Not all energy storage is clean – it might even increase emissions

By Andy Bilich

Highlights

• Investments in energy storage could soar to $620 billion by 2040, but that success may come at a price.
• How and when storage is used determines if it reduces emissions, or actually creates more.
• Only with the right market signals can the technology live up to its full potential.

Falling capital costs for energy storage coupled with a major push by grid operators to deploy energy storage technologies has the market ready for take-off.

Over the next two decades, investments in utility-scale and behind-the meter power storage technology is projected to soar by $620 billion with China, the United States and seven other nations leading the race.

Here's the problem: Not all energy storage is clean. In fact, a growing body of research [PDF] suggests the battery boom could actually increase greenhouse emissions if not done carefully – undermining the very promise of this new technology.

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Electricity rates, wholesale energy markets and the physical constraints of the electricity grid itself determine when owners of energy storage charge and discharge their systems. This is the "how" and "when" of storage utilization that determine whether or not it contributes to higher emissions.

For example, in some wholesale markets where fossil fuels are prevalent during off-peak times, when energy prices are low, storage operators will charge their devices from dirtier power plants and then discharge during high price times when cleaner energy is online – causing a net increase in emissions.

Energy storage has the added challenge of a misalignment between power production on the wholesale side and incentives on the retail side.

First, many electricity rates across the country have constant prices over time that don't signal storage technology when to align its operations with clean energy production. Second, for some of those rates that are time-variant, prices are highest in the afternoon when solar is on line, and lowest when fossil fuel plants may provide the bulk of the power.

This gives storage operators financial reasons to – again – charge from fossil-fueled plants and discharge later, which means they displace clean energy and increase emissions.

How a modernized power grid will deliver cleaner energy

All-green energy storage is, unfortunately, no panacea, either.

Any time storage charges with renewable power it takes potential megawatts away from other end uses on the grid. For that reason, energy storage that relies on clean power will only reduce emissions if it causes additional investment in renewables, if it prevents an oversupply and potential curtailment of renewable sources, or if it increases the capacity of existing renewables.

Market incentives can fix the problem

By facing these challenges now, we can take proactive and concrete steps to make sure energy storage meets the clean energy goals that grid operators and the broader industry seek. While much of that work will fall on policymakers, investors and developers of storage technology will play a key part in steering the conversation.

Here are four key things to keep in mind as we strategize our energy storage build-out.

Industry needs a real-time greenhouse gas signal. By providing storage operators and regulators with a real-time and forecasted signal for greenhouse gas conditions, we can help them balance costs and improve the emission performance of their storage. Such a signal has already helped to reduce emissions from storage systems that participate in California's state incentive program.

Carbon pricing programs can reduce storage emissions. An electric-sector carbon pricing program such as the Mid-Atlantic Regional Greenhouse Gas Initiative or the program proposed by the New York grid operator, NYISO, could help reverse the trend of greenhouse gas emissions from storage. By incentivizing storage operators to prioritize clean energy over fossil-fueled sources, such programs affect how and when energy storage is used.

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States should focus on rate design and incentive programs. States can require utilities to develop dynamic electricity rates that reflect actual grid conditions, and incorporate emissions into grid planning and procurement to better signal where and when investment in storage is needed. This will create an environment where storage operators have more incentive to support clean energy goals.

Energy storage owners can be rewarded for using clean power. The wholesale market can design products and services that reward owners and operators for integrating more renewables, and for helping to reduce the risk of clean energy getting wasted. California is exploring such a program for its storage.

We know that energy storage will play a critical role going forward, but it's becoming clear that the environmental benefits of this rapidly advancing technology are anything but guaranteed. Only with the right economic signals and market conditions will energy storage drive the decarbonization of our power sector – and allow the industry to live up to its true potential.