, the President of Masen.

“Collaborating with Masen has been very positive for our development and having them onboard means we can now work even closer together. With their incomparable experience of renewable energy and solar power we get access to a network of knowledge, resources and prospective customers. Masen will also be a key partner in verifying the technology before launching to the market”, says Jonas Eklind, CEO of Cleanergy.

A demonstrator of Cleanergy’s Thermal Energy Storage system will be presented in June 2018.

In a perfect world, grid-connected energy storage plants would never be needed. The diversity and inherent flexibility of thousands of generators and loads in a large power system would provide all the flexibility that we could need to continuously match supply and demand at a very low cost, even with variable renewables dominating our generation resources.

But the world is far from perfect. In the real world, there are numerous inefficiencies that restrict resources from offering their full capabilities, limit access by new resources, impact compensation for providing services, and make the interconnection and participation process very difficult. Wouldn’t it be great if there was a standardized way to offer a broad suite of energy, ancillary services and reliability services to the system operator that made this easier?

There might be. As I discussed in a companion blog post, FERC Order 841 requires electricity markets to create an energy storage participation model that allows storage to provide its full capabilities to the wholesale energy markets. But FERC could have gone further by using storage as the example for a general participation model to be used by all resources, simplifying the process for innovative resources to participate in the market in the future.

At first glance, Order 841 is a boon for storage but just an incremental step for other inverter-based or distributed energy resources to participate in wholesale energy markets. In practice, this new participation model for storage may help many other kinds of resources, even without moving toward a universal participation model. By embracing the participation of storage, which has capabilities far beyond conventional generation, FERC may have unintentionally created a new participation model for creative combinations of storage with high-voltage direct current (HVDC) transmission, wind, solar and conventional generation.

Thinking beyond storage in Order 841

FERC defines an energy storage resource as “a resource capable of receiving electric energy from the grid and storing it for later injection of electric energy back to the grid… regardless of [its] storage medium.” Though battery storage systems are the predominant type of energy storage resource contemplated by Order 841, the order does not say that allof the energy must come from the grid and be returned back to that same grid. An energy storage resource, or something that looks similar to one, could be used as a standardized way to interconnect and participate in the ISO/RTO markets.

Tesla has unveiled yet another new large Powerpack energy storage project and this time, it’s going to be used as a virtual power plant for grid balancing in Europe.

The new project has been unveiled today in Terhills, Belgium.

It is made of 140 Powerpacks and a bunch of Tesla inverters for a total power output of 18.2 MW.

The Powerpack system will be used for similar grid services as Tesla’s 100MW/129MWh Powerpack project in South Australia, where the project had a massive impact on the cost of FCAS (frequency control and ancillary services).

Tesla partnered with Restore, a demand response aggregator, to build the system and offer balancing services to European transmission system operators.

Instead of using gas generators and steam turbines kicking to compensate for losses of power on the grid, Tesla’s batteries are charged when there’s excess power and then discharge when there’s a need for more power.

Restore UK Vice President Louis Burford told The Energyst that they are bundling their assets like batteries as a ‘synthetic pool’:

“By creating synthetic pools or portfolios, you reduce the technical requirements on individual assets that otherwise would not be able to participate [in certain balancing services]. By doing so you create value where it does not ordinarily exist. That is only achievable through synthetic portfolios.”

The executive said that they have a second similar project that they are soon launching in the UK.

Tesla released a cool video about the project:

High-tech grid resources that have become commonplace in some utility territories aren’t even considered in others. California utilities are already deploying energy storage in place of new gas plants. Regulated utilities in places like Arizona, Florida and North Carolina have begun factoring substantial amounts of storage into their grid planning, to tackle peak demand and make the grid more flexible.

Meanwhile, Dominion Energy’s new long-term plan for Virginia and North Carolina barely mentions storage and instead calls for intensive deployment of new gas peakers.

The disparity in adoption of tools like battery storage means that ratepayers in some places get a fuller consideration of alternatives for utility investment. That analytical process impacts the kind of investments utilities end up making and the rates their customers have to pay.

From Dominion’s perspective, the price point of battery storage wasn’t ready for full consideration. For the storage industry, the time has already come.

“There’s really no excuse for any utility today to ignore storage as an investment option,” said Kelly Speakes-Backman, CEO of the Energy Storage Association.

GTM is hosting the first ever Energy Storage vs. Gas Forum in New York City May 21. The daylong event will examine the growing competition between energy storage and natural gas to provide peak power. Can storage really compete with gas peakers? Do gas investors need to be worried? Find out more here.

Flexibility, traditionally

Dominion Energy’s integrated resource plan studies the regulated utility’s expected needs through the next five, 15 and 25 years. The document embraces new solar energy and even maps out scenarios for possible carbon regulation, while affirming the need for a more modern, flexible electricity system.

CARMEL, Ind. — Stakeholders last week said they foresee MISO making multiple changes to its markets to accommodate storage in response to FERC Order 841.

MISO invited stakeholders to give presentations on storage integration under the order during a May 10 Market Subcommittee meeting. The RTO will explore how to best comply with the order during a more comprehensive meeting scheduled for June 6, a joint effort of its Reliability, Market and Resource Adequacy subcommittees.

NextEra Energy’s Holly Carias, also representing the Energy Storage Association, said MISO’s participation model should not exclude any type of resource that meets the definition of storage.

“I think it’s not simply enough to fit storage into the traditional generator definition,” she said.

Instead, Carias said, storage resources should be able to self-bid instead of being subjected to must-offer obligations, in order to prevent battery life from being cut short by unpredictable injections. She also said MISO might need to update rules on physical withholding given storage’s operational nature.

But Minnesota Public Utilities Commission staff member Hwikwon Ham cautioned that allowing storage resources too much flexibility in the market could open MISO up to attempts to game the system.

The RTO’s market platform replacement comes at an opportune time then, Carias said, as it will be able to handle how storage will change energy use.

“In 10 years, battery storage is going to be so cheap that it will disrupt how we use energy,” Carias said, adding that by 2025, storage prices are estimated to fall to about $100/kWh.

MISO Executive Director of Market Operations Jeff Bladen reminded stakeholders that Order 841 simply requires RTOs to open their markets to storage participation and does not mandate any market design changes, although MISO will nevertheless debate to facilitate storage additions.

“To be clear, our view at MISO is that we want to evolve our markets. The pathway to changing our markets is not Order 841 compliance; it’s our own Market Roadmap [improvements]. … I want to make sure we don’t lose sight of that,” Bladen said.