Challenges for the Distributed Energy Storage System Market
Energy storage systems help align renewable energy generation with electricity demand. They can be charged with excess solar or wind electricity during periods of surplus, and discharged to the grid during times of demand.
Vast quantities of potential DERs are already hiding in plain sight. Electric vehicles, home and commercial backup generators, and EV batteries are all potential DERs that can be aggregated into a virtual energy storage system (VDES). Using VDES reduces operating costs for building owners.
The cost of a distributed energy storage system is not cheap, and the market for these systems faces several challenges that are expected to limit their growth over the forecast period. Expensive setup and battery costs, shortages of key minerals used in the manufacture of batteries, and volatile pricing for the components of power-to-energy storage systems are among the factors affecting the market.
Despite the high upfront and ongoing costs, a distributed energy storage system can help reduce overall electricity prices for consumers. For example, it can reduce the peak price for electricity during the day by smoothing out demand. This can also help avoid price spikes during heat waves or holidays, and reduce carbon emissions, fossil fuel usage and wear on transmission and distribution infrastructure.
In addition, a distributed energy storage system can provide grid services currently fulfilled by distributed energy storage system fossil-fuel peaker plants (or “peakers”), such as voltage regulation or frequency regulation. This can help reduce the need for costly upgrades to existing transmission and distribution infrastructure.
There are vast quantities of potential DERs lurking in plain sight – electric vehicles, residential solar panels, commercial backup generators — all of which could be harnessed for aggregation by an ESS provider. Aggregating them into a single system can be much cheaper, faster and easier than building new, larger power plants to provide the same services.
Energy storage saves operational costs for utilities by providing frequency regulation and spinning reserve services, as well as offsets peak electricity rates for consumers who participate in demand response programs. Residential and commercial consumers can also benefit from storing low-cost energy for use during periods of high prices. The technology is also capable of keeping businesses open and allowing residents to continue with their normal activities during brief outages.
DES uses advanced technologies and lithium-ion batteries to store and manage energy within power distribution networks. It helps to mitigate energy fluctuations, strengthens grid stability and reliability, and boosts the integration of renewable energy sources. In addition, DES can improve energy efficiency and support the deployment of electric vehicles.
Storage connected to distribution systems provides opportunities to defer infrastructure build, enhance local reliability, and help commercial and residential consumers manage their energy bills. Storage can also provide flexibility to help the New York Independent System Operator meet energy reliability needs.
Centralized storage scheduling results in more effective balancing of the flexibility resource and wholesale electricity market participation, which reduces system-wide peak distributed energy storage system electricity prices through arbitrage. This lowers electricity costs for all consumers, including those without a distributed energy storage system. The centralized approach is more powerful than distributed coordination, which leads to smaller electricity savings for consumers. However, aggregated ESS capacity is required for the system to fully exploit its potential to reduce electricity prices.
As natural disasters and cyber-physical attacks continue to increase in frequency and severity, improving power grid resilience is increasingly important. This can be achieved through implementing community microgrids that use renewables-driven backup generation and battery energy storage systems to island when the grid is down or under stress. These solutions can also support public facilities and institutions with their energy needs during grid outages.
Unlike conventional fossil fuel peaker plants, which operate only during times of high electricity demand, a distributed energy storage system can be used as an energy buffer during the day and night to reduce energy prices for consumers. This can also help lower carbon emissions, fossil fuel consumption, and wear on infrastructure, which can lead to fewer repairs and replacement costs in the future.
Furthermore, the rapid response of battery storage technology can mitigate disturbances within a fraction of a second, which is a crucial advantage for improving power grid resilience. Moreover, it can also provide ancillary services such as voltage and frequency regulation to improve efficiency.
Mobile energy storage, such as electric vehicle (EV) batteries or towable storage systems, can enhance distribution grid resilience by providing localized power to critical loads during outages. This can be especially helpful in communities with limited access to high-voltage power lines, reducing the risk of losses along transmission and distribution lines.
Using a battery energy storage system can reduce electricity demand peaks during peak-demand times. It can also help smooth out the variability of renewable generation. This helps to reduce energy costs for the consumer as well as the cost of power-related emissions. Moreover, it can also help to reduce maintenance costs for utility equipment and infrastructure.
As the world moves away from fossil fuels, the market for DER is poised to grow even further. This growth is being driven by several factors. Increasing environmental awareness among consumers is one of the key drivers. Moreover, the emergence of electric vehicles (EVs) is providing another impetus. In addition, policies being released by governments to support EV manufacturing is helping to increase demand for DES.
However, the growing adoption of DERs in the market is creating a number of challenges for the market. This includes expensive setup and maintenance costs as well as the high price of numerous minerals needed for battery production. Furthermore, the risk of thermal runaway in batteries is a serious concern. This problem can be overcome by implementing advanced software-driven optimization technologies that can detect and address these issues. In order to address these challenges, the market is expected to see increased investments from both public and private entities. This will help to reduce the uncertainty for consumers and encourage further deployment of EES in the electricity market.