by Julian Spector
June 24, 2019

It's hip to be Square, as all you subscribers know. But sometimes it's hipper to be weird.

There's something refreshing about breaking out of the confines of expectations set by investors, regulators and analysts. It doesn't happen often, but some actors within the storage industry have ventured into strange and unconventional territory in recent weeks.

The standard project format that has emerged at this stage of market development features rows of shipping crates packed with NMC lithium-ion cells from a top-tier manufacturer, backed by a contracted revenue stream from a bankable utility company, if not owned by said company. It has a primary task, but the developers will note it can also provide grid services on the side, possibly.

Such projects may have been called risky five years ago, but today they raise few eyebrows outside of particularly change-averse populations.

These days, to feel that invigorating rush of technology or business model risk, you have to spice things up. That could mean integrating an unconventional storage technology, or moving into a largely overlooked geographical market, or trying out a new business model.

Developers have checked all three boxes in recent weeks.

Not only does that make a humble storage market observer's life a bit more varied and rewarding, it speaks to the overall health and maturation of the energy storage industry. Monocultures run the risk of obsolescence when conditions inevitably change. Creative development opens up revenue where a conventional approach wouldn't find it, while breaking open new markets to pursue.

Texas, hold 'em contracted revenue streams

Last week, we got news of a standalone storage project going into ERCOT's grid to sell energy and ancillary services. 

This is actually quite a rare occurrence. Projects we've written about in Texas tend to pair with renewables, like Vistra's add-on to capture clipped power at the 180 megawatt Upton 2 solar plant, or the oft-mentioned Notrees plant of yore.

Even rarer for storage anywhere in the U.S., the forthcoming Prospect battery will operate on a pure merchant basis, at least in the beginning. Developer GlidePath told me the firm likes a challenge, so they broke ground on the 10 megawatt/ 10 megawatt-hour system with no guaranteed revenue in hand.

That puts the developers comfortably ahead of the curve, and if they make money by dispatching into the competitive markets, that will inform how they deploy follow-ups. 

The arrival of this project calls into question the recieved wisdom that Texas is a scary place to develop storage.

It's true that there's no capacity market, denying storage the firm revenue that anchors many projects in places like California, nor are there state incentives for this technology. The flipside of that laissez-faire coin is the highly transparent market structure, which allows storage to go to market without utilities serving as gatekeeper.

And while some in the industry cite Texas' prohibition on utility-owned storage as an obstacle to growth, GlidePath COO Chris McKissack sees it the opposite way.

"We think it’s a good thing that [investor-owned utilities] don’t have the opportunity to own and operate storage," he said. "You’ve got to rely on developers and [independent power producers] who have the ability to push the market forward, to push the industry forward."

Whether storage makes any money is another matter. ERCOT is generally getting spikier in its peaks, which creates opportunities for fast-responding power sources like batteries to reap big profits in short periods of time. But there's no model of a battery playing that game, and it's hard to predict exactly how many lucrative peak events one can count on in a given year. 

Run of the mill arbitrage will offer a more regular, if less remunerative, business.

As we discussed last time, the Texas interconnection queue foretells massive growth for storage in the next two years. Until then, Prospect Storage will have the market more or less to itself.

Kitchen sink storage in Utah

Many a company has searched for a way to bring back compressed air energy storage at scale. Mitsubishi Hitachi Power Systems got to the salt crusted basin and range of Utah and declared, "This is the place."

The industrial conglomerate said recently that it would build a truly enormous 1,000-megawatt storage complex in this desert state to store an undisclosed number of megawatt-hours. Even more intriguing, the company ditched conventional lithium-ion batteries in favor of underground compressed air in salt caverns, flow batteries, renewably produced hydrogen and solid-oxide fuel cells.

This is, to my knowledge, the first proposal to combine all of these technologies, none of which has seen widespread use as utility-scale grid storage devices. The developer is taking on both technology risk and business model risk to pull this off.

But Mitsubishi mitigated some of that risk by partnering with someone who actually knows how to store things in giant underground caverns: Magnum Development reportedly has five salt caverns in use for liquid-fuels storage, and already is developing additional sites for CAES and hydrogen storage.

Perhaps this team of backers will finally break the dry spell for large-scale compressed air energy storage, a format which has stalled since Alabama's 110-megawatt McIntosh facility came online in 1991.

Fishy value stacking in Alaska

Some value stacking business models smell funny, but Saft's new Alaska project is fishy in a good way.

The battery manufacturer and Total subsidiary supplied a containerized 1 megawatt/ 1 megawatt-hour system to the Cordova Electric Cooperative, near the mouth of the salmon-rich Copper River. 

The system, packed with ABB power electronics, will help the local co-op meet the ramp in power to supply the town's booming seasonal salmon processing industry. The battery will also take over frequency regulation duties from the local run-of-river hydropower.

The upshot is more hydro capacity going toward generation, and less consumption of expensive imported diesel. If that doesn't make you want to swim upstream, what will?

I don't have good data on the total addressable market for fish processing grid services, although Cordova certainly isn't the only customer. Still, this project speaks to a broader need: grid support in remote, isolated areas that reduces dependence on outside fuels, particularly ones that pollute the local air and the atmosphere. 

It's a good model for how to make resilience pencil out: Find markets where the status quo energy source with the unstable supply chain already costs more than a localized battery alternative.