Inconsistent Energy Laws Complicate Energy Storage Adoption

By Jacek M. Wnuk

While solar cells have been around in some form since the 1800s, increases in their efficiency were modest and slow until about 2000. Since 2000, the technology has seen rapid increases in efficiency, both at the research and consumer levels, and consistent deceases in cost of approximately 7 percent per year.

For all of these improvements, however, solar power has a significant inherent flaw – it generates energy at a very variable rate that is highly dependent on environmental conditions. Wind turbines, which have similarly improved in both efficiency and affordability in recent years, suffer from the same flaw.

New large-scale battery technologies promise to store energy both as it is being generated and in a distributed fashion throughout electrical grids. Early adoption of these new energy-storage technologies is beginning with some of the first large-scale projects beginning construction in California, Nevada, Texas, New York, and Hawaii. These technologies effectively smooth variability in energy output by storing energy until needed, thereby increasing grid efficiency, making grids and networks more resilient to spikes in power, increasing autonomy of energy generation, providing localized backup energy in the event of a network failure, and making trade in power between states and localities easier. In short, these technologies effectively reduce the flaws in solar and wind power, and provide a number of other benefits. 

Mirroring the advances in solar power since 2000, large-scale energy storage technologies are quickly improving in efficiency, affordability, and scale, thanks in part to growth of the battery supply chain to support increasing numbers of hybrid and electric vehicles. Market research firm Information Handling Services predicts energy storage growth will “explode” from .34 gigawatts (GW) in 2012-2013 to 6 GW by the end of 2017 and over 40 GW by 2022. Though the today’s energy storage projects use lithium-ion batteries, which researchers predict are nearing their theoretical efficiency limits, recent advances in lithium-sulfur and other novel battery types promise to expand our capabilities beyond these limitations. Some recently-developed energy storage systems also supplant batteries by running excess energy through electrolyzers to produce hydrogen, which is then put in a long-term storage tank from which the hydrogen is drawn as needed by fuel cells capable of generating energy to be released back into the grid.

While the technology exists and adoption is expanding, the regulatory framework around energy storage is inconsistent and largely unpredictable, stymying progress in the field.  The Federal Energy Regulation Commission (FERC) of the Department of Energy announced in late 2016 that it intends to form a set of rules concerning energy storage, which are expected to be announced in late 2017 to 2018. These rules are expected to answer questions as to whether energy storage falls under energy generation laws, energy load laws, both, or neither, as well as questions concerning liabilities, licenses, accreditations, and compensation. In the meantime, states are expected to fill the vacuum and ease uncertainty in the industry. Since 2011, ten states have introduced bills related to energy storage, approximately half of which have passed to date. California, Oregon, and Massachusetts have all set storage targets mandating installation of a certain amount of energy storage (e.g., 1.3 GW by 2020 in California). 

On the other hand, many states have yet to address energy storage in any meaningful way. Some state power utilities have expressed concern that energy storage technologies can lead to reduced revenue by allowing customers to become energy independent, a concept termed “load defection.” Still, many expect that the rules taking shape in states currently adopting energy storage technologies will act as model rules to be adopted by other states and eventually by the FERC. The Federal Trade Commission and Department of Defense are also reportedly keeping an eye on energy storage technologies, and a number of federal and state governmental agencies already provide or are considering providing grants, loans, and subsidies for adoption and development of energy storage systems. 

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