Energy Storage - A "Game-Changer" for Electricity Utilities?

On May 16, 2016, a panel discussion titled "Electricity Storage - A Game-Changer for Utilities" was presented at the 2016 CAMPUT conference in Montreal. As we discussed in an earlier post, energy storage has been referred to by many commentators as a "game changer" because it will greatly improve the efficient use of electricity resources (generation, transmission, distribution), while at the same time bring challenges for the electricity grid and the role of local distribution companies. These themes were addressed by the CAMPUT panel on this topic. As set out in the CAMPUT program materials, one focus of the presentation was about how electricity storage could significantly change the wires portion of a utility's business and provide opportunities for electric utilities to evolve their traditional business model.

The CAMPUT panelists offered a variety of perspectives representing utilities (BC Hydro), the storage industry (Renewable Energy Systems Canada), energy management planning (Powerconsumer Inc.) and the electricity industry (Canadian Electricity Association). This led to wide-ranging discussion about how energy storage and other alternate technologies will fit into the electricity framework in coming years.

From an energy regulation perspective, two of the interesting subjects of discussion were around current barriers to the growth of energy storage and about how distributors can maintain viability when dealing with large numbers of customers using less electricity from the distributor.

A key issue with energy storage is that it can play several roles, yet that is not something that is encouraged by regulation (which favours non-integrated offerings). Indeed, as explained by a couple of the CAMPUT panelists, finding ways to allow storage to play multiple roles is necessary in order to make an economic case for investing in more energy storage. Examples are seen in the fact that an owner or operator of a storage facility (especially one connected to a generation facility) will likely want to act as a generator, distributor, retailer and consumer of electricity. There are currently barriers in some jurisdictions around parties acting in these multiple roles. These barriers need to be addressed in order to properly "unlock" the value and prospects for energy storage. As the CAMPUT panelists explained, addressing these issues and facilitating the growth of energy storage will add to grid resiliency, customer choice and environmental attributes.

Another topic of discussion was about the impact of energy storage on current distribution services. The CAMPUT panelists agreed that while there may be little customer appetite for completely disconnecting from the grid, there is a strong interest for more customer choice for options that are less reliant on distributor-supplied electricity. This will include behind-the-meter energy management systems, perhaps in conjunction with distributed generation and geothermal solutions. Of course, this raises the question about how distributors will collect their costs and be compensated when their customers are consuming less. The CAMPUT panelists did not have any consensus about solutions for this issue, though they clearly identified it as something to be addressed. A number of possible approaches were discussed, addressing how new technologies can be encouraged at the same time as maintaining the viability of the electricity distribution sector. As we have previously discussed (see here, here and here), this topic is currently being considered by the Ontario Energy Board (OEB). The OEB's solution for residential customers is to move to fully fixed (non-volumetric) distribution rates, in part so that the distributor is not harmed by self-generation, net metering and electricity storage. It is not yet clear how the OEB will evolve distribution rates for larger customers, including whether there will be a generally available "standby rate."

At the end of the presentation, the CAMPUT panelists were asked if energy storage is a "game changer" for utilities. The consensus seems to be that while energy storage is important, it is not a "game changer" on its own. However, in combination with other new technologies (including unregulated behind-the-meter renewable generation), there will be greatly enhanced customer choice, which may be a "game changer."