Battery energy storage systems: Meaning, Criticisms & Real-World Uses

What Are Battery Energy Storage Systems?

Battery energy storage systems (BESS) are technologies that capture energy from various sources, store it in rechargeable batteries, and then release it as electricity when needed. These systems are a critical component of modern energy infrastructure, facilitating the integration of intermittent renewable energy sources like solar and wind into the power grid. By storing excess generation during periods of high supply or low demand and discharging it during periods of high demand or low supply, battery energy storage systems enhance grid stability and reliability.

History and Origin

The concept of storing electrical energy dates back to the invention of the lead-acid battery in 1859 by Gaston Planté. However, the widespread adoption of battery energy storage systems for grid applications is a more recent development, driven by advancements in battery technology, particularly lithium-ion batteries, and the increasing penetration of variable renewable energy. Early electricity storage predominantly relied on pumped-hydro systems, which still account for the majority of global storage capacity.

A significant regulatory milestone for battery energy storage systems in the United States was the Federal Energy Regulatory Commission (FERC) Order No. 841, issued in February 2018. This landmark ruling aimed to remove barriers to the participation of electric storage resources in the capacity, energy, and ancillary services markets operated by regional transmission organizations and independent system operators.¹² The order required these operators to revise their tariffs to properly compensate storage resources, thereby leveling the playing field for BESS and other energy storage technologies in wholesale electricity markets.¹⁰, ¹¹ This regulatory clarity spurred significant interest and infrastructure investment in battery storage.

Key Takeaways

Battery energy storage systems store electrical energy for later use, improving grid stability and enabling greater integration of renewable sources.
These systems contribute to grid resilience by providing services such as frequency regulation and backup power.
The deployment of BESS has seen rapid growth, particularly in utility-scale applications and co-located with renewable generation.
Cost reductions in battery technology, especially lithium-ion, have made battery energy storage systems increasingly competitive.
Regulatory frameworks, like FERC Order No. 841, have been crucial in accelerating the adoption of BESS in wholesale electricity markets.

Formula and Calculation

The fundamental capacity of a battery energy storage system is typically expressed in terms of its stored energy (in kilowatt-hours or megawatt-hours) and its power rating (in kilowatts or megawatts). A key performance metric for BESS is its duration, which indicates how long the system can continuously discharge at its rated output power.

The formula for calculating the duration of a battery energy storage system is:

\text{Duration (hours)} = \frac{\text{Energy Capacity (MWh)}}{\text{Power Rating (MW)}}

For example, a system with an energy capacity of 200 megawatt-hours (MWh) and a power rating of 50 megawatts (MW) would have a duration of 4 hours. This calculation is vital for system designers and operators to ensure the BESS meets specific operational requirements, such as supporting peak demand for a certain period.⁹ Understanding this relationship helps optimize the capital expenditure for a given application.

Interpreting Battery Energy Storage Systems

Interpreting battery energy storage systems involves understanding their role within the broader energy ecosystem. BESS are not primary electricity generation sources but rather serve as crucial enablers for a more flexible and robust power system. Their value is derived from their ability to shift energy in time, respond rapidly to grid needs, and provide various grid services.

For financial analysis, the interpretation often revolves around the return on investment from deploying these systems. This includes evaluating how BESS can reduce operational costs for utilities (e.g., by avoiding the need for expensive "peaker" plants), generate revenue by participating in wholesale markets, and enhance the economic viability of renewable energy projects. The economic viability of BESS is also influenced by their contribution to energy efficiency across the grid.

Hypothetical Example

Consider a hypothetical utility company, GreenGrid Power, that operates a large solar farm. During midday, the solar panels generate more electricity than the local grid can immediately consume, leading to potential curtailment of valuable renewable generation. To address this, GreenGrid Power invests in a battery energy storage system with a capacity of 100 MWh and a power rating of 25 MW.

During peak solar generation hours (e.g., 11 AM to 2 PM), the excess electricity produced by the solar farm is directed to charge the BESS. This effectively stores the surplus energy. Later in the day, as the sun begins to set (e.g., 5 PM to 8 PM) and residential electricity demand peaks, the BESS discharges its stored energy onto the power grid. This allows GreenGrid Power to supply clean, renewable electricity during a time when it would traditionally rely on fossil fuel-fired power plants, thereby optimizing the solar farm's output and reducing reliance on conventional generation during high-demand periods. This scenario highlights how BESS can be integrated into existing grid modernization efforts.

Practical Applications

Battery energy storage systems have a growing number of practical applications across various sectors of the energy industry:

Grid Stabilization: BESS can provide essential services like frequency regulation, maintaining the stability of the electrical grid by rapidly injecting or absorbing power to keep the frequency within acceptable limits.⁸
Renewable Energy Integration: By storing intermittent solar and wind power, battery energy storage systems allow these sources to provide a more reliable and dispatchable supply of electricity, reducing curtailment and enhancing the value of renewable energy projects.
Arbitrage: Operators can charge battery energy storage systems during periods of low electricity prices (e.g., when renewable generation is abundant) and discharge them during periods of high prices, profiting from the price difference in electricity markets.
Backup Power and Resilience: BESS can offer reliable backup power for critical facilities or communities, enhancing energy resilience during outages or emergencies.
Demand Charge Reduction: For commercial and industrial consumers, battery energy storage systems can store power during off-peak hours and discharge it during peak demand, reducing costly demand charges from utilities.
Distributed Energy Resources (DER) Management: BESS are key components of distributed energy resources, enabling microgrids and behind-the-meter applications that enhance local energy independence and efficiency. The International Energy Agency (IEA) reported that battery storage in the power sector was the fastest-growing commercially available energy technology in 2023, with deployment more than doubling year-on-year.⁷ The U.S. Energy Information Administration (EIA) projects continued rapid growth, with utility-scale battery storage capacity expected to almost double by the end of 2024.⁵, ⁶

Limitations and Criticisms

Despite their significant benefits, battery energy storage systems face several limitations and criticisms:

Cost: While costs for battery energy storage systems have decreased substantially, particularly for lithium-ion technology (with utility-scale battery costs falling nearly 70% between 2015 and 2018)⁴, the initial capital expenditure can still be significant for large-scale deployments. Regional variations in costs also exist.³
Duration Limitations: Most currently deployed battery energy storage systems are designed for short-to-medium duration discharge (typically 2-4 hours). Longer-duration storage remains more expensive and is a key area for ongoing research and development. This can limit their ability to provide multi-day backup or seasonal energy shifting, which might be better suited for other storage technologies like pumped-hydro.
Resource Dependence and Supply Chains: The production of certain battery chemistries, especially lithium-ion, relies on critical minerals such as lithium, cobalt, and nickel. Concerns exist regarding the availability of these resources, their extraction's environmental and social impacts, and the geopolitical implications of concentrated supply chains. Scaling up the global battery market creates new opportunities for diversifying supply chains, but also highlights existing dependencies.²
Degradation and Lifespan: Batteries degrade over time and with repeated charge-discharge cycles, leading to a reduction in capacity and efficiency. This necessitates eventual replacement, contributing to the total cost of ownership and raising questions about end-of-life management and recycling challenges.
Safety Concerns: While advancements have been made, safety remains a concern for large-scale battery installations, particularly regarding thermal runaway and fire risks, requiring robust safety protocols and sophisticated battery management systems.

Battery Energy Storage Systems vs. Electric Vehicle Batteries

While both battery energy storage systems (BESS) and electric vehicle batteries rely on similar battery chemistries, primarily lithium-ion batteries, their design, application, and optimization criteria differ significantly. BESS are designed for stationary applications, focusing on grid support, energy shifting, and integration with renewable generation. Their primary metrics are typically power capacity, energy capacity, and duration of discharge, with emphasis on longevity and cycle life for many years of operation.

In contrast, electric vehicle batteries are optimized for mobility, prioritizing energy density (to maximize range), power output (for acceleration), and rapid charging capabilities. While durability is important, the operating environment and usage patterns for a car battery are distinct from a stationary grid-scale battery. The market dynamics and supply chains also differ, though there is increasing convergence and potential for second-life applications where used EV batteries are repurposed for stationary storage. The vast majority of global battery demand now comes from the energy sector, encompassing both stationary storage and electric vehicles, a significant shift from a decade ago.¹

FAQs

How do battery energy storage systems contribute to sustainable investing?

Battery energy storage systems contribute to sustainable investing by enabling greater penetration of renewable energy sources, reducing reliance on fossil fuels, and enhancing the overall efficiency and resilience of the power grid. They are a key technology in the transition to a low-carbon economy.

What are the main types of batteries used in BESS?

The most common type of battery chemistry used in modern battery energy storage systems is lithium-ion batteries, due to their high energy density, efficiency, and decreasing costs. Other technologies, such as flow batteries and sodium-sulfur batteries, are also being developed and deployed for specific applications.

Can battery energy storage systems replace traditional power plants?

Battery energy storage systems are generally not designed to replace traditional baseload power plants entirely, which provide continuous power. Instead, they complement existing generation sources by providing flexibility, storing intermittent renewable energy, and offering critical grid services like frequency regulation and peak demand management. They act as enablers for a more dynamic and diversified energy mix.

What is the role of BESS in distributed energy resources?

In the context of distributed energy resources, BESS are crucial for local energy management. They can store power from rooftop solar panels for later use in homes or businesses, support microgrids that can operate independently from the main grid, and provide localized grid services, contributing to greater energy independence and resilience.