Battery storage – the growing spectre of grid parity

Renewables International

In a study published this month, IRENA provides a global scope, though the depiction of Germany indicates that the wide range of countries covered may have come at the cost of some depth.

In January, the International Renewable Energy Agency (IRENA) published five studies, each of which looks interesting. I recently presented the country report on the US. Today, I would like to briefly review a second one entitled “Battery storage for renewables: market status and technology outlook.”

First, the organization’s international scope means that the study covers a wide range of cases globally, with a particular focus on islands. As small grids, islands represent a special case because power trading – which can reduce the need for storage – is greatly reduced or non-existent. But small grids in the developing world are also a main area of applications.

There, cost considerations are much different than in the developing world; instead of comparing the cost of renewable power + storage to the grid, the comparison is with offset fuel costs. In other words, the story differs considerably depending on the market, but in general battery storage is the most competitive option on islands and in remote areas.

Irenabatteriescountry

To my surprise, Japan has the greatest battery storage of all countries investigated, though the US clearly has the most in the pipeline. Despite all the focus on the alleged need for storage in Germany, the Germans actually turn out to have very little built and not much more in the pipeline.

There is a caveat to this finding, however; as with the Pew study on clean energy investments, data for small systems are hard to come by. As the study puts it: “The data presented in figure 22 underestimate battery storage because they do not include decentralized installations, such as at households or commercial facilities. The small size and private nature of these installations often do not show up in datasets.”

One of the most interesting presentations in the study is the following table showing what battery storage costs, in this case in Germany. The price at the bottom of each column indicates that we are easily looking at 40 cents per kilowatt-hour – and that does not include the cost of the electricity to be stored. At present, it seems that stored solar power, for instance, would easily cost 50 cents per kilowatt-hour, which brings us all the way back to the relatively high price of solar power without storage a decade ago.

Irenacostbattery

The country report for the US also included an interesting chart I would like to bring into the discussion now.

IrenaGermanybatteries

Here, we see that there are two types of grid parity. The first point is where the cost of solar power equals the retail rate; the second, where the cost of solar power plus storage equals the retail rate. A few years ago, people generally held the first point of overlapping (without storage) to be the Holy Grail (I did not). The second point is far more important because it represents the point where grid defection can begin to take place – households will find it cheaper to generate and store their own electricity from solar panels than to buy from the grid. And the fascinating thing is that IRENA expects this point to be reached this year based on German data.

This finding flies in the face of the current small market size. The chart assumes “a 5 kWh battery pack and a starting point of EUR 2 300/kWh in 2013 for li-ion battery packs.” It also does not assume that Germans will be able to go completely off grid affordably this year with PV + storage:

“Although it will not make sense for consumers to become totally self-sufficient, they will have an incentive to increase the level of self-consumption and market growth could potentially decouple from financial support levels and become self-sustaining.”

The challenge in Germany for PV + storage will be seasonal – getting the modest amount of sunshine from the summer into the winter, when electricity and energy consumption both rise steeply. IRENA is thus merely saying that the point where German households can affordably begin making and storing more of their own solar energy instead of buying from the grid is practically here. The challenge of closing the winter gapremains, however.

Interestingly, IRENA uses some slightly out of date information for Germany. For instance, the study writes:

“A proposal now under consideration to tax electricity self-consumption would alter this formula, negatively affecting the economics of storage with solar PV power.” 

In fact, that proposal has been law since August, and PV arrays smaller than 10 kilowatts (meaning more or less all households) are exempt. Furthermore, the cost estimates for feed-in tariffs are a bit outdated:

“in Germany, new systems installed at the end of 2014 will receive an approximate FiT value of between EUR 0.12 and EUR 0.15/kWh, depending on their size (Bundesnetzagentur, 2014), while retail tariffs are around EUR 0.30/kWh.”

Current rates are available here (in German). But on 1 December 2014, for instance, the highest rate paid was 12.99 cents per kilowatt-hour; the lowest, 9.12.

Ironically, because the prices are actually lower than IRENA indicates, the point of grid parity for PV + storage is actually closer than the study indicates. But elsewhere, the researchers show they were collecting the latest data up to the deadline for publication, such as when they state that “around 12% of solar PV systems were installed with a battery system” in Germany, statistics that were only published in the fall.

Finally, the study goes into the question of whether residential solar power storage systems should be tailored to reducing a household’s dependence on the grid or addressing what the grid needs, as the chart below shows. I recently called for a greater focus on grid-focused optimization with a similar chart here.

IRENAbattery

I have only covered the aspects pertaining to Germany because that’s what I know best, but the study is thus definitely worth reading for its much broader scope. For instance, four years ago I wrote about how China was building wind turbines faster than they could be connected to the grid, with roughly 30 percent of installed capacity not actually generating electricity. Who knew that, even today, only 61 of China’s 75 GW of installed wind capacity is actually working.

Source: Renewables International. Reproduced with permission.

Comments

One response to “Battery storage – the growing spectre of grid parity”

  1. Chris Sanderson Avatar
    Chris Sanderson

    Some thoughts from a solar user: We live in a rural area and 4 years ago, installed
    10kW of solar panels without storage.

    Battery technology continues to improve and prices to fall. The industry expects that
    batteries will become economic to install for 24 hour backup by 2016/17.

    At that point, excess electricity generated during the day can be used to charge
    batteries that will supply electricity when the sun isn’t shining.

    Batteries will also protect you from grid failure. That’s necessary because if you don’t
    have battery backup with an auto switching inverter, when the grid goes down you
    also get disconnected from your solar power – for safety reasons.

    Incidences of grid failure have been growing over the past few years due to more extreme weather that cause trees to fall on power lines, etc. This trend is likely to continue due to
    climate change, thus increasing the need for storage backup.

    Over the last 20 years in our area, 90% of grid failures have not lasted more than 24
    hours and usually not more than 5 hours.

    However when you live in a rural area, you may need to use electric pumps to access your water. Having no water is a pain, particularly with children in the house.

    So 24 hour battery backup as soon as it’s affordable is a no-brainer under these circumstances. That currently costs around $20K+ at this point, including the inverter that manages the switching when the grid fails.

    A statistical analysis of our solar production for every 15 mins, 24/7 over those
    4 years have shown that during a typical year, there are likely to be periods
    of up to 5 consecutive days or so, when you consume more power than you
    generate – due to prolonged wet and/or heavily clouded weather, for example.

    However 5 day storage backup will be hard to cost justify until affordable hydrogen fuel cells become available at the domestic level – probably 5-7 years away, at a
    guess.

    So I believe there is a strong case for staying connected to the grid to provide
    double backup as well.

    For the foreseeable future, this is likely to be less expensive than buying enough
    batteries to go completely off grid – unless of course the electricity
    retailers are allowed by the regulator to behave badly, as some are already
    reportedly doing and charge unreasonable amount to remain connected to the grid, in which case a diesel generator is the most affordable solution.

    Under normal circumstances, excess (clean) electricity that you generate can be sold
    to the grid – if rates make that a worthwhile proposition, in which case you
    become a ‘prosumer’ as well as a ‘consumer’ – which is what government policy
    in the European Union encourages the electricity industry and their citizens to
    do – right now!

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