July 11, 2016 – Utility companies or others planning to install renewable energy systems (e.g. solar and wind farms) have to decide whether to include large-scale energy storage systems that can capture power when it’s available then release it on demand. In fact, it is often said large-scale renewables generation will only work with right-sized energy storage.

But would such an energy storage system actually pay for itself through increased revenues? If so, which kind of system makes the most sense, and which system features are most important?

A new study by MIT researchers shows how to evaluate the technology choices available, including batteries, pumped hydroelectric storage and compressed air energy storage (CAES) and, according to the researchers, demonstrates such storage systems make good economic sense in some locations—even with today’s prices for these technologies—but not yet in others.

The study was carried out by Jessika Trancik and graduate students William Braff and Joshua Mueller, and published in the journal Nature Climate Change. They studied three states: Texas, California and Massachusetts.

“Researchers and practitioners have struggled to compare the costs of different storage technologies because of the multiple dimensions of cost and the fact that no technology dominates along all dimensions,” Trancik explained. “Storage technologies can only be compared by looking at the contexts in which they are going to be used.”

The study finds certain features of how electricity prices fluctuate are common across locations, and do favour some specific types of storage solutions over others—regardless of the particular circumstances at a given location.

Selling at peak price
For example, the team found pumped hydro systems in Texas can provide added value today for solar or wind installations. In these systems, excess power is used to pump water uphill to a reservoir for storage, then released through a turbine to generate power when needed.

By waiting to sell the power into the grid until spot-prices for electricity are at their peak, the increased revenue the plant can produce would exceed the costs of the added storage system.

Further, the team found such pumped hydro storage provides more value than a storage system using lead-acid batteries, even though its power capacity components would cost several times more. This is because a pumped hydro system has lower energy-capacity costs than the battery system.

(Energy capacity refers to the overall amount of energy that can be stored in the system, while power capacity refers to how much energy can be delivered at a given moment from that system, explains MIT.

A CAES could also add value comparable to that of the pumped hydro system. However, batteries are attractive, the researchers note, because they can be installed essentially anywhere and do not rely on natural features that exist only in some locations.

The team points out that much research on storage systems for renewable energy sources has focused on using the systems to smooth out the intermittent outputs to better match fluctuating demand. But, in practice, most of these wind or solar farms are feeding into the grid, so what matters to potential investors is the price curve rather than the demand curve.

Despite wide regional variations in average prices and the amount of variability in demand and pricing, Trancik said “the best storage technology in one location is also the best in the other”.

Whether an energy storage system is worth the cost today varies widely by location, because of large variations in the frequency and magnitude of spikes in the price and how the solar and wind resources fluctuate over time, she says. But the cost characteristics of the optimal storage systems are similar in all locations because of certain common, emergent properties of electricity price fluctuations.

“This means that these results can be used to inform investments in storage technology development by the private sector and government, and can inform engineering efforts in the lab,” Trancik says.

Costs still need to drop
The study also finds the costs of such energy storage systems don’t yet make them profitable enough without policy support to enable the kind of widespread adoption that is needed to make a large dent in global greenhouse gas emissions. But, Trancik says, this study does suggest market adoption already makes sense in some locations, and could be boosted with modest public policy support; this could, in turn, stimulate technological improvement in storage to encourage further growth.

The study also provides guidance on how much the costs of a given technology need to be brought down to enable such deployment, and which aspects of the system need the greatest improvement. For example, it provides cost targets for various flow batteries in development.

For this study, the team found storage systems make economic sense today in Texas and California, but not yet in Massachusetts. They plan to broaden the study to more locations to see whether their overall conclusions apply more widely.

As the cost of wind and solar power systems comes down so, too, must the cost of storage systems, say the researchers, or they will no longer be profitable. At some point it would be simply more profitable to add more generation capacity rather than additional storage.

— With files from David L. Chandler, MIT News Office