When it comes to energy storage, “there’s a big range of potential futures out there,” one researcher said.
Batteries that kick in when the sun sets or the wind dies down — but also don’t break the bank — have long been seen as the holy grail of carbon-free electricity. Now, a new study out of North Carolina State University shows they’re no myth.
Analysts say that batteries already make economic sense for certain uses today in North Carolina, and that if trends continue, by 2030, 5 gigawatts of large-scale battery storage will be well worth the investment.
“There are combinations today that are cost-effective, and for others we are right on the cusp,” said Jeremiah Johnson, an associate professor at N.C. State and one of the report’s authors. If battery costs plummet as expected in the next 10 years, he said, “we might see a very big change in a very short time.”
Five gigawatts would be enough to displace numerous fossil gas plants, a concept that’s more than theoretical: Duke Energy is at work now on a battery project in Hot Springs after regulators rejected one of its three proposed gas units in nearby Asheville.
Still, Johnson and clean energy advocates say the degree and speed of battery deployment will depend heavily on state policy, especially when it comes to home-sized batteries paired with rooftop solar panels.
“It’s not a foregone conclusion,” Johnson said of the dramatic surge in storage. “There’s a big range of potential futures out there.”
‘A challenging market’ for energy storage
Falling prices, the desire for a lower carbon footprint, and the allure of energy independence have helped small batteries like the Tesla Powerwall gain popularity of late. But the vast majority of battery storage remains “in front of the meter” — owned not by homeowners and businesses with rooftop solar, but by electric utilities.
Today North Carolina has about 1 megawatt of battery storage, mostly in the form of microgrids, self-sustaining energy systems that can disconnect from the larger grid. Two are run by nonprofit rural electric cooperatives, one on the Outer Banks and another in Harnett County about 30 miles south of Raleigh. The Brunswick County co-op is building a third microgrid on the coast near the South Carolina border, and the city-owned utility in Fayetteville plans a fourth.
Duke, the utility covering most of the state, has three battery-backed microgrids: two near its Charlotte headquarters and one in the Smoky Mountains. In October, the company announced it would build 300 megawatts of battery storage in both Carolinas over the next 15 years, including its microgrid with a 4-megawatt battery in Hot Springs.
These efforts lag behind those in regions where there’s competition in the electricity marketplace and an independent, multi-state grid management organization. The PJM distribution market, for example, which covers the Mid-Atlantic and parts of the Midwest, already boasts 278 megawatts of battery storage, according to federal government data.
“The Southeast in general is a more challenging market,” said Diane Cherry, engagement director with the North Carolina Sustainable Energy Association. “We’re vertically integrated, we’re not restructured, we’re not part of a [regional transmission organization], and we have lower energy prices.”
Given these factors, Cherry’s organization convened a working group in 2016 of advocates, utility representatives, renewable energy developers and others to determine how to boost storage deployment. But, she said, “it became clear that a study was going to be needed to really look at the values of energy storage, and how to get the price and market signals correct in the state.”
Lithium-ion batteries already cost effective
That was the rationale behind a 12-line provision of a sweeping energy law adopted in 2017, directing a study of how energy storage “may or may not provide value to North Carolina consumers,” and a suite of policies that “may be considered” to speed its deployment.
Delivered to lawmakers last month, the analysis was authored by a team of experts from North Carolina State University, the North Carolina Clean Energy Technology Center and North Carolina Central University. It draws on input from hundreds of stakeholders like Cherry and months of meetings.
As required by law, researchers examined a range of storage techniques beyond batteries, including hydropower from water that’s been pumped to a higher elevation. But the report shows batteries have the most potential for exponential growth over the next decade, since they have no site-specific limitations and their costs are declining rapidly.
For a utility like Duke — which generates most of the state’s electricity and manages most of its electric grid — analysts found that batteries offer a range of upsides. They can be rapidly ramped up or down to maintain proper balance on the grid between supply and demand, a function called “frequency regulation.”
Based largely on data from the PJM transmission market, researchers found that large-scale batteries used for frequency regulation in North Carolina could provide more benefit than cost, even at 2019 prices.
“That, to me, was really helpful,” Cherry said, “to show that the commercial and industrial sector is actually relying on energy storage right now using lithium-ion batteries.”
Batteries can also be charged when there’s little need for power, then discharged when demand is high. That can reduce the need for Duke to invest in substation upgrades or small power plants that are fired only when electricity needs reach their peak. It also saves money for nonprofit utilities and other large customers, who buy most of their electricity from Duke and pay higher rates during peak hours. Researchers estimated 5 gigawatts of batteries could be cost-effective for these “peak-shaving” and “time-shifting” services by 2030.
Still, analysts say individuals who want to pair batteries with solar panels will pay a premium to do so in 2030, in large part because residential customers — unlike large industrial and co-op customers — currently aren’t charged higher rates during peak hours.
“For something like the Tesla Powerwall, which a residential customer may want to have,” Johnson said, “what we found is there are some opportunities, [but] they are largely driven by the rate design.”
Some stakeholders are more bullish on small-scale storage because of a recent breakthrough in zinc-air, the battery technology used in Duke’s Smoky Mountains project.
A California entrepreneur said in September that zinc-air could be deployed at $100 per kilowatt-hour, half of the projected 2030 cost of the lithium-ion batteries the N.C. State team examined. Unlike lithium, the zinc-air technology doesn’t rely on scarce minerals.
The development reinforced a blueprint by Durham-based nonprofit NC WARN for a carbon-free grid, called NC Clean Path 2025, which includes the addition of 2 gigawatts of rooftop solar per year, coupled with battery power.
“This thing is just ready to change the game in a major way,” said Jim Warren, NC WARN’s executive director.
Johnson’s team focused on lithium-ion batteries because they currently dominate the market, he said, and since they had less than a year to complete the study, they didn’t have time to examine every technology.
“Should zinc-air costs continue to drop,” Johnson said, “we agree that it should be considered.”
‘Do we really want to push it?’
No matter what, policy changes will be required if North Carolina hopes to achieve anything close to 5 gigawatts of battery storage; by comparison, Duke’s 10 gas plants in North Carolina have a combined capacity of 7.6 gigawatts.
Duke has won regulatory approval for its storage proposals so far. But for a significant increase in battery projects beyond those, policy makers may need to assign a value for storage in the generation planning process, or require utilities to consider storage before building traditional power plants as some other vertically-integrated states have.
On the distribution side, there’s no open planning process and little opportunity for an independent battery developer to enter the market. Creating a standard offer program for storage, requiring Duke to procure a certain amount of storage, or simply setting a public energy storage goal would help solve this problem.
At the same time, a boost in residential battery use will almost certainly necessitate time-of-use rates or other economic incentives that would make batteries and rooftop solar cost-effective. Small customers with batteries also aren’t allowed to connect to the grid via net metering; that, too, would need to change.
N.C. State researchers laid out policy options in three categories, depending on whether the state wanted to simply “prepare” for storage, “facilitate” more of it, or “accelerate” deployment.
Cherry compared the categories to the gears in a car after neutral. “The question becomes for North Carolina,” she said, “do we want to be in ‘drive,’ do we want to be moving forward faster, or do we really want to push it?”
‘Humanity’s back is against the wall’
But utility commissioners and legislators are unlikely to enact any of these reforms — no matter how modest — if they draw strong opposition from Duke, one of the top contributors to state legislative campaigns in 2018.
And while company spokesman Randy Wheeless says Duke is “philosophically on the same page” as clean energy advocates on battery storage, he’s also more skeptical about its full potential.
“I think the hype sometimes on batteries gets a little overblown,” Wheeless said. Referencing NC WARN’s clean energy blueprint, he added, “I don’t think solar and storage alone in the future is going to power North Carolina.”
Warren, a longtime and outspoken Duke critic, is convinced that attitude will eventually mean the company’s demise, given the rapid decline in battery prices and the growing number of major Fortune 500 companies with goals for 100 percent renewable energy.
“These guys are running the risk of going the way of Kodak if they keep making 20th-century decisions,” Warren said.
But with recent reports concluding there must be a dramatic worldwide decline in carbon emissions in the next 12 years to avoid the worst effects of climate change, Warren said, there’s no time to wait for market forces to cause Duke to fail.
“We desperately need Duke Energy to turn its resources in the right direction,” he said. “Humanity’s back is against the wall.”