Microgrids and Decentralizing Power Grids
The current centralized power grid leads to power outages that affect large populations. In 2018, Hurricane Maria left over 1.5 million people without power for 11 months in Puerto Rico. In 2021, the Texas power outage left 4.5 million people without power for days.
Renewable energy sources paired with BESS decentralize power grids and allow localities to develop microgrids. BESS stores the energy generated from solar and wind which can then be distributed during power outages or during peak energy times to reduce the load on central power grids.
In Santa Rita, California, the Santa Rita Jail operates through a microgrid consisting of a 1.2-megawatt rooftop solar array, five wind turbines generating 11.2 kilowatts, a one-megawatt fuel cell, and two megawatts worth of batteries to store all that energy. This setup creates a self-sufficient operation unaffected by power outages while also saving the jail over $100,000 a year on energy.
Microgrids are also powerful solutions for more remote communities in states like Alaska or Hawaii. On the island of Kauai, Hawaii, the Kaua’i Island Utility Cooperative (KIUC) replaced old peaking generators with solar and BESS in 2017. This move allowed them to supply almost all renewable energy during the day and roughly 65% during nighttime peak load. KIUC’s initial goal was to reach 70% renewable energy by 2030 and with the development of the microgrid, they are likely to reach that a decade earlier.
Microgrids enable communities to reduce reliance on centralized power grids and even supply power during peak load times. As microgrids gain more adoption due to greater efficiencies in BESS and renewable energy generation, power grids will face less strain and become increasingly more stable.
Utility Adoption of BESS
Utilities have traditionally relied on peaker plants to generate additional power during peak load times. These plants generate power through fossil fuels and operate for relatively short amounts of time only when necessary.
BESS presents a more cost-effective and flexible solution than peaker plants. BloombergNEF found that large-scale solar and wind plants are already cheaper than traditional peaker plants. This is largely due to improvements in BESS and the ability for them to store power that can be discharged during peak load times or when the grid is under stress.
In some cases, utilities may be able to enter into energy arbitrage through BESS. Instead of spinning up peaker plants during peak hours, utilities can store and purchase energy during off-hours at a reduced rate while discharging the power during peak hours to capture a premium. This form of energy arbitrage enables them to continually generate additional revenue over the life cycle of the BESS and decrease the payback periods.
As BESS improvements continue to progress, adoptions by utility companies will accelerate. Renewable power and energy storage combine to produce an improved economic model for utilities with more sustainable revenue streams than traditional alternatives.
Company Adoption of BESS
Companies are increasingly vulnerable to power outages as extreme weather events occur more frequently. In 2021, S&C Electric and Frost & Sullivan found that 80% of commercial and industrial companies with average revenues of $75 million per year experience power outages every month, resulting in an annual loss of $1.2 million per company.
Many companies rely on diesel generators to step in when a power outage occurs. While these remain effective solutions, they rarely contribute to a company’s bottom line. With BESS, companies have power stored for potential outages, but also can use that power to reduce reliance on utilities and sell excess energy back to them.
Kaiser Permanente deployed a microgrid at its Richmond Medical Center in California that can store up to 1 megawatt-hour of energy in batteries until needed. This allows the center to run for up to 3 hours on emergency power. Overall, the microgrid has saved Richmond Medical Center up to 50% on energy bills while also helping Kaiser Permanente to become the first carbon-neutral health system in the U.S.
Companies are also being created around BESS to form renewable energy plants. In 2020, the court upheld Federal Energy Regulatory Commission (FERC) Order 841 which opened wholesale energy markets to energy storage companies. This ruling allows units as small as 100 kWh to access wholesale markets. For reference, many popular electric vehicles like Tesla have 100 kWh batteries.
FERC Order 841 introduces new competition in the wholesale energy market. BESS will drive increased pressure on energy prices leading more utilities and companies to adopt BESS to remain competitive or provide an additional revenue stream while significantly cutting utility costs.
Companies that adopt BESS develop improved cost structures and reach sustainability goals. Not only are companies adopting BESS solutions, but entrepreneurs are also building businesses around them to disrupt wholesale energy markets and drive a more sustainable future.
Consumer Adoption of BESS
Power outages are becoming more of a reality for utility customers across the United States. In 2020 the average American spent eight hours without power, more than twice the average of when this data first started being collected in 2013.
Instead of relying on utilities and the central power grid, consumers can leverage BESS and solar panels to develop energy self-sufficiency during outages. Tesla continues to pioneer battery storage with its Tesla Powerwall. During a power outage, the Tesla Powerwall can supply energy to a household for up to 12 hours. While a Powerwall may not be a cost-effective solution for many consumers, BESS innovations will continue to drive these costs down in the future.
BESS also enables consumers to work together as a community to store energy. Community storage energy (CES) allows households that generate their solar power to pool excess electricity in shared storage for later use.
In Australia, Tesla partnered with Western Power and Synergy to install three community-scale batteries. The CES was around 30% cheaper than purchasing an individual home battery system enabling many households with solar to participate in energy storage. The CES program saved residents approximately $228 each across the 44 resident trial.
As extreme weather events become more prevalent, consumer adoption of renewable energy and battery storage will continue to rise. While individual batteries may not be cost-effective for all households, CES presents an economical way for them to participate while reducing the stress on power grids during peak demand times. These solutions improve the stability of power grids, reduce costs for consumers and improve the adoption of renewable energy sources.
BESS is Powering the Renewable Revolution
BESS is on a best-in-class innovation curve driving companies, utilities and consumers to adopt renewable energy. As BESS continues to realize cost improvements, these solutions will become increasingly economically viable for all stakeholders. This movement will improve the future stability of central power grids by enabling decentralization at local levels and reducing demand during peak energy hours.