This article will focus on battery energy storage located within electric distribution systems. This lower-voltage network of power lines supplies energy to commercial and industrial customers and residences that are usually (but not always) found in urban and suburban centers. The notable exceptions are electric cooperatives and other Transmission and Distribution Service Providers (TDSPs), which supply power at distribution voltage across vast rural areas. There are several reasons why energy storage could be sited in these areas, and they offer different value streams than transmission-connected wholesale market battery storage assets.
How is the electrical distribution system set up?
While there is an infinite number of designs possible, most distribution systems share some essential attributes:
- The system is fed by one or more substations, transforming power from transmission voltage to the appropriate distribution voltage for retail customers.
- There are substations within the distribution network to supply specific large-usage customers, certain high-load areas (downtown areas, for example), and other reasons.
- The system can be built as a network system or a radial configuration.
- The network type system is fed from multiple substations and interconnects between the various lines (or “feeders”). This system is generally considered more reliable since power can be fed to customers from different directions.
- The radial system supplies individual distribution line feeders from a central substation, sometimes called a “hub-and-spoke” design. Power is fed to the customer from only one direction. While it may not be considered reliable as a network-type system, it is sometimes unavoidable in rural settings where radials extend many miles. It is simply not practical to feed these from multiple directions.
Why connect storage to the distribution system?
Energy storage placed on the distribution system has advantages in three areas: resiliency, reliability, economics, and flexibility.
Resiliency: Clearly, having additional energy storage in a system is advantageous during power outages. The ability to supply at least some customers for a certain amount of time helps maintain customer satisfaction and minimize customer outages due to power loss.
Reliability: During the natural life of an electrical distribution system, some circuits will reach their limits and may need upgrades to avoid and prevent costly outages. Installation of a Battery Energy Storage System (BESS) can help delay/defer expensive system upgrades in some cases. For example, instead of upgrading a neighborhood to higher voltage feeders or adding extra feeders, perhaps a BESS can supply power locally during those few hours each year when the existing feeders are approaching their limits. This solution has been the least-cost answer to several reliability challenges across the US in recent years.
The BESS can help balance load, and generation on selected circuits as more residential solar is installed, and more electric vehicle charging load is added. These dynamics were not in existence when many circuits were designed and installed, and without which, these circuits would experience significant reliability issues related to voltage and power quality.
Economics: A battery energy storage system interconnected with the transmission system and operating in the wholesale market must be designed to boost its output up to very high voltages (138 kilovolts up to 760kV) to be accepted into the transmission grid. Equipment to perform this function is very expensive to procure and maintain. Because of its lower voltage, all its operating components like transformers, circuit breakers, metering, and interconnection infrastructure are much less costly in the distribution system.
Also, distribution-connected BESS systems are usually much smaller than their transmission-connected cousins. The size difference reduces overall capital costs and the space needed for the facility. In addition, utilities and cooperatives may already have adequate space at existing substations to add a BESS. As a result of these factors, storage can be tailored to the size and cost needed to fulfill a specific need of the TDSP.
Flexibility: By their very nature, BESS systems can be used in many ways, from hour to hour, even minute to minute. A kind of Swiss Army Knife of power assets, the system can be balancing load and generation on a circuit now, but next hour it can pump power into the wholesale grid, earning energy revenue. In addition, it can help keep system frequency in control by providing fast-responding regulation service and then shifting to balancing load and generation on a distribution circuit.
How is behind-the-meter storage different?
A business case can be made for a customer who needs uninterrupted power to integrate energy storage into their facility. Indeed, thousands of hospitals, grocery stores, data centers, and the like have done so. However, these were simply a cost to the operation until recently, whether using backup diesel generators, flywheels, or batteries. The only revenue use case for these facilities was to use the backup power (if allowable, in the case of diesel generators with emissions limitations) to mitigate peak use and lower demand charges from the local utility.
Changes in regulations, specifically FERC Order 2222, are intended to open the wholesale market to these types of assets. As a result, a manufacturer will use its backup BESS to provide energy and ancillary services to the wholesale market, potentially turning the battery energy storage system from a cost center into a profit center. Planners and policy-makers see this value stream, coupled with the original business case for uninterrupted power and the cost savings from peak demand reduction, as a compelling case for a vast expansion of behind-the-meter storage in the coming years.
What are the revenue streams of distribution-connected battery energy storage systems?
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Terms to know:
Circuit: A collective term referring to a section of the retail grid, consisting of the feeder, with all its associated circuit breakers, transformers, switches, fuses, and attached customer loads.
Circuit Breaker: Protective device that interrupts the flow of power from the source to load. The circuit breaker can be triggered by over-voltage, short circuits, and other factors. Circuit breakers are triggered by relays, which sense the changes in parameters of interest and signal the “trip.”
Feeder: An electrical conductor that transmits power at distribution voltage from the substation to the individual loads in an area.
Fast Responding Frequency Regulation: Ancillary service provided by the wholesale grid, a subset of regulation service, helps the grid maintain steady frequency and respond in very short time-frames from 2 seconds or less.
Power Quality: Set of boundaries within which the electric system can function in its intended manner. These boundaries include voltage, frequency, and the degree to which the power is provided in clean sinusoidal waveforms at a frequency of 60Hz with no sags or spikes, allowing customers’ equipment to operate reliably and efficiently.
Resiliency: In the electric power context, the ability to supply power during short or long outages to the surrounding system.
Substation: Facility within the electrical system provides a gateway for power to pass from a high-voltage system to a lower voltage distribution system for eventual distribution to customers. Substations usually contain one or more central transforms, with all associated circuit breakers, relays, meters, buses connecting the components, and the Supervisory Control and Data Acquisition (SCADA) system for monitoring and control.
