Utility-scale energy storage reduces electricity costs for consumers through several key mechanisms:
- Energy arbitrage between low and high price periods: Utility-scale energy storage systems store electricity when prices are low, typically during periods of low demand or high renewable energy generation, and discharge it when electricity demand and prices are high. This arbitrage flattens peak demand and reduces reliance on expensive peaking power plants, which in turn helps to lower overall electricity costs for consumers.
- Reducing grid stress and preventing outages: Energy storage helps to prevent or mitigate costly blackouts and brownouts by providing backup power and stabilizing the grid during peak demands or unexpected supply disruptions, which can reduce the financial impacts on consumers associated with power interruptions.
- Lowering system costs through avoided investments: By shifting and smoothing demand peaks, energy storage defers or eliminates the need for costly infrastructure upgrades, such as new power plants or transmission lines. This avoided capital expenditure translates to lower long-term electricity rates for consumers.
- Enabling greater integration of renewables: Storage can absorb excess renewable generation that would otherwise be curtailed, increasing the utilization of low-cost renewable power and thereby reducing dependence on fossil fuel generation, which tends to be more expensive and volatile.
- Immediate bill savings through on-site or distributed storage: For building operators and consumers with on-site storage, energy storage reduces electricity bills by charging during low-cost hours and discharging during peak-cost hours. This shifting allows consumers to avoid higher retail electricity rates during peak times while maintaining uninterrupted power for essential services.
In essence, utility-scale energy storage smooths out the supply-demand mismatches and price volatility in the electricity market, reduces the need for costly peaking resources and infrastructure, and enhances grid reliability, all of which contribute to lower electricity costs for consumers.
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