In coming years and decades, as renewable energy replaces conventional generation, large amounts of energy storage are expected to replace gas generation to meet power demand on a flexible basis during times of low wind and solar output.
In 2016 California got a taste of what that future will look like, when the massive Aliso Canyon gas leak drove utilities to procure large amounts of energy storage, to make up for the lost gas. And those installations, in turn, drove the largest quarter to date for U.S. battery storage deployments, according to the latest edition GTM Research and Energy Storage Association’s (ESA) U.S. Energy Storage Monitor.
And while the 141 MW of battery storage deployed during Q4 2016 represented a 25% increase over the fourth quarter of 2015, the difference in duration of batteries deployed – megawatt-hours (MWh) instead of MW – was more stark. The 230 MWh of storage deployments was more than 3x a year ago, and more in three months than the past three years combined.
This meant as measured by duration, energy storage installations doubled in 2016 to 336 MWh.
Most of the 141 MW/230 MWh installed during Q4 was in California, which made up 88% of capacity and led for the first time in utility-scale installations as well as in the residential and commercial and industrial segments. Prior to this the PJM Interconnection grid was the largest market, and the two trends are related.
The huge capacity of four-hour batteries which California put online in the last quarter of 2016 – including the world’s largest battery storage installation – was to replace capacity normally supplied by gas plants, not the shorter-term ancillary services which have driven the PJM market.
“While California took over the pole position in 2016 from PJM, the market shift was also transformational in terms of applications – from short duration ancillary services to longer duration capacity needs,” notes GTM Research Director of Energy Storage Ravi Manghani.
And it is notable that while the report covers a range of storage technologies, that it is increasingly dominated by lithium-ion batteries, which for the sixth straight quarter made up more than 95% of capacity deployed. And due to the large systems put online in Southern California, during Q4 utility-scale installations made up an even higher portion of volume deployed than normal, at 94% of capacity.
GTM Research says that it expects this shift to longer-duration batteries to continue, but also for behind-the-meter applications to represent an increasing share of a fast-growing market.
The company does warn of an unpredictable federal policy environment for energy storage. In addition to high-profile moves by the Environmental Protection Agency and Department of Energy, GTM Research says that actions to be taken by the Federal Energy Regulatory Commission could have a big impact.
However, GTM Research also warns that it is still to early to speculate on specific policies. Additionally, the report draws attention to storage mandates in several states including California, Oregon and Massachusetts, and notes that the performance of the battery systems put online in the wake of the Aliso Canyon leak will be important in evaluating more systems in the future.
A big challenge for the energy storage market is that in many places it is still hard to get paid for the services that energy storage provides. A recent report by City University of New York put a failure to monetize and even value the benefits provided by energy storage as a key obstacle in the development of solar plus storage in New York City, despite the critical importance of backup power.
But even with these challenges, GTM Research says that energy storage is catching on, including with utilities. “We are seeing a growing number of distribution utilities look into storage in their planning activities,” GTM Research’s Manghani told pv magazine.
And overall, the future looks bright over the longer term. GTM Research forecasts that the energy storage market will grow more than 20-fold to 7.3 gigawatt-hours (GWh) in 2022, and despite falling prices for the value of the market to still rise more than 10-fold to over $3.3 billion.