TODAY’S STUDY: Battery Energy Storage Right Now

U.S. Battery Storage Market Trends

May 2018 (U.S. Energy Information Administration)

Executive Administration

This report explores trends in U.S. battery storage capacity additions and describes the current state of the market, including information on applications, cost, and market and policy drivers. There are a number of key takeaways:

• At the end of 2017, 708 megawatts (MW) of power capacity, 1 representing 867 megawatthours (MWh) of energy capacity, 2 of large-scale3 battery storage capacity was in operation.

• Over 80% of U.S. large-scale battery storage power capacity is currently provided by batteries based on lithium-ion chemistries.

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• About 90% of large-scale battery storage in the United States is installed in regions covered by five of the seven organized independent system operators (ISOs) or regional transmission organizations (RTOs) and in Alaska and Hawaii (AK/HI).

• Nearly 40% of existing large-scale battery storage power capacity (and 31% of energy capacity) lies in the Pennsylvania-New Jersey-Maryland Interconnection (PJM), which runs energy and capacity markets and the transmission grid in 13 eastern states and the District of Columbia.

o In 2012, PJM created a new frequency regulation market product for fast-responding resources, the conditions of which were favorable for battery storage. However, recent changes in PJM’s market rules have slowed battery installations in the region.

o Most existing large-scale battery storage power capacity in PJM is owned by independent power producers providing power-oriented frequency regulation services.

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• Installations in California Independent System Operator (CAISO) territory accounted for 18% of existing U.S. large-scale battery storage power capacity in 2017, but they accounted for 44% of existing energy capacity. o In 2013, the California Public Utility Commission (CPUC) implemented Assembly Bill 2514 by setting a mandate for the state’s investor-owned utilities to procure 1,325 MW of energy storage by 2020.

o Large-scale installations in California tend to provide energy-oriented services and tend to serve a wider array of applications than systems in PJM. o In addition, nearly 90% of reported small-scale4 storage power capacity in the United States was reported by four California utilities.

• Costs for battery storage technologies depend on technical characteristics such as the power and energy capacity of a system.

o In general, total installed system costs for batteries of shorter duration are less expensive than long-duration systems on a per-unit of power capacity basis.

o In terms of costs per-unit of energy capacity, the reverse is true—the longer duration batteries will typically have lower normalized costs compared with shorter-duration batteries.

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• Battery storage can serve many applications. However, the functional ability of storage to serve these applications has traditionally been not well defined under existing market rules and policies. As the technology has matured and as the industry stakeholders in some regions have gained experience financing, procuring, and operating storage installations, the situation has changed and more clarity has begun to be provided. Most of the activity has been led by specific ISOs/RTOs and state-level regulators.

Large-Scale Battery Storage Trends…Regional Trends…Ownership Trends…Chemistry Trends…Current Applications…Battery Storage Costs…Small-Scale Energy Storage Trends…Market Drivers…

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Future Trends

As of December 2017, project developers report to EIA that 239 MW of large-scale battery storage is expected to become operational in the United States between 2018 and 2021. Given the short planning period required to install a storage facility, the reported planned capacity does not necessarily reflect the entirety of builds over this period, but the estimates can be used as an indicator of trends.

California accounts for 77% of planned large-scale battery storage currently reported. In 2013, California set an energy storage mandate (Assembly Bill 2514), which requires its investor-owned utilities to install 1,325 MW of energy storage across the transmission, distribution, and customer levels by 2024. (See the section on market and policy drivers for more information.)

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The Annual Energy Outlook (AEO), provides projections to 2050 on the supply and demand needs for energy markets in the United States. The 2018 AEO report was the first year to include operational or capacity projections of energy storage outside of pumped hydroelectric storage in the model results. The Reference case, which assumes implementation of current U.S. laws and policies, projects largescale wind capacity growth of 50 gigawatts (GW) and large-scale solar photovoltaic capacity growth of nearly 150 GW by 2050. Over this same period, large-scale battery storage capacity is projected to grow to 40 GW, as shown Figure 11. In the longer term, wind and solar growth are projected to support economic opportunities for storage systems that can provide several hours of storage and enable renewable generation produced during the hours with high wind or solar output to supply electricity at times of peak electricity demand.

Challenges exist when modeling energy storage technologies in long-term planning models. Because these models are designed to deliver multi-decade results, simplifications in the structure of the model often occur. One simplification that has significant consequences for the representation of energy storage technologies is the temporal resolution of the model. AEO2018 included energy storage as a 4-hour battery system that can be utilized to avoid curtailments of excess solar- and wind-generated electricity, shift energy within a day, and help meet regional reliability requirements; however modeling sub-hourly markets, such as battery systems participating in frequency response, remains a challenge for many long-term planning models. As a result, the AEO projections shown do not represent all of the available storage technology options nor the full suite of applications that storage can serve. See the list of possible applications for storage in an earlier section of this report.

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EIA is collaborating with other modeling entities on a multi-model comparison23 to enhance the representation of technologies that challenge conventional long-term planning model design, such as wind, solar, and energy storage. The representation of battery storage in the AEO will continue to develop as the markets and applications for energy storage evolve…

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