Tuesday, October 23, 2007

Progress on Storage

Two weeks ago, I moderated a panel at "Investing in Energy Storage Technologies," a conference in New York City sponsored by Financial Research Associates LLC. The good news is that unlike the many industry conferences on energy storage I have attended or participated in where we all sit around preaching to the already converted, bona-fide, interested energy tech investors attended this one. The better news is that two significant announcements were made that could very well combine for an inflection point in interest and investment needed to commercialize energy storage technologies for our electricity grid. The presence of the investors, along with the announcements, made this conference definitely worth attending.

First, American Electric Power Corp (AEP), one of our country's largest electric utilities, has announced a program to install up to 1000 MW of energy storage devices over the next 13 years. Of that, 1000 MW is based on a relatively new technology called the sodium-sulfur battery. AEP has been demonstrating this technology at the 1.2-MW scale at a facility adjacent to a substation. Now that it has gained some confidence in the technology, the utility plans to install 6 MW worth of these devices by 2008, 25 MW by 2010, and 1000 MW by 2020. This is an unprecedented commitment to energy storage for electricity infrastructure in this country. AEP admits that the cost-benefit evaluation is "marginal," but that the strategic and political values are "high." AEP's interest is in ensuring that distributed energy at non-utility sites can be smoothly integrated into its electricity production and delivery system. The conference presentation was given by Ali Nouri, AEP's manager of distributed resources.

Second, a piece of legislation is circulating in Congress titled The Energy Storage Technology Advancement Act of 2007. The Act comes with a funding commitment of $150-million. This money would be appropriated to cost-share technology demonstration projects. What this means is that, with respect to the electricity grid and distributed generation, the federal government seeks to facilitate the transition of storage technologies from R&D to commercialization. This news was delivered by Brad Roberts, Chairman of the Electricity Storage Association, who had just testified to the relevant Congressional committee the week before. This also represents a quantum jump in commitment; until now, the federal government has supported energy storage with a meager R&D budget of around $10-15-million.

Of course, it's a long way from a bill introduced in the House to appropriated money, but the favorable press alone should create a nice tailwind. Just to put this in perspective, the federal government has spent hundreds of millions of dollars over the last decade and a half supporting one coal technology, called integrated gasification combined cycle, or IGCC.

Who benefits the most from these twin announcements? We believe renewable energy proponents do. Large-scale wind and solar, in particular, cannot compete against nuclear and fossil fuels for electricity generation without commercial storage. The intermittency and unpredictability of the resource will ultimately prove formidable barriers to renewables achieving more than 5-10% penetration on the grid or to their ability to compete without significant direct subsidies. Energy storage converts an unpredictable resource, one that utilities are essentially forced to take, into one that can be scheduled into the markets.

For someone who has long been frustrated with the pace of progress in energy storage for electricity, I am happy to report that these two announcements could lead to the "knee in the curve" for which the industry has been waiting.