According to GTM’s new report, the costs of storage are dropping at a rate that will allow it to start being competitive with new peaking plants in about five years. But ten years from now, energy storage will “almost always” win out over the cost of a new peaking plant.
It could take years or even decades for energy storage to compete with the GTM-estimated 120 GW of existing peakers, Ravi Manghani, director of energy storage at GTM Research, said during a webinar to discuss the report. The existing plants have lower operating costs because they have largely paid off their debt.
The key to the competitiveness of storage compared with peakers is not just lower costs, but lower costs for longer durations. Duration, how long a storage device can pump energy into the grid, has been the limiting factor when batteries are used to replace peakers. The other side of that concept is that peakers are an inefficient use of capital because they run so infrequently.
GTM’s research found that the median capacity factor of the operating U.S. peaker fleet is 3% and that the median hours of operation per start is 5.3 hours. In addition, 73% of the operating fleet averages eight hours or less per start.
The data show that battery systems are beginning to have sufficient duration to meet a high proportion of peaking needs, Manghani said.
The economics of battery storage used for peaking needs can also be enhanced if the batteries can serve other grid needs when they are not being used for peaking capacity. The Federal Energy Regulatory Commission’s recent Order 841 aims to creates opportunity for energy storage to compete on a level playing field in energy, capacity and ancillary service markets, Manghani noted. The opportunities will be regionally specific, as each ISO or RTO will devise their own set of rules, he added.
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