The NEC Energy Solutions Blog

Variable utility pricing adds to importance of energy storage

Utility providers face an incredibly complex financial situation that dictates they constantly adjust how much they are paying for power and, in turn, how much they charge customers for energy. The result is an often confusing and continually complicated fiscal environment that creates unpredictability and makes it difficult to manage power distribution throughout the grid. Energy storage systems can alleviate some of these challenges by helping utility companies take more control over their energy and create more predictability.

The variable nature of the current utility pricing environment was made particularly evident in a recent Scientific American report detailing lessons learned from a think tank exercise between energy industry experts from the United States and Germany.

Looking at variable pricing and its consequences
The variable cost models are not necessarily the core problem facing utilities. Instead, the underlying power generation trends that lead to inconsistent costs can create numerous challenges. According to the news source, electricity, as a commodity, is unique because the amount of power being consumed at any time exceeds the amount of energy that is widely available through storage. The result is an environment in which the vast majority of power that is used at any time is moving immediately from generation to transmission and distribution.

With energy being used as it is being created, power plants are often tasked with ramping up production during peak hours, leading to greater costs for utilities and higher rates for customers. The report explained that utilities must also deal with issues of location. Moving energy through power lines to different regions can be cost prohibitive to such a degree that companies must rely on local power generation sources, regardless of price, to meet various demands. When the issues of time, location and power availability all come together, the result is a highly variable cost environment that utilities must constantly balance.

This balancing act is set to get more difficult. The news source explained that wind and solar production will add another layer of complexity to the entire variable pricing landscape, including challenges managing transmission and distribution. Pointing to Germany, the report's author explained that there are many places in the country where wind and solar arrays are frequently generating more energy than transmission lines can move. This leads to power going to waste and more variability in costs.

Energy storage solutions hold the potential to resolve many of these issues. The technology won't remove variability entirely, but it can establish a foundation for much more consistent, reliable power delivery, particularly in response to increased use of intermittent renewable resources.

Energy storage and variability
Having to adjust prices based on demand isn't a problem. Having solar generation sites that generate too much energy for transmission lines to use, however, is a huge waste. Energy storage solutions help either utility providers or generation companies capture the excess power created during peak generation times and keep that energy available for periods when wind and solar sources are not providing as much power. This isn't necessary to use wind and solar effectively, but it can help organizations maximize the value of these resources.

Lithium ion batteries and similar storage technologies also help utility providers meet customer demands. Locations with high power costs because of limited local generation are hotbeds for investments in rooftop solar panels and similar solutions. Investing in energy storage can help utilities work with these customers to capture excess power that is generated or to provide a more localized energy source that reduces expenses and keeps the financial situation in favor of the utilities.

Variability in the energy industry often stems from an imbalance between the amount of power available and the amount of energy being consumed. Storage solutions help create greater balance, giving utilities a more predictable, controllable operating climate.

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