Beyond Backup Power: How Energy Storage Optimizes the Grid and Reduces Energy Costs

We’re excited to have our technology partner Lithion Battery contribute this guest column for The Current.

Large energy users like commercial and industrial customers have long benefited from backup batteries that have kept their operations running when the grid goes down or electricity prices go up. Way up.

However, C&I customers, governments, hospitals and other large energy users can do more with energy storage. When energy users tie behind-the-meter batteries into virtual power plants (VPPs), they earn revenue while helping keep the lights on in their communities.

VPPs prevent power outages by balancing supply and demand with dispatchable distributed energy resources (DERs) such as batteries, which can quickly increase or decrease the power supplied or consumed when the other shifts. For example, customers can use battery energy storage systems from Lithion to make and save money by providing grid services through CPower, which is the nation’s largest VPP operator.

Batteries and other DERs are increasingly important—and valuable—as grid operators struggle to supply enough electricity to keep up with accelerating demand.

Demand for electricity has never been higher and continues to reach new heights. The drivers of the increase, like new data centers and adoption of electric vehicles, are expected to persist for decades to come. So much so that the DOE’s recent VPP Liftoff Report forecasts peak demand to grow by over 60,000 MW by 2030 alone.

Peak demand occurs during the periods when energy consumption is at its highest and is at least partially served by power plants built to supply power during just peak periods. Power from these “peaking plants,” which run less than 15% of the year, comes at a much higher cost than electricity generated by baseload power plants that usually run over 90% of the time.

In addition to driving up electricity costs, peaker plants require significant time and money to build, meaning they alone cannot alleviate the strain that surging demand growth is exerting on existing grid assets. We need significant deployment of energy storage and other demand side solutions.

Peak Demand and Power Pricing

Rapid growth in peak demand is especially difficult to manage for utilities and system operators and drives higher power prices during peak periods. Energy is priced in real time within wholesale markets and when demand outpaces supply, prices increase.

These fluctuations are often significant, especially during periods when heating or cooling demands are highest. This volatility creates a large difference in power pricing between peak and off-peak periods and is especially impactful to customers in deregulated energy markets (i.e., summers in Texas or winters in the Northeast).

However, the ability to shift demand around peak and off-peak pricing periods can create massive value for both utilities and energy consumers—and batteries in particular unlock this value. Unlike intermittent on-site generation like solar energy, batteries give utilities and consumers complete control of the flow of energy.

They also allow maximum flexibility around charge and discharge periods versus other storage resources like electric vehicles. And they impact consumers less by maintaining energy levels to the site versus demand curtailing options like smart thermostats.

Batteries and Energy Storage

Energy storage has always been used to create resiliency and increase reliability of the grid. At the outset of the electricity industry, energy storage was reliant on geographical factors, like hydro power or mechanical features of power plants, like flywheels. Rechargeable chemical batteries like lead acid have existed for over 150 years. However, their low energy density and power could not meet the demands of large-scale energy storage. Only with the advent of lithium batteries did large scale energy storage make practical sense. The higher energy density of lithium decreased the space requirements and lowered long-term costs which made battery storage a viable solution.

Lithium Iron Phosphate (LFP) batteries, like those incorporated into Lithion Battery’s HomeGrid residential storage and GridBox commercial and industrial storage products are generally considered the best battery chemistry for energy storage systems (ESS). This is due to multiple factors including their high-cycle life and safety features, cost effectiveness, and other environmental benefits based on readily available materials. The modularity of Lithion’s batteries also allows consumers to scale systems up or down to maximize their benefit.

Benefits of Batteries to the Grid

Batteries have multiple grid benefits when installed in various applications. Installations can generally be categorized as either in-front-of-the-meter by utilities or power producers or behind-the-meter, which lie on site with customers.

Front of Meter (Utility or Power Producer Owned Batteries)

Front-of-the-meter batteries are installed by utilities or independent power producers and tied to power plants or transmission lines. These batteries are meant to optimize the grid assets they are tied into.

Renewable power resources like solar and wind are intermittent generators. Batteries allow the smoothing of that supply by shifting demand to pull from the stored energy when wind and solar aren’t producing. Batteries installed at transmission and distribution nodes can allow quicker balancing, minimize transmission losses and provide voltage control. Even fossil fuel plants can benefit from battery storage by providing supply coverage during the time it takes to ramp up facilities and allow plants to operate at capacities where efficiency is maximized.

Being that front of meter storage is tied directly into the grid, there are potential security concerns around foreign-made batteries in the US. In response to these concerns and the growth of the energy storage market, Lithion Battery has built a facility with 2GWh of battery manufacturing capacity in Henderson, NV to provide US made batteries to customers when system or grid security is a concern.

Behind-the-meter (DERs and VPPs)

Behind-the-meter batteries are installed at customer sites as either standalone backup power, or when accessible by a utility or aggregator as part of a Virtual Power Plant (VPP). Behind-the-meter batteries are installed on a customer electrical supply panel and not tied directly into the grid. When not tied into a VPP, batteries allow customers to peak shave (decrease consumption during expensive “peak” times) and provide backup power during outages.

Again, while these alone are beneficial, the greatest value of the stored energy is unlocked when aggregated into a VPP. Aggregation of many distributed resources allows electricity consumers to participate in several incentive programs being offered by utilities and system operators across the country. Batteries can maximize returns by making energy available for both demand response and other ancillary services sold into wholesale energy markets.

Although backup power is a good beginning, more value is to be had in VPPs.