Energy storage: How do costs compare with combustion turbines?

Reports compares cost of combustion turbines versus energy storage
A new paper on procuring power for peak capacity expects to see parity in costs between energy storage and combustion turbines by 2017

Lower cost solar PV and its rising penetration in all market segments will have a profoundly disruptive effect on utility operations and the utility cost-of-service business model, states a new report weighing up the benefits of energy storage.

The paper – Guide to Procurement of Flexible Peaking Capacity – Energy Storage or Combustion Turbines? – suggests that storage offers a way for utilities to replace lost revenues premised on margins from kilowatt hour energy sales by placing storage assets into the rate based and earning low-risk long-term regulated returns on capital.

Because solar PV is highly distributed, simply overlaying storage on a central station basis won’t maximize grid performance or cost reduction, asserts the report author Chet Lyons, a principal at Energy Strategies Group, a Boston-based consulting company.

Mr Lyons says: “The central station approach utilities have used to meet peak power requirements is on the verge of a paradigm shift.

“Central station topologies will give way to distributed grid architecture. The effective range of storage is 2 to 4 times the effective range of a combustion turbines based on nominal capacity. Storage can also switch from charging to discharging in less than 1 second.

He adds: “Also, in contrast to simple cycle combustion turbines, storage can easily be applied on a distributed basis. Aggregated and controlled as a fleet, multiple units of distributed storage can deliver regional peaking capacity and ancillary services.

Energy storage reaching turbine parity

The report estimates that by 2017 storage will be roughly competitive with many mid-to-higher range combustion turbines.

By 2017 Capex for a 4-hour storage peaker is projected to be US$1,390.

For combustion turbines at the high end of the cost range, four-hour storage will be a clear win.

Lyons advises: “Given these findings, the cost-performance of energy storage should always be evaluated against combustion turbines for provision of new peaking capacity as a matter of standard procurement policies.”

Energy storage regulation

The beginning of what will become a regulatory trend in that direction is underway in Arizona.

In October 2014, the Arizona Public Utilities Commission and other stakeholders agreed that storage must be considered as a companion or a replacement for at least 10% of Arizona’s planned capacity of simple cycle gas peaking plants.

In summary, the combined impact of low cost distributed solar PV and low cost storage will both force and allow adoption of decentralized grid architecture.