Electricity storage technology is not a luxury line item

It seems like a no-brainer. As more U.S. regional grids meltdown amid stresses of extreme weather, federal funding for new localizable, flexible technological solutions to electricity storage seems like a must-do, especially where U.S. military bases and other vital infrastructure is concerned.

So leave it to the rancorous partisan politics of energy in the United States to find detractors to the U.S. Department of Energy’s announcement that it intends to target long-duration energy storage for renewable energy. The supposed objection is the high cost the technology currently has. It’s a common theme, previously applied to everything from solar panels (now over 80 percent cheaper and falling) and deep offshore wind (now increasingly becoming commercial) and even back in the day, which almost no one remembers, U.S. natural gas.

That electricity storage has a role to play in future grids should be unchallenged. Even traditional energy like nuclear plants and key gasoline distribution companies keep generators on hand to deal with grid emergencies, in effect substituting for storage technology. It’s an imperfect system if the propane or diesel fuel needed for the generators also gets disrupted. Climate change and cybersecurity mean more similar solutions are necessary. As costs fall for batteries and/or hydrogen production, new opportunities are arising. 

The idea that storage technology is pie in the sky is wrongheaded. Already, new aggregated battery systems, referred to as virtual power plants, are succeeding where other fuels have failed, and often saving hundreds of millions of dollars in relieving electricity system congestion without recourse to expensive, billion-dollar centralized infrastructure. Virtual power plants, a system where surpluses from small scale storage devices are tapped all at once and provided to the grid as if from a centralized power station, have been deployed as a backup to renewable energy in South Australia and New York City, replacing other traditional solutions that would have been cost-prohibitive for ratepayers. In effect, these aggregated storage systems displace construction of more costly system upgrades in transmission, substations, large scale generation and capacitor banks, and can be installed and repaired much more quickly.

Customers often reject the current high costs of battery storage systems because the normal fluctuation in peak electricity prices on a daily basis takes a long time to pay out the expensive upfront cost of the battery installation. But that commercial calculation doesn’t take into account the exorbitant costs of lost business and perishable inventories when power outages do occur. Since 2000, incidents of such outages are up 67 percent. 

In certain geographic locations, as more renewables get deployed, long-duration storage will be needed in the winter months. To date, some locations, like Vermont, are relying on flexing Canadian hydro resources to back up renewables when they are intermittent. But analysts are counting on a large fall in the cost of storable green hydrogen produced by electrolyzers connected to wind and solar farms to serve as a long-duration resource. S&P Global says costs for green hydrogen will need to fall 50 percent by 2030 to render it a viable alternative to natural gas. They say that decline could come about from a combination of a continuing fall in the prices of renewable energy and an expected drop in electrolyzer capital cost, which is expected to fall from scale economies and learning curve benefits. Such cost declines are already in the works and could accelerate if the Biden administration as well as the Chinese government throw their weight behind incentives. 

All this is to say that politicians who believe that they are out to save natural gas and coal jobs by trying to kill funding for advanced storage technologies might find they are simply shipping new jobs to other countries that will be investing in research and development for long-duration storage. Other countries have shown a willingness to compete vigorously with the United States in energy research and development. Failing to make investments in storage technology and other advanced energy technology risks leaving the U.S. economy and its electric grid on a back foot in the coming years.

The DOE’s announcement that it will focus on storage should be a welcome one. In addition to research and development spending, the Congress and state electricity policymakers need to look carefully at incentives and other regulatory reforms that are needed to promote virtual power plants and other kinds of distributed energy resources mini and microgrids to build up grid resilience. That includes improving coordination functions of distribution system operators (DSOs) and related software systems and technical standards for distributed energy systems. Electricity storage systems will be critical resources in the years to come to build local resilience for important critical infrastructure and other aspects of the U.S. electric grid. It should be a bi-partisan issue. 

Amy Myers Jaffe is the author of “Energy’s Digital Future: Harnessing Innovation for American Resilience and National Security.” She is a research professor and managing director of the Climate Policy Lab at Tufts University Fletcher School.