Six months after Tesla's Elon Musk set a revolutionary new low price for energy storage, utilities are struggling to grasp how batteries—suddenly available at home and practically irresistible at utility scale—will affect the energy business.
"When you look at a company like Tesla with a lot of market capitalization and a lot of cash available to it, what is it to a utility?" asked Dale Pennington, the managing director of Utiliworks Consulting. "Is it a utility itself now? Does it store and distribute energy? Is it a competitor directly to the utility itself, that starts to take market share? Or will it be a long term partner with the various entities that require these types of services?"
The answer may be some of the above.
There are signs that utilities see Tesla as a supplier of a new product that could save them millions of dollars by deferring the construction of power plants and the maintenance of equipment. During Tesla's earnings call last month, Musk reported the company had received 100,000 reservations for batteries worth $1 billion in sales. About 70 percent of those were for the commercial and industrial scale Powerpack. Tesla's utility customers include Southern California Edison and Southern Company.
But even if Tesla turns out to be a reliable supplier of Powerpacks to utilities, it could simultaneously undercut them by selling Powerwall home batteries to consumers.
"If I take my energy storage disruptor device," Pennington said, speaking as a consumer, "I’m going to start buying all my power when it’s cheaper, and I’m going to redeploy it during the day when it’s expensive, and I’m going to do that myself. I don’t need you, Mr. Utility, to tell me what I can do. I can do it myself."
"That is a huge change on the load curves and the load characteristics that we currently run our utility system on," he said. And utilities have to predict and prepare for that change, both in their services and in their budgets.
Utilities can't complain too much, though, because if consumers can buy low and sell high, so can they.
Battery storage will enable utilities to stock up on cheap power when it's not needed and then ship it overnight, when transmission lines tend to be free, to regions where power is more expensive.
"You can take that power, continually generated, send it through the transmission lines at night when there’s a lot of availability of transmission capability in the United states, and send it somewhere south, where you can sell that same power that you bought for 3 cents and sell it for 15 or 20."
Utilities and their consumers will see a "huge change" in costs and benefits, Pennington said. "That will completely change the way people buy and sell wholesale power in the United States over the next 10 years," he said. "We start to change our whole view of energy as a commodity."
The technology is in place to do this now, Pennington added, and is just waiting for the regulatory system to catch up.
Pennington spoke at the German American Smart Grid Symposium in Chicago Tuesday. Organized by the German American Chamber of Commerce, the symposium allowed Germans and Americans in the energy industry to share opportunities created by industry disruptions caused by renewable energy and related technologies.
"For those people who are creating products there’s a lot of opportunity for things to help us measure our performance and protect the grid," Pennington told about 30 people in attendance at Chicago's Allerton Hotel.
Ken Boyce of UL (Underwriters Laboratories), which in 2014 published its first safety and performance standard for battery storage, offered some examples.
"We’ve done quite a bit of work with the Fire Department of New York, because there are discussions in Manhattan of putting in entire floors of high-rises—the 45th floor of an 80-floor building in Manhattan will be energy storage, the entire floor," Boyce said. "And so when you think about putting hundreds of lithium batteries in a high-rise building, there’s a whole lot of different things that Fire Department of New York will have to come to terms with, right, whether it’s a catastrophic unexpected event, or if there’s a fire in the building that engages that energy storage system, it’s just a much different world than what they have dealt with. So rather than banning the deployment of energy storage systems, they’ve said we need to get some answers on this."
Battery storage is moving from its pilot phase to sustainable deployment, Boyce said. Building codes have to be amended to support energy storage, and performance standards have to be set and performances measured so customers get what they expect out of a battery purchase—safely.
UL was engaged by the National Transportation Safety Board to investigate fires caused by lithium-ion batteries on Boeing 787 aircraft.
"Batteries are a very very useful technology, they’re going to continue to get better and better, but the issues that we faced in this NTSB investigation are the same issues that you’ll face for (stationary) energy storage systems and electric vehicles," Boyce said. "That is, as energy density demands increase more and more, you pack more energy density into a smaller footprint, there’s a lot of things that can go wrong, and when they go wrong they can go very wrong."
UL sees lithium ion as the frontier storage technology and expects it to dominate battery deployments for the next 3 to 5 years, Boyce said. After that, other technologies, such as flywheel storage or other chemical systems may surpass lithium-ion.
Whatever technology comes to dominate, Boyce echoed Pennington's sentiments about the revolutionary effects of battery storage.
"We really do have some compelling ways to use not only distributed generation but distributed energy storage so that the intelligence in the smart grid can let you use that energy the way you want to, where you want to, when you want to. That’s a very important thing," he said. "There is tremendous demand to install those energy-storage technologies for all those reasons we talked about."
