Evidence is building in support of battery storage as a serious challenger to the perceived dominance of natural gas in our current and future energy system. Batteries are beginning to complete head-to-head with natural gas peaker plants, and they’re starting to win.
Peaker plants are designed to fire up whenever electricity demand rises above the level that baseload fossil plants, nuclear, and renewables can satisfy — think hot summer days when air conditioners are turned up full blast or cold winter nights when heating demand skyrockets. There are more than 1,000 peakers currently in operation across the U.S. Most of these are powered by natural gas, and many of them are located in communities already burdened by poor air quality and public health issues.
Because peak events often don’t last very long, typically no more than a few hours, batteries are well-suited to step in as a peak demand resource (they’re already being widely deployed to manage customer peak demand). Batteries can also be developed more quickly than traditional power plants, they can be deployed close to the load and distributed throughout dense urban areas, and they don’t produce any harmful emissions, particularly when paired with renewable generation.
Most industry experts agree that battery storage can meet the same system needs as a gas peaker plant. As Abe Silverman, vice president for the regulatory affairs group and deputy general counsel at NRG Energy, which operates both traditional and renewable power plants, put it, “We could replace every gas peaker in the U.S. with batteries right now if we wanted to, but it probably wouldn’t make economic sense everywhere.”
It’s that second part, the economics of batteries versus gas, that is still up for debate.
The thing batteries and renewable have going for them is that their cost is largely based on technology trends. The cost of batteries, solar, and wind have all been declining at an impressive pace, and prices are predicted to continue falling over at least the next decade. The cost of natural gas generation, on the other hand, is closely tied to the commodity price of natural gas, which goes up and down depending on market conditions.
According to independent analysis — GTM Research/Wood Mackenzie, National Renewable Energy Lab, Rocky Mountain Institute, Bain & Company, and Raymond James & Associates to name a few — the intersection between falling battery prices and rising natural gas prices is likely to occur within the next few years.
In the real world, it’s already happening.
In 2016, California deployed 100 megawatts of storage to avoid summer blackouts that could have hit the Los Angeles area due to a major gas leak at the state’s Aliso Canyon natural gas storage facility. The projects were installed in a matter of months. The following year, a proposed gas plant in Oxnard, California was scrapped when the California Independent System Operator determined that a mix of batteries and distributed generation could meet local needs without negatively impacting the air quality and health of already disadvantaged surrounding communities.
Also in 2017, the Hawaiian utility Kauai Island Utility Cooperative made news when it signed a long-term contract for solar power delivered during peak evening hours after the sun has begun to set. The 28-megawatt solar facility paired with 100 megawatt-hours of battery storage will meet evening demand at 11 cents per kilowatt-hour, far less than fossil-fuel generators on the island.
Tucson Electric Power set a mainland record for solar paired with storage with a 20-year power purchase agreement rate below 4.5 cents per kilowatt-hour. The Arizona project pairs 100 megawatts of solar with 120 megawatt-hours of storage.
It’s around this time that experts began forecasting the eventual decline of natural gas peakers. But those victories were just the beginning.
Arizona added another two battery peaker projects to its power mix in 2018. Arizona Public Service tapped a 65-megawatt solar and 135-megawatt-hour battery system to meet peak demand between 3 p.m. and 8 p.m. The solar+storage project directly beat out bids from natural gas peakers. Salt River Project then put a 20-year power-purchase agreement into place for a 40-megawatt-hour battery system to deliver peak energy to the Phoenix metro area.
That 4.5 cent rate set by Tucson Electric in 2017 is starting to look expensive by 2018 standards. First, Xcel Energy reported solar+storage bids ranging from 3.0 to 3.2 cents per kilowatt-hour for projects in Colorado. Then a 101-megawatt solar project paired with 100 megawatt-hours of battery storage in Nevada posted an electricity price of 3.1 cents per kilowatt-hour.
Now, California utility Pacific Gas & Electric has proposed more than 2.2 gigawatt-hours of battery storage to replace three existing natural gas peaker plants. The proposal includes what would be the largest battery system in the world. Southern California Edison has received approval to deploy 125 megawatts of solar and storage resources as alternatives to new gas plants.
All of this is welcome news to advocates opposing new gas development, but there is currently no long-term strategy in place to support and accelerate this growing movement. Battery prices will continue to decline, strengthening its role as an alternative to gas. But without policies in place to ensure open, market-based solicitations for energy resources, many utilities will be slow to embrace batteries as an alternative to traditional peaker plants. Local voices must be backed by detailed analytics to make this transition to clean energy solutions a near-term reality.
Clean Energy Group has been following these trends through our energy storage project work. We are beginning to survey the landscape across the country for opportunities to catalyze peaker plant replacement strategies in collaboration with national partners and local environmental and social justice organizations. As part of that effort, we will be hosting a webinar, Replacing Peaker Plants with Battery Storage, on Thursday, July 19th. Clean Energy Group will be joined by PSE Healthy Energy, experts on peaker emissions and health impacts, and CAUSE, who led opposition against the proposed Oxnard peaker plant.
As Mark Dyson of Rocky Mountain Institute stated in reference to their report, The Economics of Energy Portfolios, “Renewables and demand response and batteries are about to do to gas what gas has done to coal.”
How long that process takes will depend on the actions of advocates and policymakers today.