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Could 2014 be the year of the battery?

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Energy storage was a hot topic in 2013, and there were some exciting developments. As well as the establishment of targets for electricity storage in Germany and California, some innovative funding options were introduced into the market. Serious studies that explored the economics of battery storage showed that batteries have not quite arrived except in particular circumstances such as remote renewable power generation.

However, the growing role of renewable energy especially solar PV should see batteries providing the most cost effective options for grid support and for the supply of peak capacity.

Australia, more than most, should benefit from these developments as we have a relatively high penetration of solar PV, and significant demand in remote and fringe area of the grid.

In a paper presented to the 2nd Summer Study into Energy Efficiency and Decentralised Energy in early in 2013, Energetics explored a number of questions related to energy storage. These included whether the time is right to consider energy storage, whether it is cost effective and the implications for other network users.

These themes were explored many more times in 2013, with an emerging picture that energy (primarily electricity) storage is close but not quite there. But the impact of solar PV and other forms of distributed generation on business models is already being felt by network operators and generators. Batteries will only increase that impact.

The economic status quo is well presented in the following graph, which was included in a talk given by Markus Hoehner CEO of the International Battery and Energy Storage Alliance at the San Francisco InterSolar conference in July. The graph shows the current situation in Germany, where the installation of an appropriately sized battery to support solar PV is cost effective in the residential market i.e. the solar PV system with battery has a positive net present value (NPV). However, the NPV is lower than the NPV of a solar PV only system and so the storage system is not yet adding value. Interestingly, that situation would be different if the cost of the electricity or the differential between peak and off peak rates rises or if the cost of the batteries fell from the current €2250/kWh to around €900/kWh.

Action is being taken to try to drive down the cost. As with the situation with solar PV, Germany is leading the way.

NPV_PV_Chart

Setting targets

Since 1 May 2013 the German government has provided an energy storage subsidy, which provides a grant to lower the upfront cost of installing an energy storage solution in a PV system up to 30kW in size. The subsidy equates to euro €600/kW, or a maximum of 30% of the eligible costs, for a battery-based energy storage system installed in a new PV system. Just as the German support for solar PV helps drive down the cost of solar PV, so should the support for storage drive down the cost of batteries.

Germany is not the only jurisdiction promoting energy storage. On 17 October this year, the California Public Utilities Commission (CPUC) established an energy storage target of 1,325 megawatts by 2020, with installations required no later than the end of 2024. The objectives of the proposal were the optimisation of the grid, the integration of renewable energy and the reduction of greenhouse gas emissions to 80 percent below 1990 levels by 2050, as per California’s goals. The recommendation built on work by the Electric Power Research Institute (EPRI) and by DNV KEMA Energy & Sustainability (DNV KEMA). For instance, the work by the EPRI1 showed that the majority of storage scenarios considered had a benefit to cost ratio above 1.0. These scenarios covered three different general use cases, including transmission-connected bulk energy storage, short-duration energy storage to provide ancillary services, and distribution-connected energy storage located at a utility substation.

Lux Research anticipates that the residential market will lead the way in uptake, riding on the shoulders of rooftop solar PV’s phenomenal growth globally.2 But they also see California’s proposal having an immediate and lasting impact on the grid storage market3, which Lux Research estimated will be worth $10.4 billion in 2017 rising from just $200 million last year. Citi also explored the coming boom in energy storage4. Germany provides a good example of the trend. The high solar penetration rates are inevitably steering Germany towards power storage to stabilise the grid and to mitigate the need for capacity payments to keep conventional power plants available, but off-line. Citi saw batteries as being more economically efficient for addressing peak demand than alternatives like capacity payments to generators.

The challenge is to realise this potential growth, and a couple of developments during the year may point the way.

Innovative funding

Stem Inc, based in California offers an energy storage solution that reduces costs by shifting load from peak to off-peak periods. The key is an algorithm which integrates data from various sources and applies machine learning to provide highly precise energy usage forecasts and so optimise the use of the stored electricity. Their market is the industrial and commercial sector. In October this year, Stem is offering a leasing option for the storage system with zero upfront payment.5 The company has secured funding to allow up to 15 MW of energy storage to be deployed. Just as solar leasing and related models have broadened the solar market, presumably bringing in a large number of customers who wouldn’t have gone solar using another route, this financing model is now being applied to the energy storage market.

Perhaps a more interesting development is in New Zealand, where Vector6 is offering a trial run of leases to its customers to install rooftop solar and battery storage for around the same cost as relying entirely on the grid. The solution integrates highly efficient battery storage and smart controllers with traditional solar panels. It enables homeowners to maximise their economic returns by maximising the use of electricity from the solar PV modules. Vector sees solar PV and storage as being good for the network, and for its business7. Rough calculations suggest that the levelised cost of the solar PV/storage package is around NZ$0.21/kWh. The current average tariff is around NZ$ 0.25/kWh.

All drivers point to the growing importance of energy storage. The broad global trend of winding back feed-in tariffs for small-scale solar power make it less desirable to export power generated by solar panels and consumers will look to batteries to allow them to get maximum value from the solar panels. The cost of batteries should continue to fall, encouraged by the setting of targets in Germany, California and elsewhere. Finally, the expanding penetration of solar PV into the networks will drive network operators to look for storage based solutions to better manage their networks.

Many of these factors are in play in Australia.

Storage in Australia?

In the first week of December 2013 solar power installations in Australia reached 3GW in total. This follows the passing of the one-million solar power systems milestone in April. One in seven Australian dwellings now has a solar PV system. In South Australia, the figure is one in four. The state with the largest volume of solar PV is Queensland with almost 1 GW of installed capacity. According to SunWiz8, businesses are purchasing solar power with approximately 5% of recently installed systems exceeding 8kW in size.

Analysis also performed by SunWiz showed that at midday on 29 September, solar power contributed around 9.3% to electricity demand in the National Electricity Market, and 28% of South Australia’s demand. The penetration of solar PV in South Australia is similar to the levels seen in Germany where PV power can cover more than 30% of demand on sunny days.9 These numbers are important in the light of the research done by Citi4 which highlighted the need for network operators to look for storage based solutions to better manage their networks when the penetration of solar is relatively high.

Like other countries, batteries are not yet cost effective for businesses. Typical levelised costs for battery storage ranges starts from around $0.20/kWh after accounting for the efficiency of storage and constraints on the depth of discharge. For instance the capital cost of the recently developed GE Durathon Battery is around $1500/kWh for a large system which equates to about $0.30/kWh of the anticipated life of the battery. This figure is higher than typical electricity prices and also higher than the differential between peak and off-peak power costs. So a battery will not provide a cost effective option for load shifting or for displacing purchased electricity.

However, the prices for batteries coupled with renewable energy generators such as wind are comparable to the cost of power at remote off-grid sites such as mines that use diesel generators. Australia also has a relatively large number of electricity users on the fringe of the networks, especially in remote areas of Queensland, New South Wales, Northern Territory and Western Australia. A study commissioned by the Clean Energy Council10 argued that fringe and remote electricity systems would seem to be ideal first candidates for energy storage deployment. The modelling discussed in the report showed that a material opportunity exists for storage to support fringe and remote electricity systems. The report also states that the total commercial market for storage in Australia could be approximately 3,000 MW by 2030.

2014 will be an interesting year should current trends accelerate.

This article was originally published by Energetics. Reproduced with permission

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  • Rob

    Renewable energy generation and energy storage do go together like the proverbial “horse and carriage”. Its exciting to think of what will be possible as the technology advances. Imagine your home being disconnected from the grid but still being able to generate and store enough electricity to completely power your own home every day including recharging your electric car/s whenever necessary. Thats bloody exciting!

  • stuart

    One has to question the viability of the, generally small,
    companies that are marketing battery storage solutions at EU 2250/kWh. Storage
    solutions are going to available at much lower cost in the relatively near
    future. With the entrance of Tesla (SolarCity’s DemandLogic product) into this
    market , leveraging their automotive battery pack manufacturing economies of
    scale, these companies are going to be faced with extremely stiff competition.

    Today Tesla charge the customers of their Model S $10,000 (USD $62,400 VS $72,400) to upgrade from a 60KWhr Li-ion battery pack to a 85KWhr pack. That equates to $400/ Kwhr. Furthermore Tesla have advised; “A Battery Replacement Option will be available for purchase soon. The option allows you to pre-purchase a new battery to be installed after eight years for a fixed price: $8,000 for 40 kWh batteries, $10,000 for 60 kWh batteries, and $12,000 for 85 kWh
    batteries.”

    http://www.teslamotors.com/models/design

    In essence what that statement says is that Tesla believe
    automotive grade Li-ion batteries will be available for sale at below $141/ KWhr
    in 2020. Bear in mind these are batteries with a 8 years unlimited mileage
    warranty in the demanding automotive application. Even today one can source large LiFePO4 batteries out of China at this sort of price. Admittedly these Chinese batteries are of unproven quality, durability and reliability.

    Batteries will always form the bulk of the cost of the storage solution. Companies like NEDAP can offer POWERROUTERS that combine battery management tools and inverters for less than twice the cost of a standard inverter.

    Crunch the numbers and it would appear that a behind the meter storage solution which stores 50% of the PVs output would add less than 5c/ Kwhr to the system LCOE.

    • David Osmond

      Nice post Stuart. What sort of usable battery life (in terms of cycles) do you think these batteries will have have?

      • stuart

        Hi David,

        BYD another big player in the energy storage market claim at their LiFePO4 natteries have a 6000cycle (16.4 year life) if charged and discharged at +1C/-1C rate and stored at around 25DegC. I understand this is for full 100% DoD cycling. At the end of this period they have around 80% of the original capacity. BYD also claimed these batteries would be available for $250/ KWh by 2016.

        See http://www.13004solar.com.au/pdf/DESSBrochure.pdf

        Impressive figures. Interestingly their warranty is only for 5 years at one cycle per day, but of course they have to account for diffrent charging/ discharging regimes and storage conditions.
        TESLA themselves offer an 8 year unlimited miles warranty for the larger 85KWh pack. 8 years amounts to 2920 cycles if the car was charged and discharged daily. I beleive they have stated the battery capacity will be 70% of orginal capacity at the end of this period.
        Admittedly one would have to cover 110,000 miles (175,000km) per year to fully discharge the batteries under this regime. An unlikely event. Cars of course have much more aggressive conditions to deal with ( high charge/discharge rates, wide temperature fluctuations, vibration etc)

        • David Osmond

          Thanks Stuart

  • Bob_Wallace

    “the capital cost of the recently developed GE Durathon Battery is around $1500/kWh ”

    EOS Systems is getting ready to install their batteries on multiple grids. Initially their batteries are going to be ~$250/kWh with an expectation they will soon fall to $160/kWh. >5,000 and perhaps as high as 10,000 cycles.

    One can purchase a 16.5 kWh Chevy Volt replacement battery for $2,305.88 (online retail price). $139.75/kWh. ~2,500 cycles?

    • stuart

      Hi Bob,
      Can you provide a link to the site selling Chevy Volt batteries for $2,300? That is much cheaper than anticipated.

      • Bob_Wallace

        This should be it…
        http://www.gmpartsonline.net/parts/2012/Chevrolet/Volt/Base?siteid=215055&vehicleid=407591&section=HYBRID%20COMPONENTS&group=HYBRID%20COMPONENTS&subgroup=BATTERY&component=BATTERY

        If that doesn’t work go to this page, click on Hybrid Components on the left side and the battery should appear on the right side.

        (Sounds really low based on the $8k prices when the Volt was introduced.) http://www.gmpartsonline.net/p… §ion=HYBRID%20COMPONENTS

        • stuart

          Hi Bob,
          the link you have provided clearly confirms that the replacement battery cost for the Volt is $2,305.88 as you stated. Having said that the diagram provided almost appears as the battery enclosure, rather than the battery itself.
          That is a much lower figure than was expected. It was widely expected that it would be 2020 before Li-ion batteries for car traction systems fell below $200/Kwhr.
          Have to admit I still suspect mispricing by the parts company selling the battery.

          • Bob_Wallace

            I also find the price surprisingly low. But it is the GM parts store.

            I picked the link up from another site along with this link to a GM Volt discussion forum.

            http://gm-volt.com/forum/showthread.php?70545-Volt-replacement-battery-for-only-2-300

            If you look at comment #7 one person is reporting a $1,900 price wholesale to repair shop. And in #6 someone states that the price was $3,200 a few months back.

            I wouldn’t (and I’m not) taking this as an actual fact. I want a second source but coming right off GM’s web site is somewhat convincing.

            Now let me do some ‘what if it’s true’ stuff.

            A ~40 mile battery for less than $2k would mean it possible to build a ~200 mile EV with a $10k battery. 200 mile range is enough for almost anyone. Stop twice on a full day of driving for 20 minutes to recharge. (200 + 180 + 180 = 560 miles.)

            That’s stopping about the same amount as someone driving a gasmobile. Ten minutes to refuel and 20 minutes to get some food. Saving a huge amount per year from fuel savings would make it more than worth the short extra stop time.

            A $10k battery should allow a $25k 200 mile range EV. $30k at most.

            That would do to the oil industry what renewables are doing to the coal industry.

          • Bob_Wallace

            I took a quick look at the GM parts prices for a basic Impala engine – $4,347.

            That price does not include the fuel injection system, fuel tank, pump, piping, etc. It does not include the cooling system. It does not include the exhaust system. There are hundreds (thousands) of dollars of ICE related parts in addition to the engine.

            The manufacturing cost difference between a ICEV and EV might be quite a bit less than many of us have assumed. Just for fun, if you aren’t familiar with car engines, go to the GM site and click on things like engine or exhaust system and see all the many parts that have to be individually manufactured and then assembled.

            Now think about batteries. Manufacture hundreds/thousands of identical cells and pop them in their carrier.

    • Miles Harding

      It is difficult to see a car battery being made for much less than $500/kWh, so
      I would have to think that the battery is being subsidized by GM. This would make sense if they are addressing “battery terror”. A real price of $8000 would seem more reasonable.

      I use “battery fear” to describe the consumer reaction to the prospect of replacing the much smaller, circa 1kWh, Prius battery. It looks like one of these is about $1500 including a trade in credit of $1500. It still makes a good Prius with a dead battery not too bad a deal.

      Bob, the GE battery sounds to be the same as the “Zebra” battery made by MES-DEA Gmbh Switzerland.

      • Bob_Wallace

        It’s really difficult to tell what is going on with battery prices. It’s just not made public. But what I’ve read is that batteries have been less than $500/kWh for some time and the price is falling faster than many anticipated.

        Some time back I saw a claim that Better Place was contracting for batteries for $250/kWh.

        Of course, we’ve no way to confirm this. However, I doubt that GM is selling replacement batteries at a loss. That’s just not how car companies do business. With parts they generally jack prices high.

  • Sahar

    Hi Dears

    “For
    instance the capital cost of the recently developed GE Durathon Battery is
    around $1500/kWh for a large system which equates to about $0.30/kWh of the
    anticipated life of the battery.”
    Could you please explain how he calculated 0.30$/kwh from 1500$/kmh?
    Thanks
    Sahar