In what is a first in the more than 15-year history of Black & Veatch’s annual electric report, we begin this preview section with a disclaimer: How were we supposed to know that the most significant energy policy legislation in generations would go from “not happening” to “let’s wrap it up before the August recess” by Congress, right in the midst of our survey period?
Besides the obvious “it’s not our fault” elements, we note this for a specific purpose: While many of this year’s responses regarding energy storage reflect a positive sector outlook, we feel our data likely reflects some negative bias later mitigated by the August signing of the Inflation Reduction Act (IRA).
The IRA package is critical as electric grids across the United States creak under the strain of excessive heat, droughts, aging infrastructure and the challenges of renewable integration. Across respondent groups, energy storage is viewed as having a critical role in supporting decarbonization plans by boosting grid flexibility and reliability, particularly as service providers work to address the issue of renewable generation variability. With greater amounts of generation that varies as its resource varies, and with fewer traditional baseload assets that have a predictable resource supply, a consensus is emerging that reliability cannot be maintained without more energy storage on the power grid. In fact, more than eight in 10 respondents — 84 percent — anticipate a greater risk of load shedding, a last resort for grid operators, as renewable, variable resources play a larger role in power production (Figure 24).
The IRA’s $369 billion will accelerate the clean energy transition with billions in dedicated funds for energy storage research and development.
This is key, given that 89 percent of respondents indicate a need for medium- and long-term energy storage, though some disagreement remains on the definition of medium- and long-term storage. With eight hours as the current benchmark for long-term storage, more than 40 percent see a need for capacity of up to — or longer than — one week (Figure 25).
To address clean energy pledges within the next 10 years, electricity service providers ranked solar generation No. 1, with new natural gas generation a close second and retirements of traditional fossil assets also among the top four. While the respondents view storage among the most critical methods to be deployed over the time horizon, it seems only logical that responses to the question would have reflected more optimism for storage had the IRA been passed earlier (Figure 26).
Black & Veatch’s experts did find it interesting that optimism for long-duration energy storage was the leading method to achieve carbon reductions beyond 10 years. This likely reflects the impact of the technology curve at work as storage is both a mature technology for electrochemical battery technology and one in the early stages of its development for thermal/mechanical/chemical storage technologies. For example, just 10 years ago, the 2013 EPRI Energy Storage handbook did not include lithium-ion battery technologies as (then yet) capable of providing utility scale storage solutions; today, gigawatts of battery storage have been deployed nationwide, with the vast majority utilizing lithium ion battery technology.
Further reflecting the overall optimism for battery storage is the growing trend in “solar plus” — hybrid solar projects that incorporate energy storage from the outset of their design. In 2021, these projects surpassed pure play solar generation development in terms of the number of interconnection queue requests, a trend likely to continue in 2022 and beyond.
We also note that supply chain woes have not hit the battery storage field as badly as that for certain components of the energy value chain, in particular solar panels and transformers. While no technology combining commodities and semiconductors can emerge unscathed in a period of high inflation, batteries have been fairly insulated to this point. From Black & Veatch’s perspective, nearly one-half of the price increases that our experts have observed are tied to increases in the cost of shipping versus other cost factors in the supply chain.
Without question, the disruption shaping the future of the electric sector is accelerating, and management of the grid increasingly mirrors the delicate balancing act of circus high-wire performers. For a century, the traditional grid operated like one performer walking the wire, or at most two performers that cross by each other. Yet as renewable generation expands, not only is the load varying, so are the generation sources, thereby creating levels of complexity unmatched in the industry’s history.
Yet it is also an exciting time to be participating in the operation of the world’s most complex machine. When asked to identify the trends survey participants were most excited about, 24/7/365 dispatchable power from renewable resources with storage was selected by nearly half. Inherent in this response is the belief that storage meeting the requirements for both scale and capacity will be available to help balance and shift electricity generation and load (Figure 27).
As we look ahead, we see a bright future for the energy storage market for the power grid and new opportunities to leverage technology to decarbonize the U.S. economy in commercial and the industrial, manufacturing and process industries sectors.