Electric Supply Benefits

Executive Summary

The two electric supply benefits from energy storage are:

  1. Electric energy (energy) time-shift and
  2. Electric supply capacity.

Electric energy time-shift- involves:

  1. Storage of electric energy when its value and/or price are low, and
  2. Use of the low-cost stored energy when the value and/or price are high.

These are sometimes referred to as “buy low – sell high” transactions. The electric supply capacity benefit is related to a reduced need for electricity generation equipment (i.e., capacity). Quite simply: If storage use reduces the need to install generation capacity, then the benefit from storage is the avoided or reduced cost associated with building and owning that generation equipment.


Electric Energy Time-shift

Electric energy time-shift entails storing of electric energy when energy use and value are low, so that energy can be used or sold, later, when energy use and value are high. Energy time-shift is shown graphically in Figure 1.

The objective is use low priced energy during times when the cost to produce the energy or the price to buy the energy are high (i.e., during “peak demand” periods). The price to purchase that energy real-time (when needed) is high because the demand for electricity is high. Production cost for energy at that time is also high, primarilybecause the least fuel efficient generation is used. Those generation resources are commonly referred to as “peakers.”

In most cases, the stored energy is from:

  1. “Baseload” generation resources whose output should remain constant or nearly constant (e.g., combined cycle and nuclear power plants), and/or
  2. Generation whose incremental cost of production (cost to produce the “next” unit of energy) is low, such as “high efficiency” natural gas fueled combined cycle turbine-based power plants and hydroelectric plants and renewable energy fueled generation using biomass fuel and geothermal energy, and increasingly
  3. Wind generation whose output tends to occur when energy demand and price are low.

Time-shifting may be done by electric utilities to reduce energy-related cost or by merchant storage owners seeking to profit by time-shifting wholesale electric energy – buying low and selling high. (There is a retail/end-user analog to this benefit involving retail “time-of-use” energy prices.)

Electric Supply Capacity

To the extent that storage use defers or offsets the need for electric supply capacity (generation equipment), it provides an electric supply capacity benefit. The effect is shown graphically in Figure 1. In the figure, the extent to which storage use reduces electric supply capacity is indicated by the storage output power. That is, the reduced need for generation capacity (power) is equal to the amount of storage capacity (power) in use.

The primary objective for use of storage as electric supply capacity is to reduce the need and cost for generation equipment. Depending on the circumstances of a given region, the electric supply capacity resource deferred/offset could include:

  • Less efficient simple cycle combustion turbines with high cost of production (cost per kWh of output)
  • Cleaner, more efficient intermediate duty cycle generators (e.g., operating at 40% to 60% of the year) –  especially combined cycle generators,
  • Coal, natural gas or nuclear fueled baseload generation
  • Demand response resources (electricity end-use equipment that can be controlled by the utility or system operator to provide “negaWatts” of demand reduction used in lieu of increased generation capacity)

Storage may be used for electric supply capacity by a utility to reduce capacity-related cost or by merchant storage owners seeking profit in a regional capacity market. (As with energy time-shift, there is a retail/end-user analog to this benefit: demand charge management.)

Conclusions and Observations

Energy storage is quite well-suited to providing electric energy and electricity supply capacity during peak demand periods. Several important benefits may apply – primarily, reduced cost for energy and reduced need and cost for generation equipment. Energy-related cost reduction is driven by reduced need and/or cost for generation fuel and reduced wear on and longer life of generation equipment. The capacity benefit is based on the reduced need and cost for generation equipment.

Compatible or complementary benefits may include ancillary services, reduced generation emissions and reduced equipment wear. Depending on location, additional benefits may include renewable generation integration, improved transmission system operations, reduced need and cost for transmission and distribution infrastructure and/or increased asset utilization of T&D equipment.