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[Episode #8] – Storage on the Grid

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All about storage on the grid -- in front of the meter -- with a little bit about behind-the-meter storage.  How to value storage, how storage complements and replaces generation, and some geeky excursions into locational marginal pricing, PURPA, non-market uplift payments, and FERC Order 819! And in the news segment: Comments on the COP 21 United Nations Climate Change Conference and an update on carbon capture and storage (CCS).

Guest: Jason Burwen, Policy and Advocacy Director of the Energy Storage Association

On Twitter: @jburwen
On the Web: energystorage.org

Recording date: November 24, 2015

Air date: December 2, 2015

Geek rating: 8

Chris Nelder: Welcome Jason to the Energy Transition Show.

Jason Burwen: Thank you so much for having me Chris, great to be here.

Chris Nelder: All right. So about a week ago you testified before FERC, the Federal Energy Regulatory Commission, which has authority over the interstate trade of electricity, and in your remarks you mentioned that storage can act as generation, load, or transmission and distribution infrastructure. Now that's going to be kind of a unfamiliar concept I think to a lot of people who just think about it as sort of energy being supplied. Vice President of Southern California Edison called storage the swiss army knife of the energy world. And in fact a recent review of the literature by the Rocky Mountain Institute where I work identified 37 different services that storage can provide. So can you briefly elaborate on some of these different services some, of these different roles that storage can play.

Jason Burwen: Sure thing! 37 - everyone has a number. That's one of the things you find is that there are many services that storage provides. I guess the way you categorize and slice and dice it will change that number but you can probably put this into a few different buckets. Certainly energy storage provides energy and what a lot of folks I think are interested in is the ability to time shift that energy, what you might call energy arbitrage, particularly of interest to folks who are interested in seeing energy storage store for example sunlight from the day through solar PV and discharge the electrons at night that are generated by that PV. So that's one, but only one. In addition to those energy services, there's ancillary services that energy storage provides, the grid stabilizing grid services, things like frequency regulation which ensures the frequency of the grid remains within a narrow band and a number of other different sort of services are in that bucket from things like spinning reserves to black start resources. Those are things that oftentimes are monetized in wholesale markets. You've got these transmission and distribution capacity values, right, where storage can act as effectively a transmission or distribution resource for example by shaving peak on those particular lines. And so therefore deferring capacity upgrades and acting as effective capacity alternatively relieving congestion in the transmission distribution system and also providing things like voltage support, power quality sort of when on the distribution system and then you've got of course the range of end-user values, things like not just backup power but also helping people manage their energy to avoid demand charges, or to you know optimize across time of use rates, things of that nature. Those are sort of the grid services that you could enumerate and then beyond those specific services you've got values sort of around this, you've got things like certainly the lower environmental impacts potentially from energy storage, such as the fact that by and of itself it has no emissions. It does not have a huge land footprint it does not generally have water footprint, for planning purposes it is modular. It is something that you can build in very granular increments so that you can scale up or down to what your system needs. And it can be built fairly quickly. So there's a degree to which it helps with uncertainty in managing your uncertain future in your energy system. But without going too much deeper into it, that's sort of a flavor for the many different things folks are talking about when they talk about energy storage.

Chris Nelder: Yeah, there's a lot of different roles that it plays there. So with all these different services that storage can provide, I think the really critical question right now is how do we value it? That's the fundamental question. Do we create a special value of storage tariff as we've seen discussed in solar markets like in Minnesota where you've got a special tariff for the value of solar, that would be kind of equivalent concept. Or do we create markets in these various services where the value of each service would fluctuate?

Jason Burwen: That is the million dollar question in some respects. The things that energy storage does, some of it is easily monetized right. If you're in a wholesale market, you've got products, you've got markets, things like frequency regulation you can literally bid in, and that's an effective way to value things, using markets and prices.

Chris Nelder: Time tested.

Jason Burwen: Time tested. The issue of course is that a lot of services are not necessarily in competitive markets. A lot of the value that storage is trying to provide is rate recoverable tariff based things traditionally. Certainly if you're talking about transmission and distribution capacity, that's not something that's generally open to competition. And for that matter if you're in a vertically integrated market, you're ancillary services aren't something that is competitively bid either. Right.

Chris Nelder: Hang on let's just step back and unpack that just a little bit. I think I know what you mean but for the benefit of our listeners what do you mean when you say rate recoverable?

Jason Burwen: Sure. So there are certain assets that a utility will procure, or build themselves depending on what kind of a market you're in. And those things are oftentimes intended for the reliability of the system. Right. You build a transmission line bigger, or you build a new set of distribution lines so that you can run your electric system reliably and safely. And traditionally that's the kind of thing where it's considered a natural monopoly and state utility commissions allow their utilities to have these sort of regulated monopolies, and to be able to build or acquire these assets and that the cost of those assets is then basically averaged out over all of the kilowatt hours that are expected to be consumed over a period of time and then that's basically made a small part of the rate. So you and I and everyone pays a small amount of that every time we consume electricity. And that's not just transmission and distribution but certainly that's the most obvious case for when things are made rate recoverable.

Chris Nelder: Right. OK. So then back to this question of value of storage. I mean do you think it's likely that all of these services are going to be valued through markets, or do you think that some of them are more likely to get special tariffs assigned to those values of each service.

Jason Burwen: This is a place where I think there's a lot of innovation to happen, and that's exciting, and terrifying if perhaps you're a regulator but exciting.

Chris Nelder: Wait tarrif-ying, was that a pun? Oh man, that's awful.

Jason Burwen: Oh ow, god, no I didn't even catch myself. That's how deep in this I am. Yes, I think that you know you're starting to see new innovations on this. I think some examples are like what's happening in New York. The Brooklyn-Queens demand management program. There's a substation there and its capacity is going to be exceeded but it's in a very large metropolitan area so it's very space constrained and very expensive to actually upgrade the capacity there. So instead of spending a billion dollars to upgrade that substation Con Ed with the blessing, one might say the prodding, of the New York Public Service Commission is now bidding out peak load reduction that's sited on the distribution system so that instead of spending a billion dollars to build an upgraded substation they can spend for it perhaps something less than that, that provides effectively the same capacity. And that's going to be a mixture of things like demand side resources like DER and energy efficiency but also energy storage. And that's a really interesting case. But that's the exception. And I think it will probably be the exception for quite some time. A lot of states are going to be looking at energy storage and saying well we're not sure we can go competitively bid these things, we want to make sure that we have the reliability that we want, and so we're going to have to place some sort of value on storage so that we can guide either its procurement by utilities, either as the resource itself or the service that that resource provides, and put it into our planning. Or we can go and maybe start to put our toe in the water for things like RFPs.

Chris Nelder: Right. So obviously if there is a designated tariff that's going to value this service that this storage system provides, that's going to give enough certainty to the developer who's putting up that storage system, that they're actually going to get paid back for it fundamentally.

Jason Burwen: That's the hope. And the thing is setting that value, you know you've seen some of these, I know certainly in Minnesota, in Maine I believe it's Clean Power Research folks who put together the value of storage ideas there, sort of listing out a method that follows on the value of solar methods that have been developed, and they look very similar, right where are you taking this stack, you like enumerate these various different values and costs and stack them all together you know avoided energy cost avoided capacity costs. Avoided pipeline costs potentially.

Chris Nelder: Avoided carbon emissions.

Jason Burwen: Yeah. And then you have exactly these the social cost of carbon cost. Social cost of SO2, of NOx, you could even put in things like avoided fuel price uncertainty right if you're displacing fuel. And you can build that up, and that's certainly one approach we're seeing. And I think that that can be certainly a useful way point. I also think that a lot of the interesting work right now is on valuation of storage from more of a systems and system planning standpoint. Right. These are things like production cost models that are factoring into integrated resource planning that will eventually then of course file into RFO design.

Chris Nelder: I'm sorry RFO?

Jason Burwen: Requests for offers. And what what happens is if a state utility commission can create a, designate a method for valuing storage in these planning processes, like integrated resource planning, it can also then give guidance to the utilities for how it's going to view things like bids for storage and then the utilities might for example be creating RFPs where they go seek these offers and they can give guidelines for how those offers are going to be valued. Right. So it's slightly different but fundamentally the things that we're talking about are related, and certainly the tariff for a value of storage is something that you're going to see much more behind the meter, whereas the things I'm talking about with sort of system planning are much more front of the meter.

Chris Nelder: Yeah the stuff you're talking about is happening more on the on the transmission grid, or kind of at the bulk storage level, at the utility level.

Jason Burwen: Folks are talking about this also as potentially part of distribution resource planning. Right.

Chris Nelder: Right. Right. So a day after your testimony before FERC, they issued Order 819 which established a competitive primary frequency response market across RTOs and ISOs. So briefly, if you could explain for our listeners what that means.

Jason Burwen: Sure. Primary frequency response is the service of when your grid suddenly goes pear shaped. That is to say, the frequency in the grid which is 60 hertz starts to deviate significantly. Maybe because a generator has tripped offline unexpectedly or something of that nature. And so you start diving you know 59.9, 59.8, 59.7. And that falling frequency, you need to catch that fast right and slow it down. And so frequency response is that resource that can respond nearly instantaneously and slow that dropping frequency such that then you get resources that can respond not quite as fast but still pretty fast. And bottom it out and then some resources that can come on a little less fast and then that helped bring the frequency back up. Right. The primary frequency response is that first line of defense of slowing it down.

Chris Nelder: Right. Catch it before it falls too fast, and then bring in some support underneath it. OK. So we understand what primary frequency response is. So it seems that on the question of special tarrifs versus markets here, FERC has opened a clear path to creating a market in frequency response rather than giving that a special tariff or evaluation.

Jason Burwen: For which I think a lot of folks applaud them. Now I might add that, and I should do my homework a little more but my understanding is that it creates a market for frequency response. I'm not entirely sure if it requires the ISOs and RTOs to go seek all of their primary frequency response from that market but we might have to check back in on that. Suffice it to say that if you're going to create a market for primary frequency response that means folks like for example a storage operator can say, oh I can provide that service, I can bid that into the market on whatever scheduling basis and there is a supply and there's a demand and those prices will fluctuate. And you don't have to have a regulator sitting there scratching their head about how much primary frequency response is worth because presumably there's competitive offers for it.

Chris Nelder: Right. OK. So it seems then that the ground zero for bulk storage on the grid in the U.S. right now is happening on the PJM Interconnection which is the RTO or the regional transmission organization that operates a wholesale power market and actually operates the grid between 13 states in the Northeast and the District of Columbia. So it's one of the biggest RTOs in the country, it constitutes one-fifth of US electric power demand. Now back in 2013 when PJM decided to consider allowing storage to bid into the capacity market along with conventional generators, it was clear that bulk storage was definitely coming to the grid. And in a big way and I wrote a couple of articles about it back then which we'll link to in the shownotes, but now as you noted in your remarks to FERC, PJM has implemented a market for this fast responding frequency regulation resources of which over 200 megawatts of advanced energy storage now operates, so since PJM implemented that market, procurement of conventional generation has fallen by 30 percent, you say, which is evidence that storage can meet the grid's needs, in this case the need for frequency regulation, at a lower cost than conventional generators could, and at the same time increase the usage of the existing generators which basically makes the whole system more efficient. But the market rules governing additional so-called ancillary services beyond frequency regulation have been unclear on a number of counts and held storage back I think from further advances. So first, can you remind our listeners briefly why storage is a good way to provide these ancillary services?

Jason Burwen: Sure. So what makes energy storage, in this case I'm talking about specifically battery energy storage, conventional electrochemical, is that it can respond really fast. You can basically near instantaneously dispatch it, and you can also dispatch it with a level of precision that is very difficult for other resources to provide. I should add that also flywheels are a part of that as well in terms of mechanical being very fast to respond. And the speed and precision of the resources is particularly useful for frequency regulation in which you're following very moment-to-moment fluctuations in the frequency of the grid. So speed and precision there is the name of the game. And that's why energy storage is such a valuable resource for frequency regulation.

Chris Nelder: So how is it that the marker rules have been unclear about the ways in which storage can participate?

Jason Burwen: Well so in PJM the rules have been very clear for frequency regulation and that's part of why you see this build of now 200 megawatts of energy storage in the frequency regulation market in PJM. That's what happens when you clarify those rules and those rules are intended to capture the value that energy storage can provide. But in other ancillary services, and for that matter in capacity, the rules may not be quite so clear and the market designs themselves may not for example try to capture that value.

Chris Nelder: So what kind of clarifications are still needed?

Jason Burwen: Well certainly in capacity for example one idea here is to provide capacity, you have to be able to inject electrons on a open-ended basis.

Chris Nelder: So for an indefinite period of time?

Jason Burwen: Right. OK. Which if you're a generator that's what you do.

Chris Nelder: You keep feeding coal into the plant, it keeps putting out electricity.

Jason Burwen: Right. And so that is why traditionally these coal and gas plants have been capacity. Energy storage obviously has to have enough charge for it to discharge and if it runs out I mean it has to stop, recharge and then go back. So when you had it open-ended, energy storage just has too much liabilities, even if most of the time the duration of those needs for capacity are only a couple hours. It's the one time where they call for capacity is six hours or eight hours or 10 hours that a lot of these resources would just suffer massive penalties for not showing up. And PJM has these capacity performance rules which might be a partial way to facilitate storage in the capacity markets but across other RTOs and ISOs certainly this is a, this is something that is equally unclear. For ancillary services I should add we talk about PJM and frequency regulation and how great it is that that market has been clarified. But in a lot of other markets like MISO, SPP there are not rules, or very unclear rules for how energy storage can participate. And certainly when you look at frequency regulation there's no fast signal, there's no there's no capturing of the speed of these resources responds in the way the market operates, so they're effectively competing with conventional resources. But there's no value for them to be fast.

Chris Nelder: OK we're going to get to that point in just a second. But just for a minute here I want to stay on Order 819. So one of the things that wasn't immediately apparent to me in Order 819 was whether aggregated behind the meter storage resources could participate in this new primary frequency response market. So just to decode that a bit for listeners who might not be completely up to date on the jargon, all that means is that a bunch of residential customers for example had battery systems at their houses they could cut a deal with a company that would bundle them all together in order to be able to let them bid into the market as a single large entity just like a coal plant can. So kind of creates a level playing field there. But until recently these so-called behind the meters storage systems were not allowed to play in these markets so does Order 819 address that? Would it permit residential and commercial storage systems to participate in this new primary frequency response market?

Jason Burwen: Well I guess in theory... The trouble is that you've got other barriers to behind the meter storage aggregating to provide these resources in the wholesale markets, just the metering and telemetry issues have not been worked out for example. If you need an ISO grade meter for each of those resources that's going to just be very cost prohibitive. And that's certainly something that you see folks starting to try and address in places like California. California ISO is working on revisions to rules so that distributed resources including storage can participate in wholesale markets in aggregated fashion. But even if the market is supposedly doesn't preclude it, other aspects may be too much of a barrier for that to occur at this time.

Chris Nelder: Okay so with this new FERC ruling, it doesn't specifically rule aggregated resources in or out. It's just sort of open?

Jason Burwen: Well that is my understanding in so far as you could participate, again there's some questions though about that if you're behind the meter and this is I think what you see being worked out in California right is questions about how energy storage is going to from behind the meter provide these wholesale resources in a manner that's both consistent with what ISO, RTOs need as well as with the system that they're currently on. And what I mean by that is for example if your energy storage behind the meter is doing other things for the system then is there you know there's folks that are talking about the question of are we taking care of double counting for example, and to the credit of the participants in California ISO's proceeding on this, I think that those questions are being addressed and addressed well and resolved but these are things that nonetheless are things that you have to sort out before you're going to have this open clear chance for aggregated behind the meter storage resources to provide these things. And this is all of course assuming that the Supreme Court upholds Order 745 which we haven't even talked about and I'm not sure that you want to get into that.

Chris Nelder: Well actually. I did want to talk about that. I mean sometimes I wonder if we aren't bound to keep running afoul of outmoded restrictions essentially as the progression to a distributed continues. I mean FERC ran into a legal challenge with Order 745 which disputed its authority to allow demand response to be traded on the wholesale energy markets. And that's just one sort of distributed energy resource in a very narrow regulatory instance right, because all sorts of aggregations on both the load and the supply side could conceivably face similar challenges as we deploy more and more of these distributed resources on the grid. So do you think we might be better off if we started thinking more about fundamental reforms like reconsidering the whole history of PURPA and PUKA before that and the very concept of a qualifying facility in order to come up with a regulatory framework that's better adapted to the grid topology of the future.

Jason Burwen: Yes. I mean...

Chris Nelder: Good answer.

Jason Burwen: Sure. Let's rework the system from the ground up. Let me put it this way: certainly if the Supreme Court decides to ultimately overturn FERC's Order 745 and the rumbling in the industry is that it's looking like that may be the case, that's going to sink a very intensive wall between the jurisdictions of state utility commissions and wholesale markets regulated by FERC. And this idea that you might have something that's distribution connected but participating in wholesale markets becomes really tough. I'm not sure how you do it. You know it depends on also the narrowness or the expansiveness of the Supreme Court's ruling. We have yet to see. But fundamentally this Federal Power Act separation between where federal and state authorities begin and end is a really important question as our grids become two way and as distributed resources bear on bulk operations. So yeah, we're working with multiple decades old frameworks with technologies that are moving a lot faster.

Chris Nelder: Yeah, and this is something that just keeps coming up in the various discussions that I'm having with people on the show is that we're essentially plugging in new types of technologies to an old grid and to an old regulatory environment that was built up around that old grid. And we're having to make a lot of adjustments and sometimes it seems like sort of fiddling at the edges and making these adjustments in a piecemeal fashion will get us where we're trying to go. And then in other cases it seems like you really sort of need to sort of start over and attempt a more comprehensive reform like the sort of thing that they're doing in New York but without going too far down that road, I just wanted to raise that question because it is a question of trying to take new types of technology and adapt them into a regulatory framework in this case that it's not really well-suited to.

Jason Burwen: Yeah, suffice it to say that energy storage gets to be the poster child for, 'hey the grid was never designed for us.' It was not something that was contemplated with the technical design of the grid and certainly not with the surrounding regulation and economics of the grid. And so there's a lot of value in energy storage. Not surprising to hear that from someone who works for the Energy Storage Association. But no, I mean very truly, between the array of services that energy storage can provide and the flexibility of that resource to move to a future where we value flexibility and we need these many different services to be provided by, for example, a technology that can be fed by cleaner generation sources. We really do need to contemplate how to reshape our grid operations and our market operations and our regulatory compacts to ensure that we can realize those values, it's not just a matter of, 'hey this is cool and you better let it in.' But if you do it right. Going to be less cost to the ratepayer and enable a cleaner grid.

Chris Nelder: Yeah exactly. In the past you know we didn't have a need to design markets around storage systems because apart from hydro, all we had was generators. And for that matter those hydro systems were basically considered generators they were really acting storage systems per se. So the rules, the market rules we have assume that if a unit is supplying capacity or frequency modulation that it's also supplying energy and probably supplying a 24/7 whereas with these new storage systems coming online that may or may not be true, you might have some storage units that are just supplying very short duration frequency support for example without supplying a significant amount of energy. So it's really a problem of needing to adapt the market rules to a new type of technology that's coming onto the grid and not the other way around.

Jason Burwen: Yeah. Well one would hope. I mean it's always the burden of the new entrants to convince the incumbents and the regulators that they can play.

Chris Nelder: Now that's very true. That's an excellent point. So in case we weren't quite geeky enough yet...

Jason Burwen: Let's get further geeky, let's go geekier.

Chris Nelder: So you noted in your FERC remarks that the markets aren't recognizing the true value of storage and as an example you discussed locational marginal prices. Let's see if we can explain what that means.

Jason Burwen: Okay. Ready. Here goes. So locational marginal pricing really is something that's supposed to capture at a given point in time on a given node in a transmission as distribution network. The supply and demand and transmission constraints in that particular node. So as to create a value for the provision of electrons to that node.

Chris Nelder: That's pretty darn good. So in plain language, of energy supplied at a very specific place and time.

Jason Burwen: Yes.

Chris Nelder: OK. So you noted that the startup and shutdown costs of conventional generators which are substantial and which are not costs that you have with storage technologies, are not included in locational marginal pricing but rather paid through what's called non-market uplift payments. So before we continue let's explain what that means.

Jason Burwen: Sure. So basically when you're coordinating all these resources in the wholesale market, you've got certain generators that take a while to shut down or take a while to start up because you have to get spinning mass going and these are ofetn times coal plants or gas plants depending what kind of technology they go faster or slower. But fundamentally what happens is that because there's no sense of the cost of that start up and shut down, because it doesn't happen instantaneously and it's not costless, because that's not priced in, there's this problem where the markets will call for something at one time and then they won't need it for the next interval. But then they need it again for the following interval. So there's this gap in between. And if the unit were to actually turn off because it's not needed in the interim unit it wouldn't be able to turn back on in time to provide at that following unit. And so because of that, the way these wholesale markets work is rather than make a call for, 'wow we really want to value flexibility or alternatively reflect the true cost to this.' It's just settled out of market and there's a agreement. Okay you're not needed in this interval coming but you're needed the interval afterwards so you don't have the technical capacity to shut down, if we want to have you in the interval after the next. So we're just going to give you this money to stay online it's sort of a low rate. And then that way you're available and we need you in that future interval.

Chris Nelder: Okay so it's non-market because it's basically guaranteed, it's not going to respond to an immediate market signal and it's an uplift payment because we're basically paying them to be there no matter what.

Jason Burwen: Yeah, it's not the same as a capacity payment because that's sort of a different concept. This is just taking stock of the fact that startup and shut down is its own costs, and for more efficient grid utilization the wholesale markets have determined that making these non-market payments makes things work better, even though it's non-market.

Chris Nelder: Which to me sounds vaguely like having a market work around to kind of a peculiarity of a certain kind of technology.

Jason Burwen: Sure, frankly and prior to this, it might have been something where you say well what's the alternative? And granted that alternative might have been like for example I don't know if there are particularly fast responding turbines, or certainly pumped hydro would join into that. But fundamentally the trouble here is that energy storage can provide that flexibility, and the lack of those start up and shut down costs being reflected in location marginal prices effectively devalues those marginal prices. If the start up and shut down costs were in there those prices would be higher for the kinds of intra-hourly flexibility for example that storage can provide, or inter-hourly sometimes. And then you would be able to bid for that, and say 'hey we can provide this.' So the lack of those costs being priced in means that you're effectively shutting out some flexibility resources at least on the margin.

Chris Nelder: You're effectively not recognizing the true value of an instantaneous storage system and that in essence tilts the playing field toward the old conventional generators that the markets were tweaked to work around in the first place for which we're not paying the full cost.

Jason Burwen: Yeah. And I believe FERC did a study of this and found that across all wholesale markets that it regulates that this was about a billion dollars of payments in a year, which sounds like a ton except when you realize that as a fraction of all payments is actually quite small, but you know a billion ain't chump change. And this is actually part of why I think FERC is also now asking all the different organized markets to collect and report data on uplift allocations.

Chris Nelder: Ah didn't realize that. That's interesting. So Herman Trabish who's absolutely one of my favorite writers on grid power had a recent article in Utility Dive called 'What's the Value of Energy Storage? It's complicated' and we'll link to that in the show notes. Now among other things Herman notes that in its recent procurement Southern California Edison chose several forms of energy storage including battery systems instead of natural gas peaker plants to meet peak demand. In part because those peaker plants are extremely underutilized so they're running only about 4 percent of the time and that makes them really expensive. Herman also notes that storage systems will really help to flatten the so-called duck curve in California which shows how demand jumps up after people get home from work and flip on the air conditioning. So how much of the future of storage do you think is in this kind of application being a provider of energy that can actually displace gas peaker plants as opposed to some of the other markets that storage might play in?

Jason Burwen: Sure. No I think this is actually a very exciting place as costs have come down and come down faster than folks had anticipated we're now seeing this as a real use case and cost effective use case for energy storage. This duck flattening use case. You've seen a couple of CEOs of energy companies. You've seen the head of AES and the head of Nexterra both come out saying they don't expect that we should need to build gas peakers in the future because energy storage can do what they do and provide more value to the systems. I think it was back in October at energy storage North America, the folks from GEs energy unit which I guess is now called Current said we see energy storage at prices today already cost competitive with maybe the bottom 20 percent of gas peakers. And this is a company that builds gas turbines. So it's really striking how that's changed, and the reason why that is so exciting is in part because you know you talked about the utilization of these gas peakers may be something like 4 percent. So out of 8,760 hours that's maybe 350 hours a year. Right. Hey I'm doing math in my head while I talk. So that means that you've got maybe another 8,000 hours of the year where that resource will just be sitting there. The great thing about energy storage is that it can do that. It can provide those 350 hours which is usually going to be during peak periods on a specific set of days of the year. But during those other eight thousand hours it can for example provide grid services such as frequency regulation which we've been talking about. Depending on where it's located, it can help relieve congestion in the transmission system.

Chris Nelder: Right, so instead of an expensive asset sitting there doing nothing 96 percent of the time, it can do something else useful.

Jason Burwen: Yeah. The name of the game here is efficient utilization of all assets on the grid.

Chris Nelder: You know I'm so glad you said that because my very next comment was that I like to think about storage not as a source of energy or as a replacement for a generator but as a way of optimizing the grid, filling in the valleys and flattening the tops of these load curves and making it more efficient. Germany for example is spending 100 million euro to install six lithium ion battery plants at power plants which will be used just to stabilize the grid and absorb oversupply and then letting it feed back into the grid as needed. Do you know of any studies or metrics that focus in on that point like how storage improves overall grid efficiency, or has a particular cost competitive edge in an optimizing role?

Jason Burwen: Well just to further explain the concept here, right. So with energy storage for example, and let's just remove "clean" from this picture and let's just talk about whatever grid you've got, let's say it's a bunch of gas and coal right. Those generators have to cycle up and cycle down based on the particular needs of the grid at given points in time. And that's not so efficient particularly if you have some resources sitting idle, or sitting at very low heat rates. And what happens is if you put energy storage on here to handle some of those fluctuations. For example, instead of having maybe a more consistently running combined cycle plant but has slight fluctuations in its heat rates and then you have a simple cycle turbine that's on and off and on and off, it's cycling quite a lot, which is also just an inefficient way to burn fuel. You can have the energy storage paired with that combined cycle plant and it can basically do all the cycling so that the plant can have as consistent an output as possible. And so when you do that, you're making sure that your utilization of that, for example combined cycle plant, is much better. It's operating more stably at output and so is better able to provide the value that it can over time. And I might add probably without burning quite as much fuel. So that's what we're talking about in a very sort of simple use case scenario. In terms of studies for what this can do grid wide, I think that I might have to do a little bit of culling into many of the reports out there sort of modeling full systems to figure this out but I think that this is still a fairly new concept and one that frankly is a little tough to model which is part of why it's hard to find studies on this.

Chris Nelder: Yeah and that's why I asked the question because...

Jason Burwen: Is that study out there? Tell us.

Chris Nelder: No I haven't been able to find it yet... But there must be some kind of metric that can sort of represent the efficiency of an overall grid.

Jason Burwen: Yeah. God I wish there was some sort of really dedicated graduate student out there that just wanted to write their thesis on this.

Chris Nelder: Maybe we'll be lucky enough to have one as a listener who's going to just go hit it right now.

Jason Burwen: Hit me with an email graduate student.

Chris Nelder: So, so far we've been talking mostly about large storage systems that play various roles on the transmission system or at the utility scale. But let's switch to the residential market for a moment which is probably what most people think about when they think of storage. They think about the power wall at home. How is the relatively new market for home based battery storage systems doing. Do you know?

Jason Burwen: You know residential is right now going to be very niche. Right. This is something that is still recent in terms of having behind the meter storage as a business. And your early adopters are going to be folks who either are for example have really really high value of continuity of service. They might run their own business from home, or have constant computation needs. It might be folks who are for example also in an environment where maybe they have reliability issues if they're very far at the end of the grid as it were. But it's really niche at this point. Now that could change depending on for example what happens with things like net energy metering where you have a bunch of folks with solar panels on their roofs and right now those, the output of those panels that's not consumed on site is sold back to the grid at a fairly robust value and I know states are having conversations about what net energy metering might look like in the future if it is net energy metering at all. Certainly in Hawaii we've seen, its first stage it's kind of starting to figure out what other options that you have in that future and that could very quickly create a lot of adoption of energy storage to the extent that you might see folks seeing more value in self supply particularly if it's paired with things like time of use rates. So there's a lot of moving pieces in the regulatory space for what might happen there. But really at this point in time it's still very early stages, and I think that you'll see things change both as regulations change and as the costs of these units continue to decline.

Chris Nelder: Yeah, exactly I think generally speaking the really big robust market for residential storage is is waiting for those regulatory changes such that those storage systems can get properly paid for contributing to the grid where they really can't right, Now they can you know a homeowner can have the joy of having his power on when the grid goes down. Things like that. But the storage system as an asset isn't really going to get paid properly for being there on the grid without some of these kind of value of solar or ancillary market being implemented on the distribution grid.

Jason Burwen: Two follow on thoughts from that - one is that this is not the first time you might hear someone like me bemoan the misalignment between price signals to end users and what the system needs, right. Certainly that's something, you know demand charges I think are interesting example of this right where you're charging people for sort of the effective bandwidth that they're using but that demand charge is 24 hours a day, and maybe that bandwidth is really only an issue during certain hours and not others, right. So there's a misalignment between the signal you're giving the user and what the system actually values. But the other follow on from this is as Severin Borenstein of UC Berkeley would say, these technologies are enabling end-users to adapt and that's what makes them so interesting, is that what happens in the regulatory space now is not a sort of uni-directional impact, it's going to create its own set of incentives and disincentives every time regulations changed and now there are more and more end-user technologies that can be adopted to adapt to those regulatory changes storage being perhaps the most visible one but certainly not the only one.

Chris Nelder: Yeah because this is not a static situation here right. I mean you put in new regulations, and then people respond in a certain way and then that changes the character of the market, and then that leads to more market changes and so on.

Jason Burwen: Right. Well I mean just take for example time of use rates. You're incenting people to shift their consumption so at the beginning. Thats great. But mind you we dont really worry about this at this point because its maybe a far off future. But in that far off future the logical result is that all of that energy is time-shifted. And do you no longer have the problem that you had that TOU was suppose to solve.

Chris Nelder: Right, now you probably have a different problem. Okay. So of the various sectors where storage can play a role, commercial, utility residential and so on. Where is the growth going to be in the distributed storage space?

Jason Burwen: Sure. First of all, I am not in the business of giving investment advice.

Chris Nelder: Yeah neither am I.

Jason Burwen: But I will say that I think that certainly in the near term from behind the meter its going to be in large commercial and industrial installations. That's certainly where you're seeing existing installs happening right. If you're on the distribution system I think it's really interesting to see what happens at sort of maybe like the substation level. Right. Whether we're going to see these sort of larger projects that are there to augment the distribution system but they're not behind the meter they're front of the meter. That's a really useful and interesting place for storage to be, interesting in part because it's unclear exactly who owns and operates it if it's there, but I also think that there's a lot of opportunity there to the extent that loads are getting peakier all across grids across the country. And there's going to be a need on the front of the meter to do something to deal with that.

Chris Nelder: Yeah, I think that's the right way to look at it. Final question. There are a lot of different storage technologies out there, and in fact I should probably link to another old article I wrote where I kind of detailed what some of those different technologies are. But is there any particular one that you're especially bullish on right now?

Jason Burwen: I love all of my children. And...

Chris Nelder: You're not going to say which one is your favorite?

Jason Burwen: I will say this. I will say that different energy storage technologies have different performance characteristics, they provide different services and different value. So that's like saying, 'god I'm bullish on shortstops,and not first basemans. It's like, I mean they do different things. I'm not going to tell you which one's better than the other. I will say that certainly there's a lot of enthusiasm over the cost effective deployment of what's called you know long-duration energy storage. And in this case I think folks are oftentimes referring to things like flow batteries.

Chris Nelder: Yeah, that was my thought.

Jason Burwen: And flow batteries are still electrochemical batteries but you're basically enabling them to run for a very long time by using liquids that you can store in very large tanks. And it's the same electro chemical principles as a regular battery but because you're running these aqueous batteries with very large tanks of fluid you can effectively run them for a very very long time. They're not flexible in the same way that like a lithium-ion battery might be, but they certainly can go for many many hours and still maintain good charge and good lifetime.

Chris Nelder: Yeah, I got to agree with you there. I think there's definitely going to be a very strong couple years ahead here for flow batteries. Well Jason this has really been fun. A lot more fun actually than I thought it would be considering how geeky it is.

Jason Burwen: I was going to say, I am so glad to hear that I have made the discussion of batteries on the grid really exciting.

Chris Nelder: Well it's exciting for me anyway.

Jason Burwen: I was going to say, I will tell you that this is a topic that will make folks eyes glaze over but that's just their loss because this is where a lot of exciting future economic and regulatory activity is.

Chris Nelder: Oh I agree. And it's going to be absolutely core to the energy transition that's going on. Well, thanks so much for joining us and we'll definitely have to reconvene and talk about some of the other deeper darker subjects involved in storage some time soon.

Jason Burwen: I would be delighted. Thank you so much Chris.