Valuing Distributed Storage


A complex business case calls for sophisticated modeling.

A complex business case calls for sophisticated modeling.

Fortnightly Magazine - September 2013

As advanced technologies – such as electricity storage – reach commercial viability, entities looking to adopt and deploy the technology are challenged with creating a business case to justify their deployment. The challenge is two-fold. First, though the technology potentially might be a better solution, its cost could still be higher than the alternatives. Second, where the technology is being installed into a modern, flexible electricity grid that enables the technology to perform multiple applications, current modeling approaches might be unable to capture secondary benefits offered by the device. The challenges are driving integrators of storage to examine and re-examine how such technologies should be valued on the grid.

Traditionally, these distributed energy resources (DER) have been valued as single applications with narrowly defined attributes. Examples include rural installations where the generator provides reliability in place of a grid connection; backup generation for critical loads where traditional grid reliability and power quality are insufficient for some facility needs; or part of a top-down (state) or bottom up (customer) initiative to use renewable generation. In such cases, economic valuation could be a secondary driver compared to emissions or similar green drivers; or the economic valuation is dependent on tax incentive structures, such as feed-in tariffs or provisions for net metering.

Specifically for distributed storage technologies, cases traditionally have focused on using the devices at the distribution level to serve as part of the generation and power quality equation, or in niche applications where sub-transmission and distribution systems limit growth due to excessive cost of upgrades and where DER devices such as storage can be utilized as an alternative.

Figure 1 - Modeling Energy Storage

In such cases, valuing the devices and applications is a straightforward approach – when the operational profile is well defined, and potential savings can be easily calculated.

Evaluating DER

When grids are modernized and incorporate a wider portfolio of generation, advanced distributed energy resources that are able to perform multiple roles present a need to better understand and quantify all the benefit streams of the applications. Factors such as where the systems are being placed, to which group (end users, utility, or wholesale markets) the benefits accrue, and control strategies that define how the devices prioritize their activity on the system demand more versatile valuation techniques when determining the benefits of a DER technology. Some factors leading to these new needs are: 

• Higher RPS goals lead to more distributed PV, in particular, and concentrated PV on distribution feeders can raise a variety of engineering and operational issues;

• Higher RPS goals in general lead to more variability in uncontrollable generation, and DER devices such as storage are seen as part of the solution;

• Increasing severe weather events force planners to examine the use of distributed energy resources to harden the grid and provide more resiliency to the system; 

• State laws such as California’s AB 2514 lead states to