1

Sources: Wood Mackenzie/ESA, U.S. Energy Storage Monitor 2017 Year in Review; U.S. Department of Energy, Global Energy Storage Database; Velocity Suite, ABB Enterprise Software.

Sources: Wood Mackenzie/ESA, U.S. Energy Storage Monitor 2017 Year in Review; U.S. Department of Energy, Global Energy Storage Database; Velocity Suite, ABB Enterprise Software.

Energy Storage Trends & Key Issues August 2018

E N E R G Y S T O R A G E D E P L O Y E D T O D AY

K E Y F A C T S ¡ Pumped hydropower comprises the

lion’s share of operational energy storage today—92.3 percent.

¡ Electric companies own, procure, or utilize 98 percent of all energy storage today, most of which is front-of-the meter (directly connected to the energy grid).

K E Y F A C T S ¡ Battery storage is the fastest

growing energy storage tech-nology today. In 2017, it accounted for 54 percent of all non-pumped hydro energy storage capacity.

¡ Battery storage capacity quadru-pled between 2013 and 2017, growing from 241 to 963 MW.

¡ Thermal energy storage capacity grew from 507 MW in 2013 to 664 MW at the end of 2017— a 31 percent increase.

Battery 4.12% (963 MW)

Thermal 2.84% (664 MW)

Compressed Air 0.48% (112 MW)

Flywheel 0.25% (58 MW)

Pumped Hydro 92.32% (21,953 MW)

0

200

400

600

800

1,000

1,200

1,400

1600

1,800

2,000

Compressed Air Flywheel Thermal Battery

20172016201520142013

Meg

awat

ts

Cumulative Energy Storage Capacity by Technology (Excludes Pumped Hydro)

Total Installed Energy Storage Capacity by Technology23,390 Megawatts (MW) (2017)

2 | E E I | E N E R G Y S T O R A G E T R E N D S & K E Y I S S U E S

O U R TA K E

E N E R G Y S T O R A G E O W N E R S H I P I S A N I M P O R T A N T O P T I O N F O R E L E C T R I C C O M P A N I E S

¡ Energy storage provides resource flexibility and can enhance the reliability and resiliency of energy grid operations for the benefit of all customers. Electric companies already own and operate many different types of energy storage technologies—and use storage to support grid operations and customer solutions.

¡ Increasingly, strategically located energy storage, at a distribution substation for example, is being considered as an economic alternative to traditional infrastructure upgrades or invest-ments. Equally important, as renewable energy generation continues to grow, energy storage can play a critical role in balancing the variable output of wind and solar farms. Energy storage

also can help to optimize renewable energy by storing energy when there is excess genera-tion and discharging energy when it is needed.

¡ Electric company-owned energy storage is a true win-win for customers and the energy grid. And, increasingly, electric companies are considering energy storage options as grid modernization investments along with tradi-tional generation, transmission, and distribution investments when planning their energy grids.

¡ However, public policies and regulations must be updated to allow electric compa-nies to own energy storage. It is important that regulations, standards, and industry practices acknowledge the full value of energy storage and allow storage to partici-pate in all electricity markets. This will help energy storage reach its full potential.

Elec

tric

Com

pany

Non

-Res

iden

tial

Resi

dent

ial

2013

Elec

tric

Com

pany

Non

-Res

iden

tial

Resi

dent

ial

2014

Elec

tric

Com

pany

Non

-Res

iden

tial

Resi

dent

ial

2015

Elec

tric

Com

pany

Non

-Res

iden

tial

Resi

dent

ial

2016

Elec

tric

Com

pany

Non

-Res

iden

tial

Resi

dent

ial

2017

PumpedHydroFlywheel ThermalBattery

0

50

100

150

200

250

300

350

Meg

awat

ts

E N E R G Y S T O R A G E M A R K E T S O N T H E M O V E

Sources: Wood Mackenzie/ESA, U.S. Energy Storage Monitor 2017 Year in Review; U.S. Department of Energy, Global Energy Storage Database; Velocity Suite, ABB Enterprise Software.

K E Y F A C T S

¡ Electric companies are the main drivers of the energy storage market.

¡ Battery storage is the main technology driving the energy storage market today.

¡ In 2017, electric companies represented roughly 70 percent of total investment in battery storage technology.

Annual Energy Storage Capacity Additions by Segment and Technology

E N E R G Y S T O R A G E T R E N D S & K E Y I S S U E S | E E I | 3

States across the country are acting on a variety of energy storage issues, ranging from new and emerging busi-ness models for energy storage, to valuation, to energy storage for resiliency. Following are highlights of repre-sentative state-level legislative and regulatory energy storage activity.

S E L E C T E D S T A T E R E G U L A T I O N

¡ Arizona—Commissioner Andy Tobin of the Arizona Corporation Commission has proposed a Clean Peak Standard, which would require the state to use 80 percent renewable energy resources by 2050 to generate electricity and 3 gigawatts (GW) of energy storage by 2030. If adopted, this storage target would be the largest in place to date, eclipsing the target for California (1.325 GW by 2020, with an additional 500 MW not subject to the 2020 deadline); New Jersey (2 GW by 2030); and what is proposed in New York (1.5 GW by 2025). According to the Arizona proposal, the storage would be used to store solar energy generated off-peak.

¡ California—In June 2018, the California Public Utili-ties Commission (CPUC) approved cost recovery for Southern California Edison’s (SCE’s) Aliso Canyon energy storage projects—four projects totaling 40 MW. SCE filed its application in March 2017. These projects will help SCE maintain grid reliability. And, PG&E is seeking regulatory approval of three large, transmission-connected battery energy storage projects, resulting from a CPUC-approved competitive solicitation for energy storage proj-ects to replace three natural gas power plants. If approved, one project will be owned by PG&E—a 182.5 MW/730 megawatt-hour MWh) Tesla battery.

S E L E C T E D S T A T E L E G I S L A T I O N

¡ Colorado—On June 1, 2018, Governor John Hicken-looper signed into law HB 18-1270 which directs electric companies in the state to develop procurement rules for energy storage when benefits exceed costs and to include energy storage in their long-term planning processes. It also allows both investor-owned electric companies and third-parties to own energy storage.

¡ Massachusetts—Introduced and passed by the Massachusetts legislature on July 31, H.4857 sets a state energy storage target of 1,000 MWs by 2025 and makes energy storage resources eligible for the Renewable Portfolio Standard and Clean Peak Standard compliance. This bill gives the Massa-chusetts Department of Public Utilities (DPU) the authority to refine energy storage procurement methods and authorize of alternative compliance

payments to more value appropriately storage resources. It also requires electric companies to file an annual report on energy storage installations and the MA Department of Energy Resources to study the feasibility of using battery storage as a mobile emergency relief tool. Recommendations from the MA DPU are due on Feb 1, 2020. The Bill is currently before Governor Charlie Baker for his signature.

¡ Michigan—Resolution 170, adopted on May 30, 2018, encourages the Michigan Agency for Energy to discuss the role storage could play if integrated into the state's electricity market.

¡ New Jersey—On May 23, 2018, Governor Phil Murphy signed into law AB 3723, which calls for a storage study to evaluate the value of storage to electric customers and the optimal amount of storage to add within five years, and establishes a target of 600 MW of energy storage by 2021 and 2,000 MW by 2030.

¡ Virginia—On March 9, 2018, Virginia Governor Ralph Northam signed into law SB 966, which clears the way for electric companies to imple-ment new energy storage pilot programs.

F E D E R A L R E G U L A T I O N A N D P O L I C Y

¡ In November 2016, the Federal Energy Regulatory Commission issued a Notice of Proposed Rulemaking proposing to require each regional transmission organization (RTO) and independent system operator (ISO) to establish a participation model that recognizes the operational characteristics of electric storage resources and accommodates their participation in organized wholesale markets. In February 2018, the Commission issued Order No. 841 which requires each regional grid operator to establish market rules that properly recognize the physical and operational char-acteristics of energy storage resources. Resources must be 100 kilowatts (kW) or greater; must be able to provide all capacity, energy, and ancillary services that it is technically capable of providing; is dispatchable; and can set the wholesale market clearing price as both a seller and buyer consistent with existing market rules. The final rule also requires that energy storage resources that both buy and resell electric energy in the wholesale electricity market must be compen-sated at the wholesale locational marginal price.

P O L I C Y U P D AT E

The following demonstration projects highlight the potential energy storage has as a customer solution and as an energy grid resource. Today, energy storage is helping to connect the smart grid to the smart home through whole-home optimization, as in Alabama Power’s Smart Neighborhood Project; is being leveraged for distribution investment deferral, as in Arizona Public Service’s Punkin Center project; and is helping to integrate renewable energy, as in San Diego Gas & Electric’s and Xcel Energy’s projects.

A L A B A M A P O W E R S M A R T N E I G H B O R H O O D M I C R O G R I D

Alabama Power partnered with a property developer to build 62 high-efficiency homes (35 percent more efficient than comparable newly built homes) that are all connected to a microgrid capable of islanding by Alabama Power. The neighborhood microgrid includes a 330 kW solar array, a 300 kW/680 kWh battery storage system, and a 400 kW natural gas generator for reserve power. The high-performance homes score a 45 on the HERS Index and feature 2x6 construction, triple-pane windows, 20 SEER heat pump, a heat pump water heater, and in-home smart technology like controllable lighting and outlets. All 62 homes sold within six months.

A R I Z O N A P U B L I C S E R V I C E ( A P S ) P U N K I N C E N T E R E N E R G Y S T O R A G E P R O J E C T

APS installed two, 1 MW/4 MWh Advancion (AES/Fluence) battery energy storage systems in Punkin Center, a small town 90 miles NE of Phoenix, as a cost-effective alternative to upgrading about 20 miles of 21 kV cable. During the 20 to 30 peak demand days each year, APS can deploy battery storage capacity to meet the area’s energy needs.

S A N D I E G O G A S & E L E C T R I C ( S D G & E ) S T O R A G E P R O J E C T S

In May of 2018, California state regulators approved SDG&E to move forward with five energy storage projects, totaling 83.5 MW or 334 MWh. The lithium-ion battery systems will be located in San Diego, Poway, Escondido, Fallbrook, and San Juan Capistrano. The systems will be used for distribution grid investment deferral and to firm and augment variable and excess solar energy production.

X C E L E N E R G Y P E Ñ A S T A T I O N S O L A R + S T O R A G E M I C R O G R I D

Xcel Energy partnered with Panasonic and Denver’s International Airport (DEN) to build a 1 MW/2 MWh battery energy storage system adjacent to Panasonic’s facility. Also part of the project, a 1.6 MW Carport Solar PV array is located at a nearby DEN light rail stop. During normal operations, the system is connected to the company’s distribution feeder and enables renewable integration and other grid support. During an outage, the battery, combined with Pana-sonic’s 259 kW rooftop PV system, power Panasonic’s facility.

Edison Electric Institute701 Pennsylvania Avenue, NWWashington, DC 20004-2696202-508-5000 | www.eei.org August 2018

M E M B E R S P O T L I G H T