Electricity Storage Seen Taming Volatile Prices

Electricity storage is one of the holy grails of the industry. Those who wish to continue regulating and controlling this dynamic, complex industry use the inability to store electricity cost-effectively as an argument for why electric networks have to be regulated. Of course, this argument is a canard — many things we consume are not storable (airline seats, hotel rooms, haircuts, for example), yet we do not regulate the prices or investment in those industries. But the sooner technological change moves us toward effective storage, the sooner we remove one arrow from the quiver of the control freak arsenal.

Thus I am heartened by this report on innovation in new storage technologies. The article starts off poorly, saying

Sharp price swings and congestion on the power grid are hallmarks of the deregulated power market partly because electricity, unlike other energy commodities, cannot be stored.

See how the canard rears its ugly head? This statement is false. Sharp price swings and congestion are hallmarks of a partially deregulated wholesale power market that does not allow the participation of the demand side in bidding. Furthermore, much of the volatility in electricity markets could be diffused through the use of financial instruments to diversify risk (and I don’t want to get into the regulatory and industry obstacles to increased use of financial instruments). Yet again, someone tries to hang the volatility hat on deregulation, but the hook ain’t there.

The article then goes on to discuss compressed air storage and its potential. It’s still not cheap, particularly when you take into account the energy used to compress the air. But it’s a start.


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