IEEE Power & Energy Magazine - November/December 2017 - 38

Regulations and Markets Tailored for Results

The goal of battery energy storage policy is to procure valuable services that storage can provide; these can include fast
frequency response, regulation, ramp-rate support, peak-load
reduction, energy arbitrage, voltage support, and deferment of
T&D upgrades. Minimum capacity targets for energy storage
will not necessarily provide those services, but they will require
the owner, utility, or grid operator to control and optimize the
energy storage asset correctly, potentially without clear market
signals. This may result in an inefficient deployment of energy
storage, missed opportunities, and fewer benefits. While minimum installed capacity requirements may help develop pilot
projects and foster industry learning, markets and programs for
grid services could ensure a more stable development of energy
storage projects.
In addition to minimum capacity requirements, the industry should also focus on adding a monetary value to the services that are currently under provided or will diminish as
the power grid evolves. In some instances, there is no market mechanism or monetary incentive in place for grid services, despite their value to the grid operators and electricity
consumers. For example, many deregulated power markets
and regulated utilities do not have specific ramp-rate or fast
frequency response products. If introduced, they would provide an additional revenue stream for battery energy storage
to capture, along with other technologies.
Valuing battery energy storage services rather than procuring minimum capacity targets allows the policies and the
incentives to be flexible and adaptive as technologies and the
power system's resource mix change. For example, in many
of today's large interconnected power grids, there is sufficient
system inertia; therefore, fast frequency response does not have
a high economic value. However, in a future resource mix with
increased power electronic generators (i.e., wind and solar),
the need for fast frequency response may be higher. Setting
a framework to monetize this service today, even if at a low
price, will incentive battery energy storage providers to provide the service in the future.

Technology Agnostic Policies, Regulations,
and Market Rules

The technology of energy storage is advancing rapidly: the types
of storage include battery energy storage, pumped storage, and
compressed air storage, among others. In addition, controllable
loads can serve as virtual storage devices without requiring large
capital expenditures. Policies and regulations should, therefore,
be constructed in a technology neutral way and avoid favoring
one technology over another. While technical requirements are
always important when specifying the needs of the power system, they should be written based on the physical needs of the
system (speed of response, duration, and so forth) and not on the
characteristics of today's available technology.
A Diverse Mix of Hybrid Solar Projects

Until battery storage costs and market mechanisms align, storage
developers will need to pursue creative applications for further
deployment. A recent trend in the power industry is the hybridization of battery energy storage with other generation technologies.
For example, solar + storage plants that colocate the solar generating plant with the battery energy storage are being developed,
often sharing infrastructure at the point of interconnection or
even within the dc subsystem. This can reduce costs related
to transmission interconnection, project design and engineering, construction, development (engineering, environmental, and
so on), and land, as well as offering opportunities for aggregating projects and achieving economies of scale. For the utility
off-taker, hybrid projects provide a streamlined and simplified
acquisition process, allowing the buyer to execute a single power
purchase agreement for renewable generation and storage.
Much of the battery energy storage hybridization in
the United States is coupled with solar PV projects, to take
advantage of the U.S. federal investment tax credit, which provides a tax incentive to offset the capital cost of solar installations. Other hybrid plant configurations exist, including energy
storage coupled with utility-scale wind plants or a conventional
gas turbine (see Figure 6). For example, coupling energy storage with a conventional gas turbine increases unit flexibility,
provides instant startup capability, and
allows participation in additional ancillary service markets. Moving forward,
policies to promote hybrid projects
should be technology neutral, allowing
storage to integrate with a wide variety
of renewable and conventional generation resources.
While hybrid configurations allow
plant developers to share the cost of storage deployment with a generating unit,
they may lead to an inefficient level of
storage on the system. For example, some
utilities and grid operators require storage to smooth out the variability associated with a new wind or solar plant. With
figure 6. A hybrid electric-gas turbine, GE LM6000, with a 10-MW/4.3-MWh
numerous wind and solar plants on the
battery. (Photo used with permission from Southern California Edison.)

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