Energy Storage FERC Renewable Energy

Batteries Can Be a Game Changer for the Power Grid If We Let Them

November 6, 2023

This blog is co-authored by NRDC Schneider Fellow Annie Minondo.

How much would you pay for a battery that helps utilities avoid blackouts during extreme heat and cold, accelerates the transition from dirty power plants to clean renewable energy, and makes the entire electrical grid much more reliable? It’s a question that regulators across the country are asking, and the answer will have a lot to say about how quickly the U.S. electricity sector can decarbonize power grids and transition to clean energy, which will enhance grid reliability, lower costs, and advance the battle against climate change.

Battery storage can deliver huge benefits at a time when extreme weather is increasing demands on power grids. Both stand-alone battery projects and renewable projects that are paired with batteries contribute to grid reliability and resilience. 

  • Batteries can store excess clean power and later discharge that power nearly instantaneously during periods of high demand, which helps grid operators manage supply and demand in real time, preventing blackouts and other emergencies.
  • Stand-alone battery projects can be dispatched strategically to meet peak demand, potentially displacing dirty, inefficient natural gas peaker plants. This can result in reduced ratepayer costs, improved local community health, and reduced local air pollution. 
  • Pairing renewable projects with battery storage can increase a renewable project’s value and reduce the need for transmission upgrades when connecting these projects to the grid. 
  • Storage can balance the intermittent characteristics of renewable energy, providing the grid with clean, flexible, firm generation. 
  • Battery storage can delay the need for costly expansions to the transmission grid that can take years to permit and build, and it has the potential to extend the life span of existing transmission infrastructure and bridge the gap until these new lines are brought into service.

Yet for all of these benefits, batteries are struggling to break through in many places. U.S. battery storage capacity rose to only 12.7 gigawatts at the end of the second quarter of 2023, up 61 percent from the prior year, according to S&P Global. California, which is aggressively shifting away from gas-fired generation, and Texas, where batteries make economic sense in an unregulated energy market, are leading the way in storage growth.

In other regions, however, battery storage remains a novel technology that utilities and grid operators have little experience with. One of the key challenges is how to value what batteries can contribute to reliability—a complicated calculation known as capacity accreditation. Grid operators evaluate capacity accreditation for each generation resource as part of their process to ensure resource adequacy, a process that calculates whether there are enough generators available to meet demand, especially during periods of peak usage or high levels of generator outages. 

Solar and wind power, which have historically been disadvantaged in the capacity accreditation process relative to fossil fuels, are going through similar growing pains. In addition, as renewable energy and battery storage take on larger roles in the U.S. power mix, rules for how to treat these newer technologies in interconnection rules, transmission planning, and market products have failed to keep pace, leading to unacceptably long delays in bringing those assets online, where they can enhance system reliability and lower costs. Utilities and investors need more certainty about these rules and value streams to evaluate whether to move forward with new storage, wind, and solar projects.

The Federal Energy Regulatory Commission (FERC), the nation’s top energy regulator, is weighing a petition from the American Clean Power Association, a group that lobbies for renewables, to hold a technical conference “to explore ways to improve the accreditation of resources’ capacity value.” 

“Capacity accreditation rules are oftentimes applied inconsistently within and across resource types, making it more difficult to accurately assess national and regional resource adequacy and to make efficient investment decisions to maintain reliability,” the association said.

Yet even bringing the nation’s top utility regulator into the discussion has generated controversy. PJM, the largest U.S. grid operator, and other grid managers oppose the idea of a technical conference, arguing that it will be difficult to reach a national consensus and claiming there are regional differences in how power is produced and delivered. Grid operators at California ISO, the New York Independent System Operator, ISO New England, MISO (Midcontinent Independent System Operator), PJM, and Southwest Power Pool also feel that the type of technical conference under consideration would slow their current efforts to improve capacity accreditation.

To be sure, there are no quick and easy answers, but the stakes couldn’t be higher. While there should be a measure of flexibility in how different regions implement storage, differing regional rules and standards can be an obstacle to accelerating our shift to clean energy generation. FERC is the appropriate place for an industry-wide discussion on accreditation to take place, as the commission consistently offers best practices, guidance, and rulemaking on different modes of energy technology—and storage is no different. 

“Getting capacity accreditation right is fundamental to the commission’s responsibility to maintaining bulk power system reliability,” said NRDC and other public interest groups in comments to FERC. “Accurate capacity accreditation is key to a successful transition from conventional generation resources to a more decentralized and lower-emitting resource mix, which is broadly supported by consumers and many state and local policies.”

Battery storage has already proven its worth in the field. California’s grid operator said the state avoided blackouts during record-setting heat last year, thanks in part to 3,500 megawatts of storage added between 2020 and 2022. And solar and rapidly growing battery storage were credited with helping Texas get through punishing summer “heat domes” this year.

The combination of renewable energy and battery storage is among the most valuable tools in our campaign to improve grid reliability, transition to a cleaner power mix, and cut the carbon emissions that drive climate change and the extreme weather threatening our bulk power system. As policymakers pursue ambitious targets for battery development, grid operators and regulators must ensure that these new resources are valued correctly to help get these vital assets into action as soon as possible.

Image by Dennis Schroeder/NREL, 57997