Energy Storage Benefit Categories

Executive Summary

Energy storage (storage) can provide a rich spectrum of benefits to the electric grid, to electricity end-users and to society as a whole. The spectrum of storage benefits can be grouped into six broad application/use categories:

  • Electric supply,

  • Electrical grid operations,
  • Electrical grid infrastructure,
  • End-user,
  • Renewables integration, and
  • Incidental (and other).

Storage benefits are also commonly categorized as being:

  • Energy-related or capacity-related and
  • Central (bulk power) or locational (distributed).


Electricity Supply Benefits and Uses

The two electricity supply benefits from storage are perhaps the most familiar: electric energy time-shift and electric supply capacity.

Electric energy time-shift involves:

  • Storage of electric energy when its value and/or price are low
  • Use of the stored energy when the value and/or price are high.

These are sometimes referred to as “buy low–sell high” transactions.

The benefit derived is the difference between:

  • The “low” cost incurred or price paid for energy that is stored and
  • The “high” cost or price that is avoided, net of energy losses during storage and net of the related cost to own and to operate the storage.

For example, at night there is usually limited need for electricity and there is often more supply than there is need. At those times, the cost to generate electricity and the price for that electricity are relatively low.

Conversely, during weekdays, especially summer weekdays, electric energy use is high and as are the cost to produce and the price to purchase the electric energy.

The second electric supply benefit – electric supply capacity – is related to a reduced need for electricity generation equipment (i.e., capacity). Quite simply, if storage use reduces the need to install generation capacity then the benefit from storage is the avoided or reduced cost associated with building and owning that generation equipment.

Because electric supply capacity used to serve peak demand is only needed for a few hundred hours per year, storage used to serve peak demand could also be used to provide other benefits for the remaining 80% (or more) of the year.

Grid Operations and Ancillary Services Benefits and Uses

There is more to the electric grid than energy and power. In fact, there are several “ancillary services” that are required for stable, reliable, efficient operation of the electrical grid. The Federal Energy Regulatory Commission (FERC) defines ancillary services as “Those services that are necessary to support the transmission of capacity and energy from resources to loads while maintaining reliable operation of the Transmission Service Provider’s transmission system in accordance with good utility practice.” (From FERC order 888-A.)

Although most of the cost for electricity generation and delivery are for energy and power, costs incurred for grid operations and ancillary services are not trivial, accounting for several percent of total costs.

Key ancillary services include:

  1. Reserves or backup power,
  2. Momentary and hourly reconciliation of electricity supply and demand to stabilize the alternating current (ac) “frequency” at which the grid operates (60 cycles per second), and
  3. “Voltage support” that is required to maintain the voltage of the grid.

Storage is somewhat or even much better as ancillary services resources than the conventional fossil-fueled generation approach. There are two key reasons. First, most types of energy storage can start-up quite quickly and the output from and input to most storage types can be varied quite rapidly. So, they are more responsive and flexible as ancillary services “resources.” Second, storage system life and wear are somewhat or even much less sensitive to output variability than they are for electricity generation that is used for ancillary services. (Ideally, most types of generation operate at a constant rate (power), at their “design point,” which minimizes wear, fuel use and total cost per unit of energy output.)

The benefit is reduced cost relative to generation-based ancillary services including reduced need for generation capacity (equipment), and reduced generation operations cost, for fuel, maintenance and wear. Additionally, storage can provide all of the ancillary services and the same storage can be used for other benefits.

Grid Infrastructure Benefits and Uses

Quite simply, grid infrastructure benefits are related to storage use to improve the effectiveness, efficiency and cost-effectiveness of the electrical transmission and distribution (T&D) systems and/or to reduce the need for T&D equipment.

To improve T&D equipment performance, storage is connected at or near parts of the T&D systems where there are problems –sometimes referred to as hot spots – to improve T&D equipment “performance.” The result is that the same T&D equipment has a higher “capacity” and thus can transmit more energy. (In Figure 1, note that the storage is connected at or close to the hot spot).

Odoo CMS - a big picture

Storage reduces the need for T&D equipment if it is connected to the grid so that it reduces the “peak” or maximum power draw (peak demand) by equipment using electricity. If the storage does serve a portion of peak demand – that would otherwise be served by the overloaded T&D equipment – then the utility may be able to delay (defer) an upgrade to the T&D equipment, to serve more demand.

To do that the storage must be connected to the grid at a location that is electrically downstream from the hot spot, as shown in Figure 1. The benefit is due to the reduced need for the T&D capacity (equipment). In the example in the figure above, the need for a new higher power transformer is deferred or avoided. Similarly, by reducing the peak demand that must be served by some types of T&D equipment, especially heavily loaded and older equipment, the equipment’s life may be extended – a benefit.

Importantly, the peak demand only affects T&D equipment for a few tens or hundreds of hours per year. So, a storage system used for grid infrastructure benefits is available to provide other benefits for 90% or more of the year.

End-user Benefits and Uses

There are two subcategories of end-user benefits:

  • Electricity bill management and
  • Reduced/avoided losses due to electric service quality and outages.

Both are avoided costs.

Bill management involves storage use to reduce the end-user’s cost to purchase electricity. The bill management benefit may involve:

  • Reduced cost for and use of electric energy only or
  • Reduced/avoided financial losses for and use of electric energy AND reduced maximum power draw (known as electric demand).

There are also two similar but distinct subcategories of benefits for reduced/avoided financial losses due to electric service quality and outages. The first could be referred to as a power quality (PQ) related benefit. It accrues if storage (e.g., an uninterruptable power supply or UPS) is used to reduce/avoid costs that would be incurred – without the storage – due to poor power quality (i.e., the electricity delivered by the grid does not have sufficient quality). The second subcategory – which could be referred to as a reliability benefit – is similar to the PQ benefit. It accrues if the storage is used to reduce/avoid costs associated with electric service disruptions – “outages.”

(Note that PQ-related problems tend to occur over short durations – seconds to less than a minute – whereas reliability-related problems last many seconds to hours.)

Costs that are reduced/avoided (benefits) could include avoided damage to equipment using electricity as well asthe cost and hassle associated with processes or equipment that “trips” off as a result of poor power quality and/or outages. There may also be significant, but challenging to quantify, benefits related to factors such as comfort, aesthetics or safety.

Renewables Integration Benefits and Uses

Storage is poised to play a key role in the integration of renewable energy (RE) electricity generation into the electricity grid of the future (renewables integration). Of particular interest is use of storage to assist with the effective and reliable integration of RE generation whose output is variable, primarily wind and solar and possibly including ocean wave and tidal generation. Three key challenges include accommodating:

  • Output variability,
  • A temporal (time-related) mismatch between generation and demand, and
  • Undesirable electrical effects caused by RE generation.

Output variability can be either short-durationor long-duration. Short duration variability – lasting a few seconds to many minutes – is caused by fluctuations in wind speed, sometimes involving significant moment-to-moment variations, and rapid fluctuations of solar energy due to clouds. Long term variability occurs from year-to-year, season-to-season, day-to-day and most importantly, throughout each day. Storage can be used to address both short-duration and long-duration variability.

To address short-duration variability, storage output fluctuates in such a way that it cancels out the RE generation’s variable output. For example,if wind generation output drops due to lower windspeed, then storage output is increased by the amount needed to compensate. To address longer-duration variability throughout a day, storage discharges to “fill-in” when the RE generation is not producing full power. The effect – of storage used in in concert with variable RE to address daily variability is what is sometimes called “firming” – meaning that the result is constant power output, especially during times of peak demand.

Other and Incidental Benefits and Uses

Other and incidental storage benefits are those:

  • For which there is no price and/or
  • For which there is no established market and/or
  • That are not well recognized or well understood by important stakeholders and/or
  • That are diffuse, shared among stakeholders and/or challenging to estimate.

Some of these benefits are especially important for what might be called the societal value proposition for energy storage. Such benefits include reduced generation fuel use, reducedair emissions and reduced GT&D electrical infrastructure, land and water needs. For example, if a significant amount of storage is used, the generation fleet operation can be more optimal, reducing generation equipment needs, fuel use and air emissions.

An important incidental benefit is that storage increases GT&D asset utilization: GT&D infrastructure is used more at night because that is when storage is charging, so more energy is generated and delivered per year for the same infrastructure. Ideally, doing that also reduces GT&D infrastructure needed to serve peak demand, further increasing asset utilization. By charging storage at night, rather than generating, transmitting and distributing the energy real-time during the day, the amount of energy lost during transmission and distribution is reduced. Finally, most types of storage are modular; they can be deployed as needed, unlike most utility equipment that must accommodate demand growth for several or many years.

Energy and Capacity Benefits and Uses

Energy-related storage benefits reflect avoided cost for variable, operations-related costs, especially: fuel, maintenance and labor costs that vary based on how much energy is generated and delivered. Capacity-related (or power-related) costs reflect mostly fixed, infrastructure-related costs: GT&D equipment, land and buildings. Arguably, most storage benefits are capacity-related, reflecting reduced need for GT&D equipment.

Central (or Bulk) and Locational (or Distributed) Benefits and Uses

There is growing recognition of the importance of the distinction between benefits that accrue without regard to location and benefits for which location is important. So,central benefits are somewhat or mostly the same, within a given region or state, whereas the existence and magnitude of locational benefits is quite dependent on a specific location. Electric supply benefits, grid operations benefits are central benefits. Grid infrastructure benefits and end-use benefits are locational. Renewables integration and other/incidental benefits include a mix of central and locational benefits.

Conclusions and Observations

Energy storage can provide broad array of benefits for the electric grid, electricity end-users and to society. Though many of the benefits described above are currently not recognized, not well-priced, and/or not quantifiable, they do exist in an accounting and finance sense, mostly in the form of avoided costs.

So, it is important to consider and discuss all of these benefits as more efficient electricity marketplace develops.