In a series of tweets in early March, Tesla founder, CEO and Chairman Elon Musk made a dramatic offer to help address the issues bedeviling South Australia’s electricity grid: he offered to install 100MW of battery storage within 100 days — or the system would be free. This led to talks between Musk and South Australia’s Premier, and with Australia’s Prime Minister Malcolm Turnbull.
At the time of writing, it was unclear whether the offer would be taken up, and there are serious questions as to whether such a system would be an appropriate solution to the blackouts plaguing the Australian state. But the attention that Musk’s offer generated is testament to the increasingly important role that battery storage, at scale, is playing in modern electricity systems.
Storage technology is the vital missing element in the struggle to enable the transition to clean energy, allowing grids to accommodate ever-growing volumes of intermittent generation and transforming the economics of renewable energy systems. But, along the way, the growth of battery storage promises to transform power markets, accelerate disruption of the utility business model and challenge regulators to rethink how they oversee generation, transmission and distribution.
The growing penetration of batteries is, essentially, a solution to a problem that dates back to the construction of the first electricity grids. “The electricity supply chain is the longest supply chain in the world with almost no ability to store the product,” says Matt Roberts, Executive Director of the Washington, DC-based Energy Storage Association (ESA). “That means we have scaled everything to meet the absolute peak of demand — it’s an incredibly costly and inefficient way to build a network.”
The inability to store surplus power (beyond the limited capacity of older storage technologies such as pumped hydro systems) is becoming a more pressing problem with the greater penetration of wind and solar technologies. Solar output, while relatively predictable, dips in cloudy conditions, while local wind speeds are hard to predict with confidence more than a few days into the future.
In addition, thermal power plants currently play an important role in balancing generation and load to maintain the frequency of power grids within a constant range, which protects electric equipment. Renewable energy generation is unable to provide the on-demand balancing power needed for grid stability.
This means that battery systems — predominantly, to date, using the lithium-ion technology seen in electric vehicles — have multiple uses, and multiple market needs they can address.
“The opportunity for battery storage exists in all areas of the utilities value chain — in generation, transmission and distribution, as well as on the consumer side, behind the meter,” says Manish Kumar, Managing Director of Arlington, Virginia-based AES Energy Storage, an arm of power company AES Corporation.
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