Opportunities for the lead-acid battery industry to serve the nation’s electrical grid storage needs can grow significantly as US federal agencies deal with two important issues. First, what sort of industry-wide standards will be in place to measure the performance of various energy storage technologies? Second, how will energy storage providers be properly compensated in a highly complex electric power ratemaking structure?

The first question is being dealt with by the US Department of Energy (DOE), which has invited the Advanced Lead-Acid Battery Consortium (ALABC) to participate in a forum to develop new protocols that will allow energy storage providers and users to evaluate the performance of various storage technologies.

The second question is being addressed by the Federal Energy Regulatory Commission (FERC), which last year issued a rule requiring that energy storage providers be compensated according to the quality of “frequency regulation” services to regional transmission organizations (RTOs) and independent system operators (ISOs). FERC is now broadening its effort to include all wholesale transactions and a wider range of ancillary services. The ALABC is monitoring this activity.

If the opportunities for the energy storage industry generally, and lead-acid batteries particularly, weren’t so significant, it’s likely that neither FERC nor DOE would be doing anything. But, the potential worldwide energy storage market is huge, with some studies estimating it could reach nearly $115 billion within the next five years. With the need for the electric power industry to integrate more renewable energy into the grid and make the flow of electricity more reliable, action on energy storage issues has become a top priority.

The storage market is expected to be highly competitive as a variety of technologies are already available or under development. Lead-acid will compete with lithium-ion, sodium-sulfur, zinc-bromine and other chemistries and a range of technologies including flywheels, compressed air, etc.

The DOE Energy Storage Systems Protocol Process
Reliable data on how various energy storage technologies perform will become increasingly important as utilities confront the need to integrate more renewable generation capacity and the concurrent need to maintain system reliability. At the same time, some individual consumers may elect to install individual renewable power systems and use energy storage to mitigate the variability of wind and solar units. It is this need for reliable performance and economic data that the DOE Energy Storage Systems (ESS) program seeks to provide. The ESS program has assigned Pacific Northwest National Laboratory (PNNL) and Sandia National Laboratories (SNL) to develop a new protocol to measure and quantify the performance of various storage technologies.

Industry groups have in varying degrees already undertaken efforts to develop means to measure and quantify the performance of storage technologies, including the Electric Power Research Institute (EPRI), the Energy Storage Association (ESA) and the National Electrical Manufacturers Association (NEMA). These three organizations are already participating in DOE’s ESS program. The ALABC will provide input from the perspective from the lead-acid industry, which is expected to command a large share of the storage market in coming years.

The near-term goal of DOE’s ESS program is to produce a protocol by September 30, 2012. Several meetings of program participants already have taken place and more are being schedule within the next few weeks.

The ALABC has reviewed the program’s preliminary work and notes the following:

• The goal of the effort is to establish a uniform set of conditions by which technologies will be measured.
• The protocol itself is not designed to give any system a “pass or fail” grade. Rather, it is intended to provide methodologies for measuring and reporting the performance from an energy efficiency standpoint.
• The program should not limit the scope of system types, meaning that pumped hydro would be included with batteries, flywheels, compressed air, etc.
• The program participants generally agree that the measurements should be taken over the entire system of a storage technology, rather than measurements of individual components or subsystems. (We will need to pay very close attention to conditions affecting the battery, such as climate, charging technology, maintenance, vibrations, etc.)
• While energy storage can support a wide range of power system functions, the DOE’s ESS program has decided to adopt a “phased-in” approach to focus initially on two applications, frequency regulation and peak shaving. Other applications, such as black start, spinning and non-spinning reserves, replacement reserves, voltage control, etc., can be dealt with in later stages. Thus, what DOE issues in September will be merely a step in what is likely to be a multi-year process of determining energy storage performance protocols for a variety of applications.

Ideally, those who purchase energy storage systems (whether regulated utilities or other non-regulated consumers) will be able to trust that representations made by manufacturers in the sale of products will be validated by having been measured and quantified through a protocol endorsed by industry, consumers and government.

The process being implemented by DOE, therefore, not only could be important to the energy storage industries in the US, but elsewhere in the world as well.

FERC’s Notice of Proposed Rulemaking on Energy Storage
The rule issued by FERC last year to require that RTOs and ISOs pay for the quality of energy storage performance may not have made front page news, but it was nonetheless important and the lead-acid battery industry was able to take advantage of it. One company in particular, Axion Power International, used the rule to bring on line a new lead-acid storage project synchronized to the PJM Interconnection, a major RTO serving 13 states and the District of Columbia.

But last year’s action by FERC was one step in helping energy storage an important asset to the nation’s electric power system. Still to be dealt with by FERC and other rate-making agencies is how to compensate energy storage providers for other services such as black starts, spinning and non-spinning reserves, replacement reserves, voltage support, etc.

On June 22, 1012, FERC issued a notice of proposed rulemaking (NOPR) that proposes revisions to its uniform system of accounts to better account for the range of energy storage technologies.

The NOPR is designed to deal with two distinct, but related, issues: (1) how to encourage sales of ancillary services like energy storage to the regulated power sector by third parties and (2) how to account for such sales within a highly complex rate regulatory structure.

Establishing a process by which energy storage can be compensated in a tightly-controlled regulated utility structure is particularly challenging. This is because energy storage is considered something of a “chameleon” since it can perform a variety of functions to help virtually all phases of electric utility service: generation, transmission and distribution.

The first issue is how FERC will deal with its longstanding policy (often referred to as the “Avista” policy) of allowing third party sales of ancillary services only if providers can prove they lack market power in order to charge market prices rather than regulated cost-of-service prices. Energy storage providers have complained that the process of proving they lack market power is so complex that it is not worth the effort.

The second is how energy storage can fit within FERC’s uniform system of accounting. Should FERC create an entirely new category of accounting energy storage or adjust existing categories to account for energy storage.

Resolving these issues is important so that regulators at both federal and state levels can assure consumers that compensation will not result any “cross subsidies” in which profits from a regulated sale can support non-regulated activities. (This is a never-ending challenge for regulators in any issue affecting the electric power industry.)

In its NOPR issued June 22, FERC tentatively decided on the latter approach. FERC Commissioner John R. Norris said:
“Rather than create a new functional classification in the uniform system of accounts specific to energy storage assets, the NOPR proposes to create new accounts for energy storage costs within the existing accounting functional classifications. We note that, based on our analysis, it does not appear that creating a new functional classification would provide additional benefits compared to creating new accounts within the existing classifications. I am interested in comments about the practical impacts of this proposal on energy storage assets. I encourage storage providers to give us their input once they review our proposal.”

The usual process is that once a proposed rule is made public in the Federal Register, it will become final within a year unless so many comments are filed that FERC has to review or revise a proposed rule.

The ALABC will continue to monitor the FERC activities.