US energy storage needs national standards and regulations to thrive amid clean energy transition: GAO

Industry insiders and other experts largely praised the agency's recommendations but noted that its recent report omitted some key hurdles to adopting energy storage.

In a wide-ranging report, released March 30, the Government Accountability Office outlined some of the challenges facing energy storage and detailed the planning, regulation and market changes necessary to promote its widespread use.

"No matter what we do, we will need more and more storage," said Steven Low, the Frank J. Gilloon professor of computing and mathematical sciences and electrical engineering at Caltech. "The question is cost."

The GAO developed several policy options and implementation approaches to help address energy storage's challenges, including establishing road maps, creating a common set of rules and standards for integrating energy storage into power grids, incentives such as loan guarantees and tax credits, and funding for research and development.

Experts and industry insiders are generally supportive of the agency's recommendations.

"Some of the challenges they list are absolutely valid and their policy recommendations are pretty solid," said Leslie Ponder, director of advanced energy storage for Black & Veatch, a Kansas-based engineering, construction and consulting firm.

"The study recognizes outstanding issues related to regulatory hurdles that remain when building out storage and connecting to the grid," Elise Caplan, vice president of regulatory affairs for the American Council on Renewable Energy, said in a statement.

However, even the GAO's sweeping review of the nation's energy storage needs misses some key issues, such as permitting, industry insiders and other experts said.

The primary barrier to widespread adoption identified in the report is cost, noted Lei Wu, a professor with the Electrical and Computer Engineering Department at the Stevens Institute of Technology who studies power system operation and energy markets.

But that is improving.

The price of installing retail, non-residential energy storage in New York averaged $567 per kWh in 2022, according to an analysis by the state's Department of Public Service and PA Consulting. Prices will naturally fall as the market for utility-scale energy storage matures, experts noted. Storage costs will decline by between $150 and $200 per kWh by the end of the decade, according to an estimate from BloombergNEF.

"Storage is like any other type of tech we've used before," Wu said. "When it's exponentially growing, the investment costs will keep decreasing, and that will promote usage."

Also among the key hurdles identified by the GAO: The U.S. has no standard set of rules governing energy storage. Regulators have taken steps to address this problem. The Federal Energy Regulatory Commission, which regulates the regional transmission organizations and independent system operators that oversee wholesale electricity markets, issued order 841 in 2018 mandating the removal of barriers to energy storage.

But "we don't have one standard regulatory body that oversees the entire grid in the United States," said Brian Bothwell, the GAO's director of engineering and technology assessment.

A patchwork of sometimes conflicting rules on energy storage can create a labyrinth for utility companies to navigate, the GAO report found. California, for example, mandated energy storage with renewable energy projects, but many other states have not, and states vary in their energy storage targets.

Nationwide standards and a clear plan for integrating energy storage into a power grid would give utility companies and their financial backers the confidence to invest in the emerging technology, the GAO said.

However, creating a standard set of energy storage rules across the nation is difficult in a country with three energy grids — in the East, West and Texas — with different regulations. The Texas grid operates under much less stringent rules than the other two, said Severin Borenstein, faculty director of the energy institute at the Haas School of Business at the University of California Berkeley and a board member for the California Independent System Operator.

A grid relying on renewable energy must address the supply disruptions inherent in renewable energy like wind and solar, the GAO report said.

The problem with matching supply and demand lies in how power is traditionally delivered to customers — from a nuclear, coal or natural gas-fired power plant that is always generating electricity — Low said.

"You need to balance the supply and demand in all points in the network, and the way we’ve been doing that is controlling the generation," Low said. "As we transition [to renewable energy] we don't have that control."

"Renewable energy sources are often not available when we have peak demand," said Yury Dvorkin, an associate research professor in the departments of Civil and System Engineering and Electrical Computer and Engineering at Johns Hopkins University. Consumers turn on their appliances when they arrive home from work and "that's about the time solar fades out."

Energy storage is one of the ways to address this problem, Low and Dvorkin said. Batteries can collect excess energy during daylight, or when the wind is blowing.

Regulators and utilities need to work out several details regarding energy supply and demand before addressing intermittency, Borenstein said.

"How much control does the battery owner have to give to the [Independent System Operator] during those peak periods?" Borenstein said. "And do you have to give control to the ISO or do you have a penalty system that says you have to maintain a certain level of charge? Those are the sorts of policies that are getting considered."

The intermittency problem has other solutions besides energy storage, Borenstein said. For example, transmission lines could be built across the country so solar panels in the Sun Belt could power the Midwest on cloudy days. But building those lines is enormously expensive and entails connecting the nation's power grids.

To further complicate matters, energy storage technology is advancing too fast for regulations to keep up, the GAO report said. Short-sighted regulations could restrict emerging technologies, according to the GAO.

For example, some utilities are considering flow batteries for energy storage, Bothwell said.

"Flow batteries operate differently than lithium-ion batteries," Bothwell said. They last longer than lithium-ion batteries and can provide power for a longer period of time (10 hours versus four.).

But the dangers are different. Lithium-ion batteries can catch fire and, in rare cases, explode, he said. Flow batteries have corrosive and toxic components, and must therefore be regulated in different ways.

Experts also said that widespread deployment of energy storage in the U.S. faces barriers not outlined in the agency's report.

"I think one of the major challenges for certain types of advanced energy storage and clean energy in general is permitting and that's not mentioned," Ponder said.

For example, the permitting process for a pumped energy storage facility can take years, she said. The lengthy process challenges state and national promises to add more renewable energy to the nation's power grids a long permitting process for storage challenges efforts to add more renewables, she added.

The permitting process "is something that could be directly influenced by policy," Ponder said.

A slow approval process for storage batteries to connect to the power grid is another barrier not outlined in the GAO report, Caplan said.

"One of the major barriers to further deployment is clogged interconnection queues that prevent standalone storage or hybrid projects from connecting to the grid," she said.

Nationwide, around 670 GW in storage projects stuck in interconnection queues at the end of 2022, Caplan said, citing an estimate from the Lawrence Berkeley National Laboratory.

In the meantime, solutions to some problems outlined in the report are already in the works.

The Inflation Reduction Act includes grants, tax credits and loan guarantees that may encourage more companies to develop energy storage technology, according to the GAO.

The law that cleared Congress last year earmarked tens of billions of dollars for grants to renewable energy projects, including energy storage. The law also included a standalone 30% tax credit for storage batteries with more than 3 kWh of storage.