‘Fossils’ Days Are Numbered’ as FERC Clears Batteries to Compete with Power Plants
A U.S. regulatory decision last month allowing energy storage companies to compete against traditional power plants by the end of 2020 “sent the clearest signal yet that fossil fuels’ days are numbered,” Bloomberg Technology reports. And at the big CERAWeek oil and gas conference in Houston last week, fossil executives were taking notice.
The order by the Federal Energy Regulatory Commission “has been hailed as a landmark in the development of energy storage markets,” Utility Dive reports. “It directs the operators of wholesale power markets—regional transmission organizations (RTOs) and independent system operators (ISOs)—to remove barriers that could keep storage resources from realizing their full value.”
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It means that “batteries, once relegated to powering small devices like remote controls and watches, are now poised to energize the things most central to daily life, from smart phones to cars to entire homes and offices,” Bloomberg adds. Joel Eisen, an energy law professor at the University of Richmond, likened the FERC order to regulators’ decision to break up the country’s telecommunications monopolies in the 1970s.
“This is a watershed event,” Eisen said.
“‘We’re reaching an inflection point,” agreed venture capitalist Steve Westly, former controller and chief fiscal officer for the state of California. “In the future, people will talk about energy in terms of kilowatts per hour instead of oil per barrels.”
“The question is no longer if batteries will disrupt the power sector, but rather how much and how fast?” wrote CERAWeek organizers IHS Markit in one session description.
The rise of durable, energy-dense, easy-to-charge lithium ion batteries have prompted predictions that electric vehicles will outsell internal combustion cars by 2040. “Now the batteries’ advance into power markets threatens the reign of natural gas, which at the moment generates about a third of U.S. electricity,” notes Bloomberg correspondent Mark Chediak. “In California and Arizona, utilities including PG&E Corporation and Pinnacle West Capital Corporation are abandoning gas plants in favor of renewable energy projects. These solar and wind farms can now use energy storage systems to stash their power and unleash it as needed.”
“Batteries are like bacon,” said Vibhu Kaushik, Southern California Edison’s director of grid technology and modernization. “They just make everything better.”
Bloomberg notes that the battery revolution isn’t around the corner just yet: lithium ion costs will have to fall by half to compete head-to-head with internal combustion vehicles, manufacturing will have to ramp up, and raw material supply chains will have to fall into place. “That said, battery prices are a fifth of what they were eight years ago,” Chediak writes. “And they’re projected to keep falling.”
Alexandra Goodson, spokesperson for battery-maker Saft, said the growth in energy storage will be “more exponential than linear” over the next five years. Bloomberg New Energy Finance projects EVs triggering the next big oil price crash in 2022, while Stanford University futurist Tony Seba foresees internal combustion demand collapsing by 2025.
An analysis by the Brattle Group projects that the FERC order could drive the U.S. storage market to a 50-GW threshold in the next decade. “But at least half of that potential growth would depend on the development of state, not federal, policies to support energy storage,” Utility Dive states.
While Brattle found that “at least half of the 50-GW energy storage market it forecasts unfolding over the next decade could come from opening up the wholesale power markets to energy storage,” the industry publication adds, “the greater part of the potential growth has to come from energy storage applications that serve the transmission and distribution sectors, which are largely beyond FERC’s jurisdiction.”
“The FERC order is a necessary and important step, but it is a first step,” said Brattle Group Principal and Director Judy Chang. To maximize the opportunity, “we really do need states to look at how they integrate storage on the distribution system.”