Energy storage has been around for a long time. Alessandro Volta invented the battery in 1800. Until recently, Batteries used to provide power at those locations where no grid connection is present, like for starter motors cars, mobile phones, laptops and other electronic devices or for emergency power or computer servers. 

With the last innovations in the energy storage industry, it is clear that energy storage technology and solutions will become crucial element in our life. The ongoing transition we are experiencing with the higher shares of renewable and intermittent energy resources and distributed generation applications requires ways to store and release energy when needed. 

Energy storage has the potential to provide a wide array of benefits to the electric grid, and states across the country are increasingly considering statewide targets for the deployment of energy storage resources.

Currently there are 7 states who adopted storage procurement targets:

  1. California – 1,325MW by 2020
  2. Nevada – 1,000 MW by 2030
  3. Oregon – 10 MWh by 2020
  4. NY – 3,000 MW by 2030
  5. MA – 1,000 MWh by 2025
  6. NJ – 2,000 MW by 2030
  7. VA- 3,100 MW by 2035.

These procurement targets, set a confidence among market developers and financial institutes through their approach to develop and support the energy storage market in the U.S.

There are several use cases for energy storage divided mainly to ancillary services and load shifting:

  1. Ancillary services

    1. Frequency control
    2. Voltage control
    3. Black start energy

  2. Load shifting

    1. Hedge of energy sells commitment breach penalties
    2. Energy arbitrage
    3. Schedule stabilization – to avoid ramping up costs
    4. Capacity reserve
    5. Peak shaving

Energy storage cases can also be seen through major consumers groups 

The storage industry has been boosted by few successful completion of  non-recourse battery energy storage project financings and the increase in utility procurement of battery storage projects and products, as seen above. Private developers have recently closed hundreds of millions of dollars of financings for large battery projects. Moreover, utilities have procured hundreds of megawatts of utility-owned battery projects through EPC, BOT or similar contractual acquisition structures and have executed numerous contracts for battery project services and products.

The successful development and financing of any type of energy or infrastructure project requires many different building blocks, including site control, permits, interconnection, regulatory exemptions, EPC, O&M, PPA/offtake revenue contracts, and others. Although each of these is important, the most critical issue is to ensure the viability and finance-ability of battery storage projects arise primarily in the area of dependable offtake revenues. 

Battery Storage Revenue streams:

  1. Capacity – Energy storage projects could provide a utility an obligation for the projects readiness to charge/discharge from/to the grid when such services will be called by the utility. For this on-call service, the project will get paid based on a fix amount of dollars per MW, according to the project commitment. This structure is used in PJM and CAL
  2. Tolling agreement – The energy storage tolling agreement provides the off taker (typically a utility) with capacity, energy and other products generated by a grid-connected, stand-alone battery project. As the “seller” under the agreement, the project sponsor is responsible for developing, owning, operating and maintaining the battery project, and retains technical operational control of the battery. As the “buyer” under the Agreement, the off taker typically exercises full authority to charge and discharge the battery, subject to the battery’s operating limitations and other agreed dispatch parameters. In addition, the off taker typically pays for and delivers all charging energy from the grid to the battery and acts as “scheduling coordinator” or “market participant” for the battery in managing its scheduling arrangements. The off taker pays the project sponsor a fixed (usually monthly) capacity charge for its right to utilize the battery’s capacity, and frequently a variable operating or “energy” charge for dispatches instructed by the off taker. The capacity charge may be subject to reduction for decreases in capacity, availability or efficiency of the project.
  3. Ancillary Services – Ancillary services are used by the grid operator to balance the frequency of the grid and ensure there is enough reserve capacity to meet unexpected stress events. The project sells ancillary services to the market at spot price.
  4. Demand response – various energy storage projects can aggregate into one source, like a virtual power plant, and provide the grid demand-response service in exchange for fixed payments. Demand response means shedding behind the meter load in response to a signal from the utility. The battery or other storage device may be used by customers for other applications when not providing demand response services.
  5. Demand charge – also known as peak shaving. High electricity co consumers are paying extra charges on their electricity load at peak days. To avoid those charges, customers can have another source of energy (for the peak moments only) like a battery. That way, the customer will save the peak demand charges and the economic benefits will be split between the customer and the battery provider.
  6. Energy Arbitrage - simple as it sounds, an energy storage facility can use energy prices fluctuation and charge the battery when cost of electricity is low and discharge the battery and sell electricity when cost of electricity is high