Energy storage brings values associated with traditional generation along with some additional services either not provided by traditional generation, or else provided in a more limited way by traditional generation. Energy arbitrage is the clearest example of the former. Realizing the arbitrage value means operating storage such that it consumes energy at times when market prices are low and releases the energy when market prices are higher. Energy storage can provide a host of services that have been identified as being in increasing demand due to the advent of variable renewable energy resources. For example, accommodating variable generation into power systems can require additional fast-ramping generation or load capability to maintain system stability. Energy storage technologies can provide both generation and load to meet those requirements.
Flexible Capacity Value
In most systems, resource additions are driven largely by the need to reliably meet peak demand periods. Peak demands may occur only a few hours per year, making it very expensive to exclusively meet this need through additional generation. Given the relative infrequency with which peaking demand occurs, energy storage is a good candidate for providing such service, especially if the storage resource can provide additional (i.e., non-peak demand related) services. Fueling flexible capacity from renewable energy sources— storing light load hour renewable energy generation to meet peak demands may be a particularly attractive stacking of energy storage value streams.
Most power system energy storage today is accomplished with pumped storage units capable of shifting bulk quantities of energy from low price hours to higher price hours. The arbitrage and capacity value aspects of energy storage have been used to justify energy storage investments in the past. Today’s relatively low wholesale market prices for power driven by increasing penetration of low variable cost wind, solar generation and relatively low fossil fuel prices have made this a more difficult value proposition on its own. As renewable penetration grows, it is expected that periods of negative market prices may grow—brightening the prospects for energy storage from arbitrage.
System Balancing and Ancillary Services
System balancing and ancillary services are needed to ensure the reliable operation of the power system. They are services necessary to support the transmission of energy from resources to loads while maintaining reliable operation of the transmission system in accordance with good utility practice.
System balancing services are not uniquely defined across the industry, but generally are divided into categories relating to the time scale in which devices need to respond. Power system balancing refers to the need to hold reserve generation capable of increasing or decreasing generation (or demand) levels on relatively short notice to maintain power system reliability as demand or less-controllable resources unexpectedly shift consumption or generation levels. System balancing includes regulation/frequency control reserves, following reserves, and imbalance reserves.