Energy storage can upend US power model, S&P says

Advances in battery technology stand to boost renewables, while posing challenges for traditional power and gas-fired generators, according to the rating agency’s latest report.

Advances in battery storage technology represent “a possible disruptor to power markets”, according to a new report by S&P Ratings.

The technology’s increasing significance stems from factors including growing renewables capacity. Given the unpredictability in wind and solar generation, battery storage can complement renewables by smoothing out their power output.

In the long term, this is likely to negatively affect baseload generators, S&P concluded.

“If there’s increased owner value in renewable resources due to batteries having the ability to more economically shop their power around, the adverse effects will likely be felt by conventional generators, especially those that collect substantial energy margins during peak periods,” the report stated.

The more immediate impact, however, will be felt by peaking gas-fired generators which are now valuable in large part thanks to their ability to meet changing demand.

“In essence, they serve the same role as batteries,” S&P noted. “Smoothed-out, renewable output, which would be a more likely outcome under a battery-storage scenario, would diminish peak pricing.”

Large-scale energy storage facilities have increasingly entered investors’ radars, as the technology is seen as key to incorporating renewables into the power mix.

“Any time you talk about a large number of renewables coming on to a grid, battery storage becomes an immediate next discussion,” Starwood Energy chief executive Himanshu Saxena told Infrastructure Investor last year. In 2016, Starwood invested $100 million in a California-based energy software and storage provider.

In 2017, activity in the storage space continued to heat up. In March, Macquarie Capital and CIT Bank helped finance a 50MW fleet of battery storage systems. The previous year, the US market for this technology grew nearly 300 percent, with more than $800 million in investment, according to the US Energy Storage Association.

Greater growth may lie ahead, with more than 40GW of installed capacity expected by 2022, according to S&P.

“With renewable costs plummeting and utilities scrambling to maintain existing business models, an affordable battery could be the last piece of necessary infrastructure to prompt a seismic shift,” the S&P report stated.