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Advanced Energy Storage: What's the Value of Frequency Regulation?

Advanced energy storage, including solutions based on lithium-ion battery technology, are technically and economically superior to traditional generation-based mechanisms used for supply of ancillary services. Energy storage can also help accelerate the adoption of renewable energy by compensating for the variabilty of wind and solar. Energy storage makes these sources more predictable, allowing them to be more seamlessly integrated with the existing power grid.

However, there remains a lack of industry-wide awareness about these and the other significant benefits of energy storage. Some within the power industry still view energy storage as theoretically advantageous but not practically deployable. Thanks to the emergence of next-generation technologies, though, the business case for deploying advanced energy storage for existing applications is more compelling than ever.

For example, frequency regulation has historically been provided by traditional generation assets, including gas turbines or coal generation plants, often as a requirement for participation in energy markets. However, this has been an imperfect approach to regulation because traditional generators are slow to respond, often taking as much as 10 minutes to respond to a regulation control signal. 

Bulk grid-level generation and demand imbalance is measured by the area control error (ACE), typically on a second-by-second basis, and assets deployed for regulation are instructed to regulate up or down in response. Traditional slow moving assets are an imperfect mechanism for minimizing and managing ACE. Traditional assets performing regulation also exhibit increased wear and tear as well as reduced efficiency, which translates directly into higher operating costs and increased emissions.

In contrast, advanced energy storage systems are ideally suited for providing frequency regulation services. Since the ACE represents the short-term fluctuations in supply and demand, it is by-and-large energy neutral—over a measureable amount of time, an asset providing regulation service neither generates nor consumes energy. Therefore, a storage asset with a finite amount of capacity can provide the regulation service successfully. Energy markets are typically managed on an hour-by-hour basis, but a storage asset with robust energy management capabilities can successfully provide this hourly market-based service with as little as 15 minutes of energy stored.

Advanced storage assets are also capable of responding significantly faster than traditional generation assets, without the wear and tear or efficiency loss associated with continuously ramping up or down. In fact, with response times measured in milliseconds, advanced storage can provide significantly more value since the correction to the ACE is virtually instantaneous. In turn, traditional generator assets can be utilized at their optimal efficiency, improving asset utilization and reducing emissions.

In deregulated energy markets where the rules have been adjusted to allow advanced storage to participate and regulation services to be traded, storage has already demonstrated its fast response value. For example, in the New York ISO market, participants are completing the construction of 40MW of fast-response storage dedicated to regulation service using advanced lithium-ion batteries and other technologies. These are ideally suited for this use case because of their ability to ramp aggressively with short duration storage and cycle hundreds of times each day, with low round-trip energy loss.

The return on investment based on revenue generated from providing regulation services is expected to occur in as few as three years given today’s market conditions. And when ancillary benefits such as improved asset utilization and emissions are also considered, the payback time is accelerated. Without question, advanced energy storage technology is now an economically viable, next-generation substitute for traditional, fossil-fuel generators for frequency regulation.

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