To enhance the competitiveness of thermal energy storage (TES) through rate design reforms, several key strategies emerge from recent analyses:
1. Aligning energy charges with wholesale/marginal pricing
Energy charges should reflect real-time grid conditions, allowing TES to capitalize on low-cost periods for charging and high-value periods for discharging. This mirrors wholesale market dynamics and improves TES’s ability to arbitrage price differences.
2. Reducing capacity charges
Current demand/capacity charges based on peak consumption penalize flexible loads like TES. Reforms could exempt or reduce these charges for TES systems, as their operation inherently reduces peak demand stress on infrastructure.
3. Incorporating value-stacking incentives
Tariffs should recognize TES’s grid services (reliability, reduced transmission/distribution costs) through credits or reduced rate components for customers using TES to:
- Avoid infrastructure costs by shaving peak demand
- Provide grid-balancing services through predictable load shapes
- Integrate renewable energy by absorbing excess generation
4. Enabling wholesale market participation
Reforms should allow TES to compete in capacity and ancillary service markets on equal footing with electrochemical storage, particularly through:
- Demand response program eligibility
- Clarity in resource adequacy valuations
- Transmission charge reforms that avoid double-charging for storage
5. Implementing time-varying rate components
Modern rate structures should:
- Decouple generation investment costs from energy charges (via separate capacity components)
- Apply time-sensitive pricing to transmission/distribution fees
- Prioritize net grid injections during system peaks through dynamic export credits
These reforms would allow TES to optimize both energy costs and infrastructure-related charges, transforming rate structures from barriers into enablers of thermal storage deployment.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-can-rate-design-reforms-make-thermal-energy-storage-more-competitive/
