The Growing Importance of Energy Storage

A new report published by Deloitte, titled “Elevating the Role of Energy Storage on the Electric Grid,” notes that energy storage is critical for mitigating the variability of wind and solar resources and positioning them to serve as baseload generation. “In fact, the time is ripe for utilities to go ‘all in’ on storage or potentially risk missing some of their decarbonization goals,” says the report.

The report elaborates, noting that the power sector stands at a crossroads, potentially facing unprecedented challenges as the need for decarbonization intensifies. “Electric companies are grappling with changing demand patterns, evolving customer behaviors, and increasing electrification of previously fossil fuel–fired sectors, all while managing an aging grid.” Climate change challenges, including extreme weather events and wildfires, underscore the urgency for resilient and flexible electric grids.

While most utilities have set targets for decarbonization and formulated strategies to meet those targets, achieving them brings a host of complexities. Notably, the relentless rise of the infamous “duck curve,” a phenomenon becoming visible in the United States, could challenge grid reliability as the gap between peak demand and renewable generation widens.

(The “duck curve,” named after its resemblance to a duck, shows the difference in electricity demand and the amount of available solar energy throughout the day. When the sun is shining, solar floods the market and then drops off as electricity demand peaks in the evening. The duck curve is a snapshot of a 24-hour period during springtime, when this effect is most extreme, because it’s sunny, but temperatures remain cool, so demand for electricity is low, since people aren’t using electricity for air conditioning or heating.)

Amid this dynamic energy landscape, the report suggests, energy storage may emerge as an important tool to address these challenges, potentially revolutionizing how electricity is generated, managed, and consumed. “Technological breakthroughs and evolving market dynamics have triggered a remarkable surge in energy storage deployment across the electric grid in front of and behind-the-meter (BTM),” says the report. Battery-based energy storage capacity installations soared more than 1,200 percent between 2018 and 1H2023, reflecting its rapid ascent as a game changer for the electric power sector.3

The report notes six important points:

1 – The need for energy storage is becoming critical, with electricity demand shifts arising from evolving customer behaviors, increasing end-use electrification, and changing climate patterns against the backdrop of an aging electricity grid. Energy storage, as a result, may emerge as an essential tool for power companies to help meet their decarbonization goals.

2 – Energy storage on the electric grid is expected to reach between 225 and 460 GW by 2050, progressing from short-duration solutions to a combination of short- and long-duration energy storage (LDES) technologies.

3 – Three interlinked dimensions can guide the role of energy storage on the electric grid. These are: renewable energy integration, grid optimization, and electrification and decentralization support.

4 – Electric companies can harness storage opportunities through new business models, including: renewable energy + storage power purchase agreements, tolling and capacity contracts, virtual power plants, storage as transmission, storage as an equity asset, and microgrid as a service.

5 – The report identifies the California Independent System Operator, the Electric Reliability Council of Texas, the New York Independent System Operator, and the Southwest (not operating as an ISO) as entities exhibiting particularly favorable conditions for storage expansion.

6 – The developments that are likely to shape the role of energy storage in the future electric grid include advancements in battery materials and technology, the dynamic interplay of policy and market forces, and the management of efficient manufacturing and supply chain developments.


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