Do You and Your Energy Storage Investment Have Good Chemistry? Part 2

It is important for customers to evaluate a number of factors that will affect their returns on investment in energy storage systems. Energy shifting arbitrage and demand charge reduction are common savings mechanisms for behind the meter applications, but applications may include wholesale services such as demand response and even ancillary services such as frequency savings. The key is to make sure these intake strategies (savings and revenue) and multiple services can operate simultaneously, conflict-free, and without unnecessarily degrading the energy storage platform itself. In Part I of this series on energy storage investment, we discussed concerns about the safety of various battery chemistries. (Read Part I here.)

The multi-service capabilities of energy storage are a critical factor affecting the economic value of battery storage platforms, though not all platforms can support several applications at the same time. This is especially true for longer duration applications, which are a significantly growing portion of the use cases.  Logically, an asset that is able to fulfill a greater number of applications provides multiple revenue streams, thereby providing quicker payback and higher value over its lifetime. The graph below represents a typical behind the meter application in California and illustrates how the ability to stack multiple applications improves IRR by incorporating multiple revenue streams.

energy storageEnergy storage system capabilities fall into two general categories: energy services, characterized by a longer duration discharge at lower output (measured in kWh); and power services, characterized by discharge at higher output (measured in kW). Utilities and large energy users seek energy storage solutions for a variety of applications that require both power and energy; these systems can either be located in front-of-the-meter or behind-the-meter (which may include wholesale services such as demand response). Front-of-the-meter applications are those utilized by utilities and grid operators. They include frequency regulation, transmission and distribution (T&D) deferral and capacity reserve/peaking among others. Behind-the-meter applications are customer-sited and perform some function directly beneficial to the end user such as demand reduction/peak shaving, emergency power backup and time shifting of renewable energy resources.

An energy storage asset has much more value if it is deployed closer to the edge of the grid (closer to the end users — including businesses and residential customers) because grid-edge siting gives the battery the opportunity to deliver services to customers who are using power behind the meter while providing grid level services to the utility.

Redox flow batteries are usually associated with providing energy services, making them more suitable for applications that do not require high power; this characterization is true for flow batteries using vanadium and bromine chemistries. Zinc-iron, however, has performed well at both high-power and long-duration applications, increasing the system’s capabilities and allowing them to effectively perform a greater number of applications.

One drawback to lithium-ion batteries is that they have significant SOC and cycling restrictions that limit the number of applications for which they are suitable. Since they experience rapid capacity degradation when operated at high and low SOC, the capacity and the number of available daily cycles they can perform are reduced, meaning that they simply don’t have the capability of performing a wide range of applications. As a result, they are limited as to how many revenue streams can be offered by a single system. In addition to the inherent SOC restrictions, systems using lithium-ion require additional parasitic loads like HVAC and fire suppression to mitigate the dangers of thermal runaway, further consuming battery capacity, adding to system cost and complexity, and decreasing the capabilities of lithium-ion energy storage systems.

Since vanadium flow batteries have SOC restrictions due to safety concerns, their available capacity is diminished and, as a result, they have limited application flexibility. For example, many large utilities like PJM and ERCOT require energy storage to provide frequency regulation services, allowing for smooth solar energy output during periods of PV ramping. This application requires rapid switching at high frequency between charge and discharge cycles. Vanadium flow batteries are restricted in their ability to perform this type of high-power, rapid-cycle application, due to the chemistry’s tendency to break down, particularly in high ambient temperatures.

Because zinc-iron flow batteries utilize a “liquid-liquid” as opposed to “liquid-metal” electrolyte, they don’t have the same hazardous potential, allowing them to operate across the full SOC so they can perform a much wider range of applications with both high power and long duration requirements. A multi-service asset which can perform a wider range of applications through the entire SOC is more valuable than one with limited capabilities and provides a better internal rate of return (IRR).


Check out Part III, in which we examine energy storage O&M and the hidden costs that negatively affect returns.

Lead image credit: Amy | Flickr

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Ron Van Dell is President and CEO of ViZn Energy Systems, Inc . With more than 30 years of experience, Van Dell has an exceptional track record of success and proven leadership skills in early-stage, turn-around and established businesses. His background covers a broad range of industries in semiconductors and electronics – power, communications, computing, industrial control, electrical distribution and clean tech. As President and CEO of SolarBridge Technologies, Van Dell led the development and launch of a ground-breaking microinverter solution for AC Solar Modules, reaching eight digits in sales, while raising four rounds of funding. Before SolarBridge, Van Dell served as President and CEO at Primarion (sold to Infineon), President and CEO at Legerity (spin off of Communication Division of AMD), General Manager for Dell Computer’s Dimension Line of Business ($6B in sales), and VP-GM of the Communication Products Business at Harris Semiconductor (now Intersil Corporation). He also held previous international management positions in the U.S. and in Europe at Groupe Schneider, Square D Company and General Electric.

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