When Xcel Energy conducted a reverse auction in 2018 to help build out its energy storage systems, it received hundreds of bids. It’s all about integrating energy storage into its wind and solar energy networks to increase reliability.
In a traditional auction, the seller does business with the highest bidder. But in a reverse auction, the buyer will go with the low-cost bidder. And that model has had success in the energy storage market.
“Reverse auctions offer a transparent and cost effective approach for procuring goods and services,” says Maureen Lackner, a policy analyst with the Environmental Defense Fund, in an interview. “These features have made it a popular tool applied to a diverse set of needs, including fulfilling road salt contracts in Pennsylvania and purchasing ethyl alcohol for University of California research centers.”
She adds: “With regards to renewable energy, reverse auctions have also gained traction. It is expected that nearly half of global renewable energy capacity between 2017-22 will come from competitive auctions.”
In the case of Xcel, the median price was $21/MWh for wind plus storage and $36/MWh for solar plus storage. The solar-plus-storage bid fell by 20% from one year to the next. Altogether, energy storage prices have dropped by 74% since 2013, says analytics firm Lazard, although it depends on the application. It expects such prices to fall by 8% a year through 2025.
Ambitious goals open way for reverse auctions
Hawaii Electric has had similar success. The utility may have too much solar and it has to curtail it during times when energy usage is less. Battery storage allows it to harness those electrons and to discharge those devices during peak periods — for four hours at a time, instead of having to run a fossil plant. The power company currently has proposals for seven grid-scale solar-plus-storage projects totaling 262 MW with 1,048 MWh of storage.