Batteries 101 Series: Use Cases and Value Streams for Energy Storage

March 25, 2016 by Joyce McLaren

This series explains the basics of batteries for energy storage as well as providing an overview of relevant topics to help readers understand the applications of batteries.  This is the first part of a two-part series. Read part two of the series.

Batteries are used every day to store energy, but there are a lot of misconceptions about the types of batteries needed for different applications. This post covers the various ways batteries are used to contribute to electric-system stability and reduce customer costs.

Energy storage can be located at the transmission-system level, the distribution-system level, or behind the customer meter (i.e., distributed storage). Each energy storage system may provide services to the Independent System Operator/Regional Transmission Organization, utility, community, commercial or residential customer, or a combination of these.

Some battery-storage systems, especially utility-scale, front-of-the-meter systems, are designed to provide a primary service, such as utility load-peak shaving. Behind-the-meter systems, particularly at the commercial scale, may be used for multiple purposes with owners drawing on several value streams to reduce the payback period of their investment. Each value stream can be categorized as either an avoided cost (or avoided loss) or as direct income (through monetary payment). The tables below list the multiple-use cases and the potential value to the system owner, according to the two categories (avoided cost or direct income).

Table 1. Value Streams for Storage: Opportunities To Avoid Costs and Losses
Service Description Potential Value Grid Scale Commercial Scale Residential Scale
Demand-charge reduction Uses stored energy to level peaks in load to reduce demand charges on utility bills  High   Yes  Yes (Limited locations)
Time-of-use bill reduction Uses storage to shift the time self-generated electricity is used onside to reduce grid purchases when electricity costs are high High   Yes Yes
Energy arbitrage Stores energy when grid prices are low then sells it when grid prices are high (high value in real-time markets, low value in hourly markets) High Yes Yes  
Resiliency and backup power Uses battery to sustain critical loads during grid outages High Yes Yes Yes
Avoided renewable energy curtailment and increased self-consumption System owners avoid curtailing their own renewable generation when system load is low and renewable generation high Medium Yes Yes Yes
Supply capacity and resource adequacy Uses storage to meet peak- load growth and defer need for new generating capacity Site Specific Yes    
Transmission and distribution upgrade deferral Defers the need for transmission or distribution system upgrades (e.g. via  utility system-peak shaving) Site Specific  Yes    
Transmission congestion relief Utilities can avoid extra transmission charges from Independent System Operators during times of congestion by deploying strategically located storage Site Specific  Yes    


Table 2. Value Streams for Storage: Opportunities for Income
Service Description Potential Value Grid Scale Commercial Scale Residential Scale
Demand response Storage used to support participation in utility programs that pay customers to lower demand during system peaks High   Yes Yes
Frequency regulation Stabilizes frequency on moment-to-moment basis High Yes Yes  
Reserve markets Supply spinning, non-spinning reserves Medium Yes Yes  
Black start Helps restore system to operations after a blackout Low Yes    
Voltage support Inserts or absorbs reactive power to maintain voltage within required ranges on distribution or transmission system Low Yes    


During the past few years, battery deployment has grown rapidly in the U.S—particularly in California and Hawaii—and across the PJM Regional Transmission Organization. These are locations where state regulation and policy have created markets that allow system owners to tap into the value streams listed in the tables above, making projects economical. Regulatory changes in other areas could open up new markets for energy storage in the future.

A multi colored pie graph showing the various battery services.

Credit: Rocky Mountain Institute, 2015

Other reading:

The Economics of Battery Energy Storage, Rocky Mountain Institute

PJM Frequency Regulation, RES Case Study

Distributed Batteries Offer Value Far Beyond Demand-Charge Reduction, GTM:

Applications of Energy Storage, Energy Storage Association:

Residential Energy Storage: The Industry’s Next Best Thing, Utility Dive:

How Aggregated Storage can Help Utilities Create a 'New Kind of Demand Response,', Utility Dive: