We are in the middle of the most remarkable transformation in the history of the electricity grid — from dirty and centralized to clean, distributed, and digital. Many policymakers and pundits believe that if only we had enough batteries, we could adapt to this new mix of generation resources and continue to pretend that nothing but a few operating conventions have changed.
And indeed, utilities, regulators and state legislators are allocating ever-larger piles of ratepayer and taxpayer money to subsidize lithium-ion batteries on both sides of the meter. Subsidizing batteries sounds simple and wonderful, but the unspoken problem is that the emperor has no clothes. There is no economic model of behind-the-meter batteries for grid purposes — period.
Don’t get me wrong: I love batteries. I drive a battery to work every day. I’ve checked the math behind utility-scale batteries combined with renewables as a substitute for gas peakers, and in many places, it checks out. I even understand the attraction of batteries in microgrid or resilience projects, as a clean but expensive alternative to generators.
But as an energy economist and former utility rate designer, I am cursed with the ability to do basic arithmetic, so to be clear: The economics of behind-the-meter (BTM) batteries in grid-connected commercial buildings are and will continue to be wasteful, inefficient and impractical, to put it kindly.
I know, I know. You’re saying, “But lithium-ion batteries are really cheap, and they keep getting cheaper, and that changes everything!”
Except that it doesn’t. I read the same reports as you do, but those $150-headed-toward-$100/kWh numbers for battery capacity prices have nothing to do with the installed cost of a battery in a commercial facility. We are not making master electricians any cheaper, nor permitting any easier, nor fire suppression any less necessary, nor commercial floor space any more widely available.
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