Deloitte Report Details Importance of Energy Storage to U.S. Power Grid

Energy industry analysts have said energy storage will be needed to support the integration of renewable energy into the U.S. power grid, and to provide grid flexibility and reliability.

Energy storage, including the use of battery energy storage systems (BESS), also will support moves toward electrification and continued decentralization of U.S. power generation.

A new report from Deloitte, “Elevating the role of energy storage on the electric grid,” provides a comprehensive framework to help the power sector navigate renewable energy integration, grid flexibility and reliability, and electrification and decentralization support. The report released September 26 echoes many of the arguments for energy storage made during the RE+ clean energy conference in Las Vegas, Nevada, earlier this month, for which POWER was a media partner.

The Deloitte report, written by company analysts including Jim Thomson, Marlene Motyka, Craig Rizzo, Kate Hardin, and Jaya Nagdeo, focuses on how energy storage can help achieve a clean, flexible, reliable and resilient power grid. Among the takeaways:

  • Renewable energy integration strategies include co-locating storage to minimize curtailment, developing hybrid renewable energy storage systems to maximize renewable energy penetration, and utilizing advanced forecasting to optimize renewable energy utilization.
  • Grid optimization enhancements include replacing natural gas-fired peaker plants with energy storage for peak demand management, integrating behind-the-meter (BTM) storage with demand response programs while providing ancillary services, and creating storage-centric transmission infrastructures to reduce congestion and bolster resilience.
  • Electrification and decentralization support includes integrating storage with electric vehicle (EV) charging infrastructure for transportation electrification, developing power and heat storage solutions for industrial electrification, integrating energy storage in microgrids while consciously leveraging community-based solutions, and using storage to support potential peer-to-peer energy trading platforms.

Thomson, who serves as vice chair, US Power, Utilities & Renewables leader at Deloitte, told POWER, “Energy storage is the linchpin of our electrified future, offering solutions for utilities to bridge the gap between intermittent renewables and consistent power supply. Battery-based energy storage can help alleviate current challenges with interconnection queues, grid stability, and clean energy integration.”

Storage Called ‘Critical’ for Decarbonization

The report notes that “Energy storage is critical for mitigating the variability of wind and solar resources and positioning them to serve as baseload generation.” It also says that “the time is ripe for utilities to go ‘all in’ on storage or potentially risk missing some of their decarbonization goals.”

Thomson said energy storage “also significantly contributes to unlocking a cleaner, more flexible, and resilient grid. Energy storage is the key to redefining how we generate, manage, and consume electricity.”

Deloitte in another report published earlier this year said operating and maintaining the U.S. power grid will require major expenditures from electric companies through the end of this decade, and the price tag is even steeper if measures to meet decarbonization goals are added to the mix.

That report—“Decoding the cost dilemma: How can electric companies navigate a shifting landscape?”—detailed how large U.S. electric companies could together spend as much as $1.8 trillion and perhaps more to maintain, operate, and decarbonize the nation’s electricity grid. It examines how electric companies can best plan their investment strategies through 2030, while operating in an environment of higher costs to produce electricity during a period of slow or uncertain demand.

The reports on costs, released on June 1 of this year, noted that utilities would need to make operational improvements, including promoting electrification and investments in energy storage, as part of future capital outlays. That includes integrating distributed energy resources (DERs) into the generation mix and the power grid.

“You see the interest level from utilities,” said Jigar Shah, director of the Loans Program Office for the U.S. Dept. of Energy (DOE), in an interview with POWER at RE+. “There’s growth every week, we’re seeing EVs added every week. DERs are integral to the energy transition.”

Shah said wider adoption of DERs is part of the move to add energy storage to renewable energy installations, such as solar and wind farms.

“The U.S. has been a leader in solar technology, and today we are getting an opportunity to deploy it at scale,” Shah said, noting that the “DOE has an incredible role to play” in moving renewable energy and energy storage forward.

Legislation ‘Supercharged’ Energy Storage

Tuesday’s report on energy storage said the 2022 passage of the Inflation Reduction Act (IRA) “supercharged interest in energy storage.” The report notes that capacity projections for energy storage have “increased dramatically, with the U.S. Energy Information Administration raising its forecast for 2050 by 900% to 278 GW in its ‘2023 Annual Energy Outlook’.”

Energy industry analysts have said that as of July of this year, about 111 GW of energy storage projects are in various stages of development across the U.S.

Deloitte said energy storage deployment can be part of several business models for utilities and other power generators, including power purchase agreements around renewable energy-plus-storage installations, as well as tolling and capacity contracts. Virtual power plants (VPPs), and storage as transmission schemes, are also part of the mix.

“We’re looking at hundreds of gigawatt hours of energy storage capacity,” said Jennifer Downing, a senior advisor in the DOE Loans Program Office. Downing, also speaking with POWER at RE+, said VPPs are “more affordable” as a generation resource, and offer numerous benefits to electricity customers, including “EV charging, thermostat control … there’s an urgent need for DERs as supply-side resources.”

Microgrids in the Mix

The latest Deloitte report also said storage also can be used as an equity asset, and as part of microgrid-as-a-service (MaaS) model.

In the latter example, Deloitte said the MaaS business model “can offer customers, especially in the commercial and industrial segments, turnkey access to microgrid infrastructure, battery storage, and renewable energy sources through subscription-based arrangements, helping to ensure reliable and resilient energy supply without any upfront investment.” The report pointed to Xcel Energy’s Empower Resiliency program for large commercial and industrial customers in Xcel’s home state of Minnesota, noting that “the microgrid-based service is designed to enhance reliability for customers requiring higher-than-standard service.” In the program, “Xcel owns, installs, and maintains microgrid assets, including battery storage and renewable energy, providing a turnkey resiliency solution and upfront capital.” Xcel previously offered the program to customers in Wisconsin.

The report details the potential for energy storage across different U.S. regional power transmission networks. It notes that the California Independent System Operator (CAISO) remains the strongest region for deployments, with Texas—the ERCOT system—also showing high potential.

The report said energy storage “is expected to grow exponentially in ERCOT, aligned with the rapid growth of solar and wind power. With 92 GW of wind and solar, plus 32 GW of storage in the pipeline, the region’s outlook appears promising. Additionally, the [Texas] grid faces possible reliability issues due to high congestion costs, primarily attributed to increasing load, supply, and outages in the region, making storage even more attractive.”

The report said “strategic adoption” of energy storage will be paramount as the power sector evolves. “The electric power companies poised to integrate storage solutions strategically could be well positioned to accelerate renewable energy integration, navigate grid challenges, and facilitate a resilient energy future,” it said, noting that “advances in materials and technology will likely play an important role in helping to ensure energy storage’s significance in the future grid.”

Deloitte’s analysts in the report also wrote that “Policy and market dynamics will likely be instrumental in shaping the future of energy storage and its role in the broader energy landscape: Supportive policies and dynamic market structures could help drive additional investment, innovation, and widespread adoption of energy storage technologies, helping to ensure their effective integration into electric power systems.”

Darrell Proctor is a senior associate editor for POWER (@POWERmagazine).

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