Energy storage is tagged as the key enabler for any comprehensive transition to a renewable electricity supply. Storage will be essential to ensure stable voltage as sun- and wind-dependent generation flows into or subsides from the grid at unpredictable rates, while the ability to capture surplus generation for later use would provide logistical and economic advantages to help squeeze fossil-fuel-fired sources out of the market.

For now, though, emergent entrepreneurs face some barriers in a market designed around a non-durable commodity. Industry insiders speaking at the Energy Storage Canada conference in Toronto last week celebrated technological advances, but stressed that viable, steady revenue will be needed to propel the technology into the mainstream.

“We’re trying to get an industry off the ground and energy storage is the holy grail that everybody has always talked about,” observed Jim Fonger, senior business developer with the renewable energy and conservation consulting firm, Ameresco Canada. “Opportunities are in where the electricity system is going in the future as opposed to where it is today.”

“As we talk about decarbonization in power markets globally, that’s going to require wind and solar. You can’t do that without resources to store energy,” concurred Ben Grunfeld, managing director with the professional services firm, Navigant.

Other strategists suggested that getting to that future could turn on securing long-term contracts, capitalizing on climate volatility and exploiting existing market-shaping mechanisms like Ontario’s global adjustment price add-on and the associated Industrial Conservation Initiative (ICI). Policies and regulations for achieving Canada’s target to reduce greenhouse gas (GHG) emissions by 30 per cent compared to 2005 levels by 2030 are also expected to play a role.

“There’s a focus on increasing from 80 per cent (currently) to 90 per cent non-emitting electricity and the role storage can play in decarbonizing other energy sources,” Jen Hiscock, science and technology advisor with Natural Resources Canada, told conference attendees as she outlined several programs to support energy storage projects for the buildings and transportation sectors, and in northern and remote communities that are highly reliant on diesel generators. Funding priorities for joint federal/provincial infrastructure projects and/or formation of public-private partnerships will also be assessed through a GHG-reduction lens.

Ontario’s deputy minister of energy, Serge Imbrogno, similarly pointed to commitments in both the soon-to-expire iteration of the provincial long-term energy plan (LTEP) and the updated version slated for release later this fall. Pilot projects for 50 megawatts (MW) of energy storage — 34 MW devoted to frequency control and grid reliability and 16 MW in long-term capacity — are now in place, and studies have been commissioned to assess how energy storage fits into and could profit from the bigger conservation and low-carbon supply picture.

Public and private investment targeted

Storage has potential appeal for generators, local distribution companies (LDCs) and end users in a province where surplus base-load supply is exported at a loss, the transmission grid is constrained in some critical areas, and industrial and large commercial customers are offered inducements to curb electricity consumption during times of peak demand. A range of technologies, including batteries, flywheels and compressed air are evolving and vying for a share of an embryonic market.

Frequency regulation, or using stored energy to flatten out power surges and sags, is perhaps the bigger concern on a citywide scale. Major LDCs like Toronto Hydro are piloting energy storage applications that could provide system assurance now — a particular need in Toronto’s central core where existing infrastructure is aging and a steadily increasing residential population heightens concerns about the grid’s capacity — and increase flexibility to connect more distributed generation within the utility’s network and/or accommodate anticipated dramatic growth in electric vehicles in the future.

The technology could also have implications for the expansion of light rail transit. Patrick Savoie, global business development manager with the utilities, transportation and infrastructure service provider, ABB Group, reported that the company is deploying 10.5 MW of storage to provide frequency reliability for Philadelphia’s transit system. This includes the potential to recover the trains’ braking energy.

“Energy storage in rail has other value propositions,” he said. “Energy efficiency will be an integral part of the design process for new rail.”

Governments or other large institutional players typically drive investment on this scale, but a deeper pool of private sector participants will be needed to sustain the industry for the long-term. For this, proponents see opportunities to leverage the commercial real estate sector’s concerns about spiking energy costs and adapting to an increasingly volatile climate.

The rise of complementary technologies such as building automation systems, building information modelling and data analytics provide the tools to store and consume stored power in optimal sync with electricity rate structures, suggested Matt Sachs, chief operating officer of Peak Power Inc., a company that integrates in-building batteries with various computer-based monitoring and predictive programs.

“It’s not happening in a vacuum,” he asserted. “Software analytics is the value-add.”

Global adjustment and global warming factor in business case

In Ontario, his company’s pitch drafts off the global adjustment (GA) — a largely opaque bucket of costs that now accounts for about 85 per cent of the commodity cost of electricity — and the opportunity for a select group of customers to reduce those costs through participation in the Industrial Conservation Initiative (ICI). These are commercial customers with a monthly peak demand of at least 1 MW and industrial customers with a monthly peak demand of at least 500 kilowatts (kW) whose GA is calculated with a mathematical factor based on their demand during the five hours of the year (defined from May 1 to April 30) with highest province-wide demand.

Evidence of eligible customers saving hundreds of thousands of dollars through strategically cutting load during those hours underpins this element of the marketing strategy for energy storage. “I think your initial implementation is paid for with your initial value and within Ontario it’s from the global adjustment right now,” reasoned Ron Dizy, managing director of the Advantage Energy Centre at Toronto’s MaRS district.

However, others expressed some hesitancy about a scheme that’s rather inequitably constructed to redistribute costs to non-qualifying customers. “From a risk standpoint, I wouldn’t get into something that’s taking a big chunk of costs out of the sector (but) that’s lowering it down somewhere else,” Jim Fonger cautioned.

Energy storage businesses also grapple with the inherent contradiction of a commodity that both exploits and bridges an imbalance between supply and demand.

“In general, storage destroys the market it participates in and makes money from,” mused Michael Salomon, chief executive officer of CleanHorizon, a firm, based in France, that provides business and technical consulting for energy storage. “The real thing that storage is bringing to the grid that other technologies are not really bringing is resiliency.”

From this perspective, Toronto’s experience in the ice storm of December 2013 and other recent weather-related calamities worldwide are, indeed, natural marketing for energy storage. However, it still has to compete with other conventional forms of emergency power that are arguably more cost-effective in the short term.

“I do think the ultimate value is resiliency. The drivers are going to end up being from end consumers, and in a ‘climate change is real’ kind of world, that will happen sooner,” Dizy predicted. “The problem is, it’s a thin, thin market. They just don’t need that much of it.”

“There is very rarely a financial value associated with resiliency,” Salomon agreed. “At some point, with more hurricanes, perhaps we start moving toward a world where storage has more value.”

Given that criteria, a delayed recognition of value isn’t necessarily an unhappy situation. Meanwhile, the instinctive pairing of energy storage and distributed generation contrasts with the economies of scale of a centrally controlled electricity grid.

“The smaller the scale, the more resilient and the more costly,” Salomon advised.

Alternatively, LDCs might be able to tap into a wider pool of investors, moving from ownership to what Jen Hiscock termed a “local balancing authority” or administrator of what will still be a regulated transmission and distribution system. “It’s a way to share and manage risk because you can get other shareholders that can come in and finance some of the assets,” she said.

Barbara Carss is editor-in-chief of Canadian Property Management.