by: Mina Mesbahi
Energy storage* will play a crucial role in enabling the next phase of the energy transition and facilitating deployment of higher shares of variable renewable electricity (VRE). According to the European Storage Association (EASE), the European battery storage market is estimated to reach 3.5 GW of capacity by the end of 2019, implying a growth of more than two-folds within a span of two years. Among the frontrunners, Germany and the UK comprise the two key energy storage markets in Europe. Germany is particularly leading in the residential energy storage primarily supported by the country’s solar-rooftop expansion in combination with increasing electricity prices and expiring FiT schemes.The budding energy storage market is aided and hindered by a number of factors. This article aims to recap the cost trends, value streams and key constraints associated with energy storage.
The shrinking costs of lithium-ion battery storage systems will alter the business case for batteries in the electricity and vehicle segment. Bloomberg New Energy Finance (BNEF) reported an approximate 80% decrease in lithium-ion battery prices per MWh since 2010 and expects a 67% decline in costs by the year 2030 due to the abundant supply of lithium-ion batteries. An interesting aspect is also the fast decline rate of the balancing of system (BOS costs): inverters, wiring, containers, climate control, and other hardware. In Germany, small-scale household lithium-ion battery costs have tumbled by over 60% since 2014. Despite this downward trend, analysts expect a possible reverse effect due to the output from the Kamoto project in the Democratic Republic of Congo, a major producer of cobalt, coming to a halt in November 2018.
“The arrival of cheap battery storage will mean that it becomes increasingly possible to finesse the delivery of electricity from wind and solar, so that these technologies can help meet demand even when the wind isn’t blowing and the sun isn’t shining. The result will be renewables eating up more and more of the existing market for coal, gas and nuclear.”
The Primary Value Streams Of Battery Storage
It is noteworthy to mention that the following value streams tend to occur in parallel, a phrase that is also known as stacking of services in the battery storage space.Energy Arbitrage or simply, buying low and selling high. According to Peter Loo, the COO at The Faraday Grid, there has recently been more movement towards hybrid batteries. These storage systems entail a primary and a secondary battery, allowing to extend the battery duration and optimizing the window available for monetization of the asset. Furthermore, a battery can be optimized to export power back to the grid. The dispatch decision could be preset within the control layers of the battery and follow a ladder of logic, which can be adjusted by seasons, response to changes in market structure or price signals. Another value stream is the support of ancillary services, enhancing frequency responses and capacity reserves. VRE smoothing in combination with solar and wind represent another link in the chain of battery storage value. Local capacity, particularly valuable when required by design for resilience reasons. Network upgrades could potentially represent the most significant drivers in the underlying economics of storage. This could help with materially de-risking investment decisions, especially in the case of utility-scale deployments. Lower demand charges during peak periods, specifically for the commercial & industrial (C&I) segment. Boosting self-consumption in lieu of importing power from the grid is another component contributing to the rising value streams of energy storage. Addressing backup and reliability related issues, for instance by adding uninterrupted power source (UPS) functionality to storage in order to avert the negative effects of outages or poor performance quality (PQ).
Challenges & Consideration
Visual Capitalists, a Canadian news firm, suggested that lithium-ion will shape 70% of the rechargeable battery market by 2025. Now, what are some of the main challenges on the pathway of coupling energy with storage? There are some concerns regarding the raw material supply, particularly with respect to the resiliency of the supply chain’s social economics and rightly so in the light of recent news. This mainly relates to cobalt graphite lithium; 60% of which is mined in the Democratic Republic of Congo (DRC). The political situation in DRC is highly unstable, affecting the sensitive pricing of graphite lithium. Such instability has resulted in the need for a more abundant range of sources as well as raw materials for the manufacturing process to be able to meet future demands. Another constraint is the total number of charge and discharge cycles over a battery’s life. Frequent charging and discharging leads to the battery degrading at a faster pace. Nevertheless, batteries inevitably do degrade over time. This issue can be addressed by oversizing, to begin with, or more ambitiously, a strategy towards the end of the life cycle.
Current Projects
Based on the latest data by IHS Markit, more than 1.2 GWh of front-of-the-meter battery energy storage is operational across Europe. Nevertheless, energy storage remains in its infancy for the majority of European markets except for Germany and the UK. In particular, the UK experienced a spike in storage systems through 2017 and early 2018. This was primarily due to the fact that The National Grid's Enhanced Frequency Response (EFR) tender outcome (which took place in 2016), was strongly dominated by battery storage. More than 450 MW of energy storage was commissioned in 2017 and the first half of 2018. Table 1 and 2 provide an overview of major projects developed in the UK and Germany.
SELECTED OPERATIONAL ENERGY STORAGE PROJECTS IN GERMANY
Access the full list for the complete overview
| Project | Rated Power (MW) | Capacity (MWh) | Primary Function | Developer / Operator |
|---|---|---|---|---|
| Herne Power Station | 15 MW | F.O. | F.O. | F.O. |
| Enercity Storage | 15 MW | F.O. | F.O. | F.O. |
| Herdecke Power Station | 7.6 MW | F.O. | F.O. | F.O. |
| Eins Energie Chemnitz | 10 MW | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
Source: IHS Markit © 2018 IHS Markit
SELECTED OPERATIONAL ENERGY STORAGE PROJECTS IN THE UNITED KINGDOM
Access the full list for the complete overview
| Project | Rated Power (MW) | Capacity (MWh) | Primary Function | Developer / Operator |
|---|---|---|---|---|
| AES Kilroot | 10 MW | F.O. | F.O. | F.O. |
| Pelham | 50 MW | F.O. | F.O. | F.O. |
| Glassenbury | 40 MW | F.O. | F.O. | F.O. |
| Blackburn Meadows | 10 MW | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
| F.O. | F.O. | F.O. | F.O. | F.O. |
Source: IHS Markit © 2018 IHS Markit
To learn more about the latest energy storage market developments, most innovative business models and to be at the heart of energy transition, join the brand new Future Grid Lab on The Economics of Energy Storage taking place on 12 December in the bustling forward-thinking city of Rotterdam.
*The terms energy storage and battery storage are used interchangeably in this article.
