Value propositions for utility-scale energy storage

A fundamental truth of the electrical grid has been, in general, that electricity must be generated at the precise moment it is demanded. It is the ultimate "just-in-time" system, required by the laws of physics to carry no inventory. This characterization is again under challenge, as development of grid scale energy storage devices, both electrochemical and mechanical, is accelerating and being represented as a critical piece of the grid infrastructure of the future. Much of the impetus behind this activity follows closely with the early days of meaningfully high penetrations of renewable generation into our power systems, at both the transmission and distribution-level; each of which presents somewhat different challenges in terms of integrating wind and solar energy. Storage, it is argued, offers the stabilization and buffering capacity that will be necessary to reconcile the variability of growing amounts of renewable generation and the challenges these might cause with relatively predictable and stable loads. Our purpose in this paper is to introduce a few frameworks for consideration of both the necessity of grid scale energy storage for the reliable operation of the grid of the future as well as the economic propositions that these assets will face in developed electricity markets and under established utility practices. Simply put, there are three basic and obvious questions that must be addressed for any asset deployment: (1) what is the problem the asset will solve?; (2) what is the mechanism by which an investor would be able to recover the costs of the asset?; and (3) what other means are there of solving the same problem? This paper will consider each of these questions for a variety of applications of utility-scale energy storage.