Future of Grid Storage in the US: Applications, Technologies, and Markets

Author: Justin Malecki, Phd

Contributing Authors: Shahab Shahnazari (Phd), Michael Deaves, and Tim Wohlgemut

- Q1, 2013 -

Prepared by ClearSky Advisors Inc. © ClearSky Advisors Inc. 27-Jun-2013

About This Report

The nascent market for grid storage devices will be characterized by the specific purposes (applications) for which the storage is used. Early adoption will occur for certain applications and favour specific technologies. These applications and technologies will have a huge impact on market development in this sector but may not be indicative of long-term viability. This report documents the most promising applications and technologies for grid storage in the USA. It quantifies likely installations segmented by application and technology over the next 10 years. Importantly, using ClearSky Advisors’ proprietary Dynamic Forecasting Tool, the report examines multiple scenarios for which market development is likely to occur. Implications for market size, technology adoption, market value, and policy development are discussed and quantified as appropriate. Recommendations and considerations for those organizations considering their role in future grid storage adoption are also provided. © 2013 ClearSky Advisors Inc. All Rights Reserved. Copying of or reproduction from this report in any form without prior permission is strictly forbidden. The materials ClearSky Advisors Inc. provides to clients will reflect ClearSky Advisors’ judgment based upon the information available to ClearSky Advisors Inc. ClearSky Advisors Inc. disclaims any other representations or warranties, express or implied, including without limitation any implied warranties of merchantability, fitness for a particular purpose or non-infringement. This report is based on sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. ClearSky Advisors Inc. shall have no liability for errors, omissions or inadequacies in the information contained in this publication.

Why This Report?

The emergence of grid storage is expected to facilitate greater renewable energy generation and promote the evolution of a smarter electrical grid. While some studies have reported on the feasibility and economics behind the various grid storage technologies such as lithium ion or compressed air energy storage, critical questions concerning suitability, installation costs, and opportunities remain unanswered. In this report, ClearSky Advisors provides not only a comprehensive analysis of key grid storage technologies and applications but also a detailed forecast for their growth.

Executive Summary

As jurisdictions around the world set ambitious goals for the proportion of electricity that will be generated by variable renewable sources such as wind and solar, utilities and grid operators are becoming increasingly aware of the challenges that this new generation will pose to existing grid infrastructure. One of the primary ways to mitigate these challenges is to incorporate more storage capability on the grid to:

a) dispatch renewable generation during times of high demand b) provide a more steady and smooth source of electricity that does not tax existing grid

infrastructure As of Q1, 2013 there is 20,738MW of grid storage power capacity servicing the US grid. Currently the majority of this storage power capacity (99%) is comprised of pumped hydro storage. While pumped hydro will continue to play a large role in energy storage, ClearSky Advisors expects that the next 10 years will see three-fold higher installations of non-traditional mechanical and battery-based storage technology than traditional pumped storage.

Grid Storage Technologies: 1. Pumped Hydro Storage 2. Non-traditional Mechanical Storage

a. Flywheel b. Compressed Air Energy Storage

3. Battery Storage a. Advanced Lead Acid b. Lithium Ion c. Zinc Bromine d. Sodium Sulfur

Grid Storage Applications:

1. Distributed Energy Storage Systems 2. Commercial and Industrial Applications 3. Transmission and Distribution Support 4. Frequency Regulation 5. Bulk Storage Applications

Applications can be combined in order to form systems capable of performing multiple tasks (e.g., wholesale energy arbitrage with regulation, local capacity, and transmission benefits)

Pumped99%

Battery and Non-

traditional Mechanical

1%

Current US Grid Storage Power Capacity (MW)

Pumped73%

Battery and Non-

traditional Mechanical

27%

2022 US Grid Storage Power Capacity (MW)

The forecast data presented in this report is based on analysis using ClearSky Advisors’ Dynamic Forecasting Tool (DFT). The DFT is a proprietary model designed to calculate the economic viability of electricity generation or storage technology in a given region, and based on that economic calculation, determine the volume of adoption of that technology within the region. The DFT is informed by more than 140 inputs describing average current local conditions for a particular technology and grid application, policy rules that influence the economic attractiveness of facilities, and assumptions for how these factors will change over the course of the forecast period. Using the DFT, ClearSky Advisors has modeled 189 different scenarios across:

13 different grid storage applications

9 different technologies

3 different scenario classes (High, Expected, and Low)

Combining these modeling scenarios into three broad categories and incorporating the schedule of known planned projects results in a 10-year forecast of 28.2 – 47.0 GW of grid storage power capacity by 2022. The 10-year compound annual growth rates (CAGR) for each scenario are:

9.3% - High Case

6.3% - Expected Case

3.4% - Low Case Excluding the pumped hydro market, the growth rates (CAGR) for each scenario will result in an increase to between 37.9%-45.3%. The following graph shows the annual installations for the expected case scenario. Complete segmentation of this data by technology and application can be found in the full report.

Due to their flexibility, we anticipate that over the 10-year forecast period, market opportunities for battery technologies (i.e., advanced lead acid, lithium ion, and zinc bromine) will be greater than those for mechanical technologies (i.e., pumped hydro, and compressed air energy storage). ClearSky Advisors expects that overall growth in this sector will continue to accelerate beyond 2022.

Segmentation:

1. Advanced lead acid 2. Lithium ion 3. Zinc bromine 4. Sodium sulfur 5. Vanadium redox 6. Flywheel 7. Compressed air

energy storage (above ground)

8. Compressed air energy storage (below ground)

9. Pumped Hydro

0

1,000

2,000

3,000

4,000

5,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(MW

)

Annual US Grid Storage Installations - Expected

The modeling scenarios also consider the market opportunities for grid storage facilities with individual grid applications as well as facilities comprised of multiple/combination applications. The following two graphs show the modeled expected case annual installations for each. Complete segmentation by combination application and individual application can be found in the full report.

With greater revenue opportunities, combination applications are more economically viable but have greater local requirements (i.e., there are fewer locations requiring such combinations of grid storage services). As a result, markets for combination applications are expected to take off early but will become saturated more quickly compared with individual applications. There are numerous factors that will determine precisely how US grid storage markets will evolve over the next 10 years. The following table summarizes the primary factors currently driving and restraining grid storage markets.

0

500

1,000

1,500

2,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(MW

)

Combination Storage Applications - Expected

0

1,000

2,000

3,000

4,000

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

(MW

)

Individual Storage Applications - Expected

Grid Storage Markets: Drivers and Restraints

Drivers Impact

Increasing Renewable Generation High

Government Funding High

Deregulation of Electricity Markets Moderate

Location Flexibility Low

Restraints

High Capital Cost High

Unproven Technology High

Decreasing Cost of Gas Generation Moderate

Lack of Storage Specific Permitting/Regulation Low

Segmentation:

1. Distributed energy storage system commercial and industrial customers with local capacity benefits

2. Stationary transmission and distribution support with regulation, local capacity and deferral benefits

3. Transportable transmission and distribution support with regulation, local capacity and deferral benefits

4.Wholesale arbitrage with regulation, local capacity and transmission benefits

5. Commercial and industrial energy management with distribution benefits

Segmentation:

1. Distributed energy storage system commercial and industrial customers

2. Commercial industrial energy management

3. Transportable transmission and distribution support

4. Stationary transmission and distribution support

5. Wholesale arbitrage 6. Commercial and industrial 4-hour

reliability 7. Wholesale frequency regulation 8. Remote wind

Table of Contents

ABOUT THIS REPORT ..........................................................................................................................1

WHY THIS REPORT? ............................................................................................................................2

EXECUTIVE SUMMARY .......................................................................................................................2

LIST OF FIGURES .................................................................................................................................7

LIST OF TABLES ..................................................................................................................................8

LIST OF COMPANIES MENTIONED IN THIS REPORT ..............................................................................9

1. INTRODUCTION ........................................................................................................................ 10 KEY FINDINGS ........................................................................................................................................... 12

2. GRID STORAGE MARKET DRIVERS AND RESTRAINTS .................................................................. 13 DRIVERS.................................................................................................................................................... 13 RESTRAINTS .............................................................................................................................................. 14

3. GRID STORAGE APPLICATIONS .................................................................................................. 16 MAXIMUM MARKET POTENTIAL .................................................................................................................. 20

4. GRID STORAGE TECHNOLOGIES ................................................................................................. 22 MARKET PENETRATION .............................................................................................................................. 24

Pumped Hydro Storage Projects ......................................................................................................... 24 Demonstration Projects Funded by the Department of Energy .......................................................... 26

CHARACTERISTICS OF GRID STORAGE TECHNOLOGIES ................................................................................. 27 Distributed Energy Storage Systems for Commercial & Industrial Customers .................................... 28 Commercial & Industrial Electricity Reliability & Management .......................................................... 28 Transmission & Distribution Support .................................................................................................. 28 Frequency Regulation.......................................................................................................................... 29 Bulk Storage ........................................................................................................................................ 29

5. GRID STORAGE MARKET FORECAST ........................................................................................... 30 FORECAST SUMMARY ................................................................................................................................ 30 MODEL ANALYSIS: APPLICATION & TECHNOLOGY SEGMENTATION .............................................................. 33

Combination Applications ................................................................................................................... 34 Individual Applications ........................................................................................................................ 38

DISCUSSION .............................................................................................................................................. 43 The interplay of combination and individual applications .................................................................. 43 The role of technological innovation ................................................................................................... 43 The dominance of battery technology ................................................................................................ 44

6. MARKET VALUE ........................................................................................................................ 45

7. CONCLUSIONS AND RECOMMENDATIONS ................................................................................. 47

APPENDIX A – FORECAST METHODOLOGY ........................................................................................ 49

APPENDIX B – DETAILED MODEL SEGMENTATION ............................................................................. 51 DISTRIBUTED ENERGY STORAGE SYSTEMS FOR COMMERCIAL & INDUSTRIAL CUSTOMERS ............................. 51

Distributed Energy Storage System Supporting Commercial/Industrial Customers with Local Capacity Support ................................................................................................................................................ 53 Distributed Energy Storage System Supporting Commercial/Industrial Customers ........................... 54

Safety Concerns Low

COMMERCIAL & INDUSTRIAL ELECTRICITY RELIABILITY & MANAGEMENT ....................................................... 56 Commercial/Industrial Energy Management with Distribution Benefits ............................................ 58 Commercial & Industrial Energy Management ................................................................................... 59

TRANSMISSION & DISTRIBUTION SUPPORT .................................................................................................. 62 Stationary Transmission & Distribution Support with Regulation, Local Capacity, and Deferral Benefits ............................................................................................................................................... 64 Transportable Transmission & Distribution Support with Regulation, Local Capacity, and Deferral Benefits ............................................................................................................................................... 65

FREQUENCY REGULATION .......................................................................................................................... 68 Wholesale Frequency Regulation ........................................................................................................ 70

BULK STORAGE ......................................................................................................................................... 72 Wholesale Energy Arbitrage with Regulation, Local Capacity, and Transmission Benefits ................ 74 Wholesale Arbitrage ........................................................................................................................... 75

APPENDIX C – COMPANY PROFILES .................................................................................................. 78

Disclaimer The materials ClearSky Advisors Inc. (ClearSky Advisors) provides to the client will reflect ClearSky Advisors’ judgment based upon the information available to ClearSky Advisors. ClearSky Advisors disclaims any other representations or warranties, express or implied, including without limitation any implied warranties of merchantability, fitness for a particular purpose or non-infringement. This report is based on sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed.

List of Figures

Figure 1 - 10-Year US grid storage maximum market potential, individual applications. Source: EPRI, Sandia National Laboratory, ClearSky Advisors ............................................................................ 20

Figure 2 - 10-year US grid storage maximum market potential, combination applications. Source: EPRI, Sandia National Laboratory, ClearSky Advisors ............................................................................ 20

Figure 3 - Current US grid storage power capacity. Source: EPRI, Sandia National Laboratory, ClearSky Advisors ........................................................................................................................................ 24

Figure 4 - Cumulative US grid storage installations ............................................................................... 31 Figure 5 - Annual US grid storage installations ...................................................................................... 33 Figure 6 - Cumulative installations: combination applications ............................................................... 34 Figure 7 - Forecast of modeled combination applications, application segmentation ........................... 36 Figure 8 - Forecast of modeled combination applications, technology segmentation ........................... 38 Figure 9 - Cumulative installations: individual applications ................................................................... 39 Figure 10 - Forecast of individual applications, application segmentation ............................................. 40 Figure 11 - Forecast of individual applications, technology segmentation ............................................. 42 Figure 12 - Annual market value, overall forecast .................................................................................. 46 Figure 13 - Installation cost assumptions for distributed energy storage systems ................................. 51 Figure 14 - Installation forecast: distributed energy storage systems for commercial/industrial

customers with local capacity applications .................................................................................... 53 Figure 15 - Installation forecast: distributed energy storage systems for commercial/industrial

customers ..................................................................................................................................... 54 Figure 16 - Installation cost assumptions for commercial/industrial applications .................................. 56 Figure 17 - Installation forecast: commercial/industrial energy management with distribution benefits 58 Figure 18 - Installation forecast: commercial/industrial energy management ....................................... 59 Figure 19 - Installation cost assumptions for transmission & distribution support applications ............. 62 Figure 20 - Installation forecast: stationary transmission & distribution support with regulation, local

capacity, and deferral benefits ...................................................................................................... 64 Figure 21 - Installation forecast: transportable transmission & distribution support with regulation, local

capacity, and deferral benefits ...................................................................................................... 65 Figure 22 - Installation cost assumptions for frequency regulation applications .................................... 68 Figure 23 - Installation forecast: wholesale frequency regulation .......................................................... 70 Figure 24 - Installation cost assumptions for bulk storage applications ................................................. 72 Figure 25 - Installation forecast: wholesale energy arbitrage with regulation, local capacity, and

transmission benefits .................................................................................................................... 74 Figure 26 - Installation forecast: wholesale energy arbitrage ................................................................ 75

List of Tables

Table 1 - Grid Storage Markets: Drivers and Restraints ............................................................................ 13 Table 2 - Most valuable grid storage applications ..................................................................................... 17 Table 3 - Other grid storage applications ................................................................................................... 17 Table 4 - Multiple grid storage applications ............................................................................................... 18 Table 5 - Present value of grid storage benefits. Source: EPRI ................................................................. 19 Table 6 - Most feasible grid storage technologies ..................................................................................... 23 Table 7 - Pumped hydro storage projects in the US. Source: FERC ......................................................... 25 Table 8 - Demonstration projects funded by the US DOE......................................................................... 27 Table 9 - Technology characteristics for distributed energy storage systems. Source: EPRI, ClearSky

Advisors. ............................................................................................................................................. 28 Table 10 - Technology characteristics for commercial & industrial electricity reliability & management.

Source: EPRI, ClearSky Advisors. ....................................................................................................... 28 Table 11 - Technology characteristics for transmission and distribution support. Source: EPRI, ClearSky

Advisors. ............................................................................................................................................. 29 Table 12 - Technology characteristics for frequency regulation. Source: EPRI, ClearSky Advisors. ....... 29 Table 13 - Technology characteristics for bulk storage. Source: EPRI, ClearSky Advisors. ..................... 29 Table 14 - Financial parameters assumed in model ................................................................................... 49 Table 15 - DESS - Installation Cost Assumptions ....................................................................................... 52 Table 16 - Distributed Energy Storage System Supporting Commercial/Industrial Customers with Local

Capacity Support - Annual Installations ............................................................................................. 55 Table 17 - Distributed Energy Storage System Supporting Commercial/Industrial Customers - Annual

Installations......................................................................................................................................... 55 Table 18 - Commercial/Industrial - Installations Cost Assumptions .......................................................... 57 Table 19 - Commercial/Industrial Energy Management with Distribution Benefits - Annual Installations

............................................................................................................................................................ 60 Table 20 - Commercial and Industrial Energy Management - Annual Installations.................................. 61 Table 21 - Transmission and Distribution Support - Installation Cost Assumptions ................................. 63 Table 22 - Stationary Transmission and Distribution Support with Regulation, Local Capacity, and

Deferral Benefits - Annual Installations ............................................................................................. 66 Table 23 - Transportable Transmission and Distribution Support with Regulation, Local Capacity, and

Deferral Benefits - Annual Installations ............................................................................................. 67 Table 24 - Frequency Regulation - Installation Cost Assumptions ............................................................ 69 Table 25 - Wholesale Frequency Regulation - Annual Installations .......................................................... 71 Table 26 - Bulk Storage - Installation Cost Assumptions .......................................................................... 73 Table 27 - Wholesale Energy Arbitrage with Regulation, Local Capacity, and Transmission Benefits -

Annual Installations ............................................................................................................................ 76 Table 28 - Wholesale Arbitrage - Annual Installations .............................................................................. 77

List of Companies mentioned in this Report

List of Companies mentioned in this Report

1. A123 26. Energy Storage & Power LLC 50. Nippon Chemi-Con

Corporation

2. Active Power 27. Enersys 51. Nrstor

3. AES Energy Storage 28. EnerVault 52. Panasonic Corporation

4. Alstom 29. Eos Energy Storage 53. Plug Power

5. Altairnano Technologies 30. Exide Technologies 54. Powerthru

6. Amber Kinetics 31. FireFly International Energy Co. 55. Premium Power

Corporation

7. Andritz 32. General Compression Inc. 56. Primus Power

8. Aquion Energy 33. General Electric Company 57. Prudent Energy

9. Ashlawn Energy 34. Gravity Power 58. RedFlow Ltd.

10. Axion Power International 35. GS Yuasa Corporation 59. Saft Batteries

11. Beacon Power Corporation (bankrupt)

36. Heart Transverter 60. Samsung SDI

12. Black & Veatch 37. Highview Power Storage 61. Seeo

13. Bright Energy Storage Technologies

38. Hitachi Ltd. 62. Siemens Energy

14. BYD Company Ltd. 39. Hydrogenics 63. Sony Corporation

15. C&D Technologies 40. Hydrostor 64. Sumitomo Electric

Industries Ltd.

16. Celestica 41. Isentropic Ltd. 65. SustainX

17. CellStrom GmbH 42. Johnson Controls 66. Temporal Power

18. China National Electric Equipment Corporation

43. LG Chem Ltd. 67. Ultralife Corporation

19. Deeya Energy 44. LightSail Energy 68. Valence Technology

20. Dow Kokam 45. Lithium Technology

Corporation

69. Verdant (VRDT Corporation)

21. Dresser-Rand Group 46. Maxwell Technologies 70. Voith Hydro

22. East Penn Manufacturing Company

47. MWH Global 71. Vycon

23. Electrovaya 48. Nesscap Energy 72. Xtreme Power

24. Ener1 49. NGK Insulators 73. ZBB Energy Corporation

25. EnerDel

2013 US Grid Storage Report

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