Powering the energy storage revolution

 By Mike Scott

Energy storage has moved from being a fringe technology to the verge of the mainstream within the space of about 18 months. A host of sources predict that it will move towards centre stage in 2016 as it follows the cost trajectory of the solar sector. The World Energy Council, for example, says that energy storage costs will fall by 70% over the next 15 years. But what are the practical implications of this ramp-up in storage capacity? What impact would it have on sectors such as solar, wind, electric vehicles and therefore on other sectors such as coal, oil, gas and nuclear? Mike Scott explores these questions and ask what technologies will be the winners in this emerging sector – will batteries sweep all before them or do other technologies such as compressed air and hydrogen have promising futures as well…?

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One of the main problems with electricity is that you have to use it as soon as its generated, otherwise it goes to waste. In the past, the solution has been to have enough power stations available to meet the highest-possible demand.

But this is very inefficient because it means a lot of spare capacity is sitting idle most of the time, and it is not an option for intermittent renewable sources of power like solar or wind because they only produce power when the sun shines or the wind blows. In fact, sometimes these sources produce too much power at times of low demand and so the energy they produce is lost.

But if you can store that energy, it changes the entire energy landscape. Energy storage is the missing link in the evolution of the low-carbon economy. It means more energy is available at peak times, so it cuts peak energy prices. It increases the viability of renewable energy projects by enabling them to sell more power and take advantage of those peak prices. It makes the entire network more robust and reliable and reduces the total amount of capacity that is needed.

Source: US Department of Energy

Pretty much all current energy storage around the world takes the form of pumped storage hydro-electric schemes, which can react to changes in demand in seconds and pump water back up into their reservoirs at times of low demand. But you need a particular set of geographical assets to build hydro schemes, and most of them have already been exploited. They’re also generally a long way from centers of demand, so not only do you need to build the hydro project, you have to build new power lines too.

As a result, most of the energy storage projects in the pipeline involve battery storage, mainly using the lithium-ion batteries that are used in devices from laptops to electric cars. These are still too expensive to match the cost of traditional power sources, but costs are falling fast. GTM Research calculates that the price of energy storage will fall by 40% by 2020, while investment bank Lazard says that costs will fall in the same way as renewable technologies have.

“Although in its formative stages, the energy storage industry appears to be at an inflection point, much like that experienced by the renewable energy industry around … eight years ago,” says George Bilicic, the head of Lazard’s energy and infrastructure group. “We expect to see rapid declines in the costs of energy storage.”

Important as batteries will be in the storage market, a whole host of diverse technologies are set to fill specific niches in this emerging sector. These include supercapacitors and flywheels that can react very quickly to fluctuations in electricity supplies or power outages via compressed air, and molten salt storage (used in wind and concentrated solar projects respectively) that provides energy for a few hours to power-to-gas projects that can provide large amounts of power for weeks, months or even entire seasons.

An artist rendition of Tesla's 'gigafactory' under construction in Nevada which will make batteries for electric cars and stationary energy storage

Energy storage capacity rose last year to 3.69GW from 3.5GW in 2014, according to the US Department of Energy, but the market looks set to accelerate in the next few years. The UK alone is set to add 1GW of capacity by 2020, Marianne Boust, an analyst at IHS Technology, told an industry event in London recently. Also noteworthy is Tesla’s Gigafactory in Nevada, which is due to start producing batteries in 2017.

“By 2020, the Gigafactory will reach full capacity [of 35GWh per year] and produce more lithium ion batteries annually than were produced worldwide in 2013,” the company says. “By the end of the first year of volume production of our mass market vehicle, we expect the Gigafactory will have driven down the per kWh cost of our battery pack by more than 30%.”

The implications of this growth in storage capacity are profound – for households, drivers, utilities and providers of primary energy sources ranging from coal and petroleum products to wind and solar power.

By buying solar panels and a battery pack, consumers will increasingly be able to disengage from the grid and produce their own power while electric vehicle (EVs) drivers could become suppliers as well as consumers of energy. If grid operators buy peak power from EVs, they will make such vehicles cheaper and increase sales, permanently depressing demand for gasoline and diesel.

But the biggest shock is likely to be for utilities, who are seeing their business model upended almost in real time as more and more customers generate their own electricity. How they cope with the rise of energy storage remains unclear, but one thing is obvious – they can’t ignore it and they are going to need to embrace new business models if they are to survive.

about the author
Mike Scott
Journalist. Environment, Sustainability, Climate Change, Investing, Energy, Supply Chain, Transport, Circular Economy, Stranded Assets, ESG, Smart Cities, Wealth Management, Family Offices, Asset Management, EU.