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Martin LaMonica

A View from Martin LaMonica

Batteries: Cheapest Form of Grid Power?

Using a wind energy and expensive lithium-ion batteries, AES Energy Storage is making money by stabilizing the grid.

  • April 12, 2013

The conventional wisdom is that batteries, particularly lithium-ion batteries, are way too expensive to be used on the electricity grid in a financially viable way. Chris Shelton begs to differ and he has two years of data to make his case.

Shelton is the president of AES Energy Storage, which has developed 150 megawatts worth of energy storage projects in four locations using giant lithium-ion batteries. The trick to making them economic is using them for what they’re good at and in this case, that’s speed.

The company earlier this week said it has provided 400,000 megawatt-hours worth of frequency regulation services to the electricity grid in the mid-Atlantic states, a portion run by grid operator PJM. The battery–actually 16 connected batteries packaged in shipping containers–draws its energy from 61 mountaintop wind turbines in West Virginia with a capacity of 98 MW. That configuration consistently outperforms natural gas and coal power plants in providing the service, says Shelton. “It’s competing every day in getting selected and winning. It’s a commercial, scalable proof point that storage is economic,” he says.

Frequency regulation is one of those essential but invisible grid services that few people outside the utility industry are aware of. Electric current needs to be sent at a consistent frequency and when the amount of power that’s being pumped into the grid is out of sync with the amount of power that’s being consumed–essentially a supply demand imbalance–then service can be interrupted. Right now, fossil fuel power plants provide bursts of power into the grid to maintain that stability. Energy storage can perform the same task either by quickly absorbing or delivering power.

At the Laurel Mountain facility in West Virginia, the batteries, supplied by A123 systems, are capable of charging or discharging at the rate of 32 megawatts for up to 15 minutes. Because it’s connected to a wind farm, the energy emissions-free. But AES Energy Storage earns money on the flexibility and stability it can provide to the local grid operator. In contrast to many fossil fuel plants, the batteries are used continuously and can respond within seconds, says Shelton. The project was also helped by a change in FERC regulations that rewards power providers on their ability to supply services quickly. “You can’t just look at the cost in dollars per kilowatt. There are so many factors that apply,” he says.

In practice, energy storage product developers will try to provide a number of services. Duke Energy earlier this year commissioned the Nortress Battery Storage project, where a 36-megawatt battery from Xtreme Power is coupled to a wind farm in Texas. In that case, the batteries will smooth out the flow of wind power and also earn money by providing frequency regulation services. The project received $22 million from the Department of Energy to demonstrate the technology. The Laurel Mountain project the not receive any grants. 

There are dozens of grid storage companies pursuing different chemistries to greatly lower costs and provide many hours of power, which is considered crucial to adding large amounts of intermittent solar and wind to the grid. An investor in one of these potentially disruptive storage technologies once told me that lithium-ion batteries, which cost around thousand dollars per megawatt, are a dead-end because of their high costs.

New technologies are needed for multi-hour bulk storage, a potentially very large market. There, the economic value is firming intermittent energy sources and supplying power at peak hours when it’s most expensive–something now done by natural gas plants. But in the complex world of utilities, electricity storage isn’t one thing. For at least one application, even pricey lithium-ion batteries can play a role.

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