Weighing the Advantages of Distributed and Centralized Energy Storage

As the amount of electricity generated by solar and other distributed energy resources increases to substantial levels, there becomes a greater need for technologies such as energy storage that can help grid operators enhance the operational functionality of their assets as well as provide customers with a platform to better manage their energy use. When many energy professionals hear the term “distributed storage,” they envision a large battery-based centralized system, connected either in “front” or “behind” the utility side of the meter, and more than likely including a solar array as the power generation source.

But there’s another distributed storage option, one that offers the scalability, flexibility, and control advantages of a true distributed energy storage system architecture. Such a distributed architecture increases end-user accessibility to storage, which generates revenue streams for homeowners and businesses while boosting storage saturation and strengthening support for the utility grid.

There are several operational advantages of distributed storage. System reliability is increased since there is no single point for power conversion. Because the DC-to-AC power conversion component is attached to the battery module, the need for high-voltage DC wiring is eliminated and the risk of fire and electrocution risk is greatly reduced, resulting in a safer product. This feature may also help facilitate higher output over time since batteries degrade at different rates. Finally, the lighter, smaller units in a distributed architecture allow a single person to install a storage system of virtually any size.  

Traditional residential and commercial centralized battery storage systems are customarily designed with a battery bank connected to a single or a few large multi-kilowatt battery inverters. These systems have limited sizing options and often feature large, heavy battery modules or inverters. A distributed architecture uses lightweight storage building blocks as small as a single kilowatt-hour of capacity, with appropriately sized inverters for each unit, depending on the charge/discharge rate necessary.

This flexibility in storage capacity and charge rate promotes a fine-tuned, targeted approach to optimizing market opportunities in distributed energy storage. The potential revenue streams can be divided into two categories: one, customer savings based on utility rate price signals and export control regulations, and two, ancillary services provided to utilities. Both streams benefit from the flexibility, controllability, scalability, and sizing precision associated with distributed storage.

There are multiple advantages gained from eliminating the constraints of large storage building blocks. The distributed approach avoids the problem of oversizing components and translates into higher net present value for the end-user.

For example, if a Hawaiian customer who has a load with two 6 KW peaks installed 10 KW of solar and 12 KWh of storage, the homeowner would save approximately $38,900 over 15 years. (This scenario assumes a c/2 charge rate, time-of-use tariff, 8% discount rate, zero export, 5.2% fuel price increase, 18% PV module efficiency, and financing at 6% interest rate.)

If the storage system is oversized or undersized, those savings would be reduced. Precision sizing also translates into cost savings for emergency back-up or off-grid applications because the system can be accurately sized to power loads for the specified amount of time that the end-user wishes to be independent of the utility grid.

In the utility ancillary services market, portability and ease of installation encourage more flexible, faster deployment into specific feeders. Customers may be more willing to share the cost of a storage system with utilities if there is a lower initial cost barrier to entry.

Effective communication protocols can even allow customers and utilities to clearly identify which units have shared utility/end-user control at specific times and which units are reserved for the homeowner or business. Incremental scalability can optimize the value of storage in markets with constantly changing electricity rates and regulations. Utilities may value more granularity in control at specific points within a circuit as well as the modularity necessary to modify systems, specifically as electric vehicle and solar saturation levels increase.

Although the market for distributed energy storage is in its early days, solar-plus-storage and other parts of the emerging sector are expected to experience prodigious growth over the next decade as systems costs decline, attractive financing options become available, profitable business cases multiply, and regulatory concerns are addressed. Innovative, advanced grid-friendly approaches such as systems employing a true distributed energy storage architecture will offer a strong, scalable alternative to the more traditional centralized battery storage models as the market matures into a multibillion-dollar opportunity.

Lead image: Scale. Credit: Shutterstock.

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Deepa Shinde Lounsbury is strategic initiatives manager at Enphase Energy (Petaluma, CA). She has been involved with the company’s AC Battery project from concept to product development. Lounsbury has worked at the intersection of environmental technologies and finance for nearly a decade, including experience in cleantech venture capital, international carbon finance, investment banking and environmental NGOs. She holds a bachelor’s degree in business and international relations from the University of Southern California as well as a master’s degree from UC Berkeley’s Energy and Resources Group, where she published her research on innovations in energy access and renewable energy microgrids. Lounsbury can be reached at dlounsbury@enphaseenergy.com.

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