New utility rate structures to expand distributed energy storage market

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As utilities seek mechanisms to shift heavy consumer energy usage from times when demand is high to off-peak periods, distributed energy storage systems are also expected to play a key role in providing new revenue streams for utilities.

In addition to increasing the revenue flow for energy companies, distributed energy storage systems are expected to encourage the integration of renewables with the main grid. Today, utilities are facing the challenge of renewable energy intermittency and as such storage will enable them to store energy which can be used to meet baseload power.

Research firm Guidehouse Insights projects that the global market for distributed energy storage will expand through 2030 and into an increasing number of countries. This expansion is expected to be driven by utilities charging customers based on usage patterns, relay accurate price signals, and design rate structures that reflect the fixed and variable costs of providing electric service. The rates will include time-of-use (TOU) rates, demand charges and real-time pricing.

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In addition, new market participation models that enable system owners to capture multiple value streams are emerging as important enablers of continued DES growth around the world.

North America, Western Europe, and the Asia Pacific are expected to account for around 98.4% of the global distributed energy storage market in 2021.

Despite the COVID-19 pandemic disrupting business operations in 2020, the year proved to be a transformational one for the market. Factors including declines in cost and performance improvements, an uptick in renewable generation capacity, grid-modernisation plans, and improved opportunities for wholesale market participation, favored the market. Moreover, the availability of government policy, financial backing and the phase-outs of feed-in-tariffs also improved the market.

Ricardo F. Rodriguez, research analyst with Guidehouse Insights, said: “Much of the early success in these markets is the result of financial incentives and government support for energy storage and other distributed energy resources.

“Incentives and subsidies in each of these three markets, paired with support from utilities, have made DES an economical investment for many customers.”