Battery and storage infrastructure is the next growth area for energy. Here’s why.

The Next Growth Area in Energy Has Nothing to Do With Oil, Wind, or Solar. It’s Batteries.

The Next Growth Area in Energy Has Nothing to Do With Oil, Wind, or Solar. It’s Batteries.

A Closer Look at the New Energy Economy
Jan. 9 2015 12:07 PM

Long May You Run

The next growth area in energy has nothing to do with oil, wind, or solar. It’s batteries.

The IB 30 heat exchanger coils in the Ice Energy, Ice Bear.
Imagine a new, advanced cooling technology that uses ... ice?

Photo illustration by Slate. Photos by Leigh Prather/Thinkstock and Joe Amon/The Denver Post via Getty Images

The notion of a giant utility regarding the melting and refreezing ice cubes as a realistic way of storing power would have seemed fanciful a few years ago—or even 12 months ago.

But next year, pursuant to a deal announced with utility Southern California Edison in November, Ice Energy will install 2,000 of its $10,000 Ice Bear units throughout Orange County, California. Erected adjacent to air conditioners, they use cheap electricity at night to turn tap water into a 450-pound ice block. During the day, refrigerant liquid is funneled from air conditioners through the Ice Bear, which cools it off and sends it back to the AC unit. The process saves an amount of electricity equivalent to taking a 5-ton commercial air conditioner offline for six hours. “We’re able to provide cooling without using any electricity other than using the fan,” says chief executive officer Mike Hopkins. (Watch a video on how the machines work below.) In all, the Ice Bears will provide SCE with the equivalent of 26 megawatts of storage capacity—enough to power several thousand homes for a few hours.  

This is monumental for Ice Energy, a 12-year-old company based in Santa Barbara. “Until two years ago, the market for energy storage was really a R&D market,” Hopkins says. Ice Energy had conducted some 36 pilot programs—money-losing, time-consuming one-offs. This order, for three times the number of units it has deployed in its entire history, will transform Ice Energy into a viable, profitable company.

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The deal, part of a larger transaction in which SCE purchased a large amount of storage capacity for the first time, highlights an important new trend in the power business. Utility systems face constant stress. Demand (and therefore price) can swing wildly over the course of a 24-hour period—starting off low in the cool hours of the morning, peaking in midday when the sun is hottest, and then tapering off again at night. For much of the past century, utilities dealt with demand surges by keeping “peaking” plants idling on standby—firing up noisy coal- and gas-burning turbines when demand surges and powering them down when it abates. But that’s an expensive and fossil fuel–intensive proposition.

It makes far more sense to treat electricity the way people in the desert treat water: harvest it in times of plenty, store it in convenient cisterns, and then release it in times of need. That hasn’t been an option, largely because batteries and other storage systems were very expensive. But the market has shifted rapidly in the past couple of years—in part because the private sector is making huge investments and strides in new technologies and in part because California is using mandates to conjure an energy-storage industry into being.

In the fall of 2013, the California Public Utilities Commission issued a mandate that will force the three giant investor-owned utilities in the state to add 1.3 gigawatts of energy storage capacity by 2020—a huge amount. Utilities, whose profits are regulated already, often look askance at such efforts. “We always balk at any sort of minimum requirement,” says Colin Cushnie, vice president for energy procurement and management at Southern California Edison, which will be compelled to add some 580 megawatts of storage. “We like to let the market dictate.”

Aiming to get ahead of the mandate, SCE dipped its toes in the water last year, sending out a request for 50 megawatts of storage capacity in February 2014 as part of a larger offer to acquire new generating capacity. Some 1,800 bids from storage providers materialized, with many of them at surprisingly low costs. For utilities, a megawatt of storage can be equivalent to a megawatt of production. So SCE ended up acquiring 264 megawatts of storage capacity—more than five times the amount it had initially plotted.

In addition to Ice Energy, SCE contracted with three large companies that provide different varieties of battery-based storage: 100 megawatts of free-standing battery capacity from AES , 50 megawatts of battery systems that fit inside buildings from Advanced Microgrid Solutions, and another 85 megawatts of storage from Stem, which relies on advanced predictive analysis to dial building and battery usage up and down.

What’s so great about storage? After all, batteries and the Ice Bear don’t create new power. But they’re less noisy and intrusive than power plants—and provoke much less NIMBYism. The Ice Bears, for example, reside unobtrusively on roofs and in mechanical rooms near existing air-conditioning equipment. They start up more rapidly than power plants. And they make it easier for systems to manage the rising amount of intermittent energy coursing through the system—wind power that ebbs in calm periods and solar power that goes dark at night. “It allows you to store energy at times when it is either less expensive to generate, or is cleaner energy, and then discharge it when you have a need for it,” SCE’s Cushnie says.

This is good news for companies like Ice Energy, but also for other entities in the business of providing power. The Imperial Irrigation District, which provides electricity and water to California’s Imperial Valley, was ordered to increase its reliability as part of a settlement after a blackout in 2011. A few years ago, says Bruce Townsend, superintendent alternative energy at the Imperial Irrigation District, the only way to do so “would have been through fossil-fuel generation.” But instead of building a new gas-powered plant, IID is constructing a 20 megawatt battery.