Commercial, Industrial, and Institutional (CI&I) customers across North America are accelerating their investigation and deployment of battery energy storage systems (BESS) and microgrids, as severe weather like wildfires in the West, hurricanes, flooding, and the Texas deep freeze of February 2021 have dramatized the costs and problems of power outages. Aside from power outages, more CI&I customers have very high electric reliability requirements. Grid electric service that fails to measure up is getting dumped, or supplemented, by microgrids installed to serve CI&I customers’ premises.
The cost of a BESS has fallen about 87% between 2010 and 2019, and further reductions are expected in the coming years, according to an annual survey conducted by Bloomberg NEF.
The U.S. Energy Information Administration (EIA) reported much the same. Average capital costs for large-scale – greater than 1 megawatt (MW) of storage capacity – BESS fell 27% per year, or a total of 72%, between 2015 and 2019, EIA reveals in its August 2021 U.S. Battery Storage Market Trends report.
As costs have come down, interest has perked up and deployments are following suit. So far, most of the activity is with utility companies deploying large-scale BESS – often prodded by state mandates, as in California. But CI&I customers are increasingly installing small-scale BESS (less than 1 MW of storage capacity) to meet their needs for highly reliable power, according to the EIA battery market report.
At yearend 2019, there were approximately 402 MW of small-scale storage energy storage systems operating in the United States, and roughly 41% of this capacity was installed in the commercial sector, the EIA battery market report said. Most of the small-scale storage projects were installed in California (Figure 1), which enacted a BESS mandate years ago.
Figure 1: Energy storage trends
As of yearend 2019, most battery energy storage projects deployed in the U.S. were large-scale and owned by electric utilities (bar chart). Ownership of small-scale systems totaled 402 MW across the nation (pie chart). EIA, U.S. Battery Storage Market Trends
On a national basis, the EIA report noted, about 41% of small-scale BESS capacity was installed at commercial sites. Another 14% was installed at industrial sites.
Outside California, other states including Hawaii, New York and Georgia also have installed small-scale energy storage systems at commercial sites (Figure 2).
Figure 2: Energy storage projects at commercial sites outside California.
The numbers shown on the horizontal axis are megawatts of storage capacity. EIA, U.S. Battery Storage Market Trends
Brit Burt, vice president of research for the power industry at Industrial Info Resources (IIR), a Texas-based industrial business intelligence firm, estimates approximately $42 billion of battery energy storage projects scheduled to begin construction between 2021 and 2023.
CI&I customers are investigating or installing battery energy storage systems, often in conjunction with distributed generation or a microgrid, because they require very high electric reliability – typically expressed as “five nines,” meaning power is available 99.999% of the time.
The types of CI&I organizations installing microgrids include power-sensitive manufacturers, military bases, hospitals, data centers, and police, fire, and first responder complexes, Burt commented.
“Anywhere there’s a premium on high electric reliability or high electric prices, energy storage systems and microgrids are popping up,” Burt said in an interview with EnergyTech. “We expect that the extreme weather and natural disasters we’ve seen in 2021 will cause a growing number of CI&I customers to sharpen their pencils and take a fresh look the costs of low reliability and the value of resilience.”
IIR’s databases are tracking a high level of BESS and microgrid project activity in California, the Rocky Mountains, and the Southwest – mainly Texas.
But it’s not only natural disasters like wildfires and extreme weather driving this trend. Assembly lines at power-sensitive manufacturers can be shut down for hours after a power blip trips off equipment. Companies often pay employees who are idled when an assembly line trips off, and semi-finished product has to be discarded. It can take up to eight hours to restart a complex manufacturing line after a surge or sag in power. The costs quickly add up.
Another driver for BESS growth is the late-2020 extension of the federal Investment Tax Credit (ITC) for solar energy, Burt noted. The ITC guidelines grant investment tax credits to battery energy storage assets when coupled with solar generation projects. The guideline states that a BESS is eligible for an ITC based on its proximity to solar generation, its ownership, and whether it was being charged at least 75% of the time.
As the costs of renewable generation like solar and wind continue to decline, a growing number of utilities and CI&I customers are pairing those generating assets with battery energy storage systems and microgrids.
The cost of an energy storage system or a microgrid is not irrelevant in a company’s or agency’s planning. But Burt and other experts expect more projects will pencil out when CI&I customers sharpen their proverbial pencils and take a closer look at the cost of energy storage or a microgrid compared to the cost of power interruptions or unreliable power.
In years past, most microgrids were powered by generators burning diesel fuel or natural gas. But increasingly the trend is turning toward connecting BESS and microgrids to non-emitting resources, for reasons of decarbonization and sustainability.
There are more than 4,000 MW of microgrids installed across the U.S. as of yearend 2020, and another 787 MW are planned or forecast to become operational in 2021, according to Wood Mackenzie grid edge analyst Isaac Maze-Rothstein (Figure 3).
Figure 3: U.S. microgrid year-on-year capacity additions, 2010-2021E
Microgrid deployments are rising as power outages tied to extreme weather, and unacceptably low levels of power reliability, are being weighed against the cost of a system. Wood Mackenzie