Energy Storage Kills Need for Grid Upgrades

David Fessler By David Fessler
Energy and Infrastructure Strategist

Alternative Energy

For the last hundred years or so, utilities have expanded generation and grid infrastructure in anticipation of future load growth.

But that’s no longer necessary, partly due to the rapid growth in renewable energy (like solar) and energy efficiency measures. They are driving electricity demand down.

This is a real problem for grid planners. They make investment decisions on assets that are designed to last 50 years.

Today, the information they have to base their decisions on is continuously changing. New thermal generation and grid infrastructure might not be needed.

Let’s look at a real example. In 1999, regional transmission organizations (RTOs) were created to coordinate, control and monitor America’s electric grids. They were supposed to keep utilities honest.

PJM Interconnection is one such RTO that overlooks the grid that covers a large chunk of the East Coast and parts of the Midwest. It is responsible for grid reliability for more than 65 million Americans.

As part of its duties, it coordinates the wholesale movement of electricity and acts as a referee in a price-competitive market. PJM must also estimate its electrical load growth.

This has never been an easy task. And for the last decade, PJM has consistently overestimated its summer peak load.

Its projections were always “Next year, load growth is going to increase.” But that never seemed to materialize.

That didn’t stop PJM from spending money on major generation projects and grid upgrades.

Who paid for them?

The utility customers in PJM’s territory… I’m one of them.

But today, that money can be better spent elsewhere.

Utilities are finally starting to realize this. Today we are seeing progressive RTOs taking a much more cautious view toward grid upgrades.

Arizona’s Big Little Problem

In 2017, Arizona Public Service (APS) – the state’s largest electric utility – had a big little problem. The small village of Punkin Center, 90 miles northeast of Phoenix, needed more power.

Only 600 people live in this tiny hamlet. One solution was for APS to upgrade 20 miles of a transmission line that serviced the village.

The line would have had to traverse very mountainous terrain. Constructing it would have been very expensive.

Instead, APS looked into a battery storage system. It found the cost to be far less than that of the transmission line.

So the utility installed 2 megawatts’ worth of storage on land it owned in Punkin Center. Now on the 20 to 30 days during the year when Punkin Center’s load overloads the existing transmission line, the town can source additional power from the battery system.

The overall cost ended up being less than half that of the transmission line upgrade. It’s a great example of not having to install a thumbtack with a sledgehammer.

Transmission and distribution lines can take years to permit and install. Whereas a battery storage system can be permitted and installed in six months or less.

The Punkin Center project is one of several battery storage systems APS has installed in its territory. It now considers storage as part of any new grid upgrade discussion.

Another advantage of battery storage, often overlooked by its detractors, is its flexibility. While an upgraded transmission or distribution system can provide relief to only one place, a battery storage system can source power onto a grid that can then be redirected anywhere. What’s more, if storage is no longer needed in one place, it can be dismantled and moved elsewhere.

Energy storage can solve headaches for utilities and soothe the wallets of utility ratepayers.

Everyone wins.

Good investing,

Dave