FINAL 11/14/18 © COPYRIGHT 2018 BY THE ENERGY BAR ASSOCIATION ENERGY STORAGE: CAN WE GET IT RIGHT? David Schmitt and Glenn M. Sanford* Synopsis: Widespread adoption of energy storage has been described as the “Holy Grail” for the electricity sector because, among many of its benefits, it would allow the temporal transmission of electricity - something that has never happened before at a large scale. However, energy storage can only make such a transformative impact to the industry if proper policies are in place. This article will explore what energy storage is, the different energy storage technologies, the benefits of energy storage, the issues preventing the deployment of energy storage, and some potential paths forward. Chief among these issues are: (1) how to clas- sify energy storage; and (2) how to value energy storage. The effects of possible answers to these two questions on other important issues facing energy storage, including transmission planning/cost allocation, jurisdiction, interconnection, double counting/double recovery, and environmental concerns, are also discussed. I. Introduction .................................................................................... 448 II. What is Energy Storage? ................................................................ 451 III. Types of Energy Storage ................................................................ 453 IV. Technologies .................................................................................. 455 A. Mechanical .............................................................................. 457 B. Electrochemical Batteries ........................................................ 457 C. Electric .................................................................................... 458 V. What Benefits Can Energy Storage Provide? ................................ 458 A. Ancillary Services ................................................................... 459 B. Renewables ............................................................................. 464 C. Reliability ................................................................................ 467 D. Economics/Arbitrage/Capacity ............................................... 467 E. Efficiency ................................................................................ 468 F. Environmental ......................................................................... 470 G. Transmission/Distribution ....................................................... 471 1. Transmission ..................................................................... 472 a. Transmission Upgrade Deferral .................................. 472 b. Transmission Congestion Relief ................................. 473 2. Distribution ........................................................................ 473 H. Smart Grid and Building Tomorrow’s Grid With Energy Storage .................................................................................... 474 VI. What Issues Are Confronting Energy Storage? ............................. 475 A. The Issues of Newness ............................................................ 475 * David Schmitt, J.D., LL.M, is a Federal/Regional Attorney at the Iowa Utilities Board. Dr. Glenn M. Sanford, J.D., Ph.D., is a Professor of Philosophy and Associate Dean at Sam Houston State University. David Schmitt contributed to this article in his personal capacity. The views expressed are their own and do not repre- sent the views of the Iowa Utilities Board, any of its Board Members, its staff, or the State of Iowa. Any errors are solely of the authors. 447 448 ENERGY LAW JOURNAL [Vol. 39:447 B. How Do We Categorize Energy Storage? ............................... 476 1. Generation ......................................................................... 477 2. Transmission ..................................................................... 479 C. Who Has Jurisdiction Over Energy Storage? .......................... 482 D. Valuing Energy Storage .......................................................... 486 E. Interconnecting Energy Storage .............................................. 494 F. Energy Storage and Transmission Planning and Cost Allocation................................................................................ 497 G. Environmental Concerns with Storage .................................... 498 VII. Getting Energy Storage Right ........................................................ 499 VIII. Conclusion ..................................................................................... 501 I. INTRODUCTION Energy storage has been called the “Holy Grail” for a clean energy future.1 It has the “potential to play a large role in the electricity system, especially as the grid ages and new infrastructure is required to maintain reliability.”2 Due in part to falling costs of energy storage technology and technological advances, there have been many advances in grid-deployed energy storage resources.3 Many of these resources have moved into the commercialization phase of technology de- ployment.4 If these technologies are widely adopted they will alter the current landscape of the electric system. Utilities are approaching energy storage as a continuation of the research and development work that they are already doing with renewables.5 Furthermore, energy storage has “the potential to substantially ease the transition between our current centralized generation system and a mass 1. Tam Hunt, Is an Energy Storage Tsunami About to Hit California?, GREENTECH MEDIA, (May 5, 2014), https://www.greentechmedia.com/articles/read/is-an-energy-storage-tsunami-about-to-wash-over-cali- fornia#gs.z8dnrrs (last visited May 13, 2018). 2. Dhruv Bhatnagar et al., Market and Policy Barriers To Energy Storage Deployment: A Study for the Energy Storage Systems Program, Sandia Report SAND2013-7606, SANDIA NAT’L LAB. 13 (Sept. 2013), https://www.sandia.gov/ess-ssl/publications/SAND2013-7606.pdf [hereinafter Market and Policy Barriers]. 3. Andrew H. Meyer, Federal Regulatory Barriers to Grid-Deployed Energy Storage, 39 COLUM. J. ENVTL. L. 479, 480 (2014); see also NATIONAL HYDROPOWER ASS’N, COMMENTS OF THE NATIONAL HYDROPOWER ASSOCIATION ON THE NOVEMBER 9, 2016 TECHNICAL CONFERENCE (2016), https://www.hy- dro.org/wp-content/uploads/2017/08/NHA-Comments-on-November-9-2016-Technical-Conference.pdf [here- inafter Technical Conference]; see also Jeff McMahon, In 5 Years, Batteries Will Blanket The U.S., Duke Exec- utive Says, FORBES (Oct. 22, 2017), https://www.forbes.com/sites/jeffmcmahon/2017/10/22/in-5-years-batteries- will-blanket-the-u-s-duke-executive-says/#143840206f9f (last visited Oct. 22, 2017). The price for lithium bat- teries for energy storage has dropped at rapid pace. It has dropped from $800 kw/hr. in 2012 to $216 Kw/hr. in 2016. The projected price decrease will continue to decrease at 9% per year. This price decline has been driven in part due to the electric car industry. The price is only projected to drop further at ever increasing rate as energy storage becomes a more mature technology. Roger Lueken et al., Getting to 50 GW? The Role of FERC Order 841, RTOs, States, and Utilities in Unlocking Storage’s Potential, BRATTLE GRP. 3 (Feb. 28, 2018); see also Kerinia Cusick, Energy Storage Misconceptions, CENTER FOR RENEWABLES INTEGRATION 1-4 (2016) (noting that the quick decline in energy storage is due in part because of the rise of the electric car, whose growth will only continue to grow. Used electric car batteries could have a second life as grid batteries). 4. Meyer, supra note 3, at 480. 5. Herman K. Trabish, Where is the U.S. Energy Storage Market Going?, UTILITY DIVE, (Mar. 10, 2015), http://www.utilitydive.com/news/where-is-the-us-energy-storage-market-going/373479/. 2018] ENERGY STORAGE 449 distributed generation future.”6 In sum, interest in energy storage is increasing because: (1) energy “storage technologies are demonstrating increasing perfor- mance and reliability at lower costs”; (2) stakeholders are increasingly aware of the benefits that energy storage can provide; and (3) new installations are proving that energy storage can fulfill multiple needs on the grid.7 The electric sector is seeing numerous changes, including the growing adop- tion of electric transportation and the ever-increasing amount of renewable energy penetrating the grid.8 These changes in the electric power grid are causing it to “quickly evolve into a smarter, more sophisticated delivery system that incorpo- rates new renewable, distributed generation, end-use, and communications and control systems.”9 “These changes will provide many benefits, such as the ability to respond to public policy goals,” increased “diversity of generation options,” and increased consumer choice, but these changes will also present several distinct challenges that energy storage can help to alleviate.10 These challenges, which properly implemented storage will help address, include the following: (1) increas- ing consumer demand for reliable, affordable, renewable power options; (2) speed of investment and deployment of variable generation; (3) ancillary services needs resulting from the fact that distributed energy resources (such as storage) create bidirectional power flow that taxes distribution systems which are reliant upon voltage regulation and protection schemes that were designed for one-way power flow; (4) “[s]mart grid designs call for additional distribution automation and so- phistication, such as islanding