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Quantifying the financial benefits of energy storage

Renewable generation and energy storage are hot topics today in the utility industry. The analysis of high penetration of renewable generation on the distribution networks and the potential problems that may cause has distribution engineers looking for solutions. Energy storage is one technology that may help in relieving some of these problems. It offers the potential to provide greater flexibility in the generation, delivery, and consumption of power on the distribution grid.  Though energy storage is not a unique concept for the power industry, recent developments in technology and policy have brought us closer to the potential realization of its broad use.

Intensive research has been carried out—in part by DNV GL as well as others—to better understand the potential role for, and benefits of, applying storage on the distribution network.  However, little research has been done to assess its economic impacts.  Rather, various “high level” and generalized benefits have been developed for storage on the grid and several inconsistencies exist across these studies.

Furthermore, based on initial pilot studies and research into energy storage operations, utilities and their regulators are beginning to look differently at using energy storage.  By analyzing energy storage in more detail, DNV GL has found the need for more accurate information to justify investments to utility shareholders or regulators.  Specifically, many utilities are in need of evaluations to justify investments, including detailed circuit impact assessments and cost-benefit analyses that are specific to their systems.

DNV GL has developed a tool that quantifies the financial benefits of storage for specific applications.  The tool was originally created to fill a gap that existed in storage valuation.  Prior to ES-Grid, most assessments of storage was done via an average “$/kW” assessment that was generalized and extrapolated across different utilities.  This tool examines storage via simulations and circuit analysis.  This technique was instrumental in the model being selected to support the State of California’s “cost effectiveness” evaluation of energy storage.  The DNV GL ES-Grid model, methodology, and approach was cited and recommended in the actual ruling by the State that mandated the adoption of 1.325 GW of Storage.

The methodology is based on a bottom-up approach that provides a financial evaluation based on the physical performance of storage on a distribution system.  This allows for the effective evaluation of storage benefits by:

  • Testing combinations of storage characteristics and controls can perform the expected tasks to accrue expected values,
  • Evaluating the indirect benefits (and value streams) of storage on the distribution system, and
  • Observing how storage performs against alternative solutions.

This tool also allows for the evaluation of specific storage designs using localized circuit data.  This creates an auditable approach for developing business plans that utilities can take to their regulatory commissions or shareholders.

This tool links energy storage assessment with distribution planning.  This is important as specific design elements and control schemes, including the location, size, and number of units can influence the cost/ benefits of storage and potentially influence distribution plans and design.  As an example, community energy storage (CES) devices that are located closer to customers have greater reliability benefits than a single large unit located at a substation.  Furthermore, locating storage at the source of existing underground feeders allows planners to better leverage the value of existing investments and can influence their plans for reliability build-outs.

In addition, the tool allows for the simulation of unique storage control schemes.  This provides a platform for “trying out” alternative control schemes and linking them directly to financial value.  In turn, this allows the user to “package” the storage unit and control scheme with the financial valuation.

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