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Energy storage to reach cost ‘holy grail’, mass adoption in 5 years

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A major new Deutsche Bank report has predicted that energy storage – the “missing link of solar adoption” – will be cheap enough – and technologically ready – to be deployed on a large-scale within the next five years.

The solar industry report, published on Friday, said that while costs for the greater majority of available battery technologies remained prohibitive, economically competitive batteries were the “killer app” and the “holy grail” of solar penetration.

But with many costs already lower than published literature would suggest, Deutsche Bank believes this ultimate solar and renewable energy goal might not be far out of reach.

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“Using conservative assumptions and no incentives, our model indicates that the incremental cost of storage will decrease from ~14c/kWh today to ~2c/kWh within the next five years,” the report says.

“When overall system cost decreases are considered, we believe solar + batteries will be a clear financial choice in mature solar markets in the future.”

deutsche solar storage

Currently, according to Deutsche, the cost of a typical lead-acid battery may be as low as ~$200/kWh, while best in class lithium-ion technology was producing commercial/utility packages in the ~$500/kWh range at end 2014 – half the cost of the ~$1000/kWh 12 months prior.

“We believe 20-30 per cent yearly cost reduction is likely (for lithium-ion batteries), which could bring (them) at commercial/utility scale to the point of mass adoption potential before 2020,” the report says.

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Deutsche points to the commercial-scale market as one of the first areas where battery deployment will flourish, due to clear economic rationale.

“Commercial customers are often subject to demand based charges, which can account for as much as half of the electric bill in some months,” Deutsche says.

“We think companies with differentiated battery solutions coupled with intelligent software and predictive analytics that work with the grid to avoid these charges and smooth electric demand will pave the way for mass adoption.”

The report also points to utilities as a major market for batteries on a large scale, as costs drop and distributed renewable energy generation deployments increase.

On the residential level, the report said households were still unlikely to go down the energy storage path in the short term, without proper pricing mechanisms in place, or access to solar plus storage energy packages.

But again, Deutsche sees this as as a major, untapped opportunity for utilities: “Over the next decade, we see a substantial opportunity for utilities to utilize smart grids through residential battery aggregation.”

Properly incentivised, the report says, utilities could begin to aggregate neighborhoods of solar + batteries to behave as a single source of load reduction.

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“Batteries could be dispatched as needed to reduce peak demand across the system. In a high grid-
penetration scenario, this could reasonably lower the necessary capacity from conventional generation sources.

“In turn, we think it is reasonable to hypothesize that lowered capacity needs from lowered peak demand would simultaneously lower the need for large up front capital investment in peaker plants.”

Deutsche sites two likely scenarios that would enable this sort of utility-driven household battery deployment: Third party leasing companies and individuals work with the utilities; or a shift in regulatory framework that allows utilities to include residential solar in their rate base.

“Both of these scenarios would likely significantly improve reliability, enable microgrids to function as needed, and improve grid resiliency during emergency situations,” the report says.

So what sort of batteries will homes, businesses and utilities be using? As the table below shows, there is quite a range of key technologies that, according to Deutsche, have the potential to be longer-term energy storage solutions, subject to technological feasability and cost.

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And while lithium-ion and other electrochemical based batteries are still the most commonly discussed – AES Energy calls lithium-ion as the chemistry of choice for the next decade – the Deutsche report details a wide range of potential new technologies looking to fill the need for on grid storage.

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Flow batteries, for example, while a relatively new technology and probably not likely to make a big impact on the market for several years, are tipped by Deutsche to be suited to large-scale utility storage with potential for long-term adoption.

Typically consisting of two tanks of liquids (electrolyte) which are pumped past a membrane held between two electrodes to store and generate electricity, flow batteries have the advantages of ease of scaling, reliability, and long life.

Varieties of flow batteries include Iron-Chromium, Vanadium Redox and Zinc-Bromine. Deutsche notes that recently, EnerVault dedicated its first commercial flow battery-based energy storage system in California.

In Australia, Brisbane-based company Redflow is fast-tracking the rollout of the latest iteration of its unique zinc bromide flow battery to the residential and mining sectors, the costs for which, it says, are 40 per cent cheaper than its first generation products, and are now approaching grid tariffs in some markets.

Elsewhere, start-ups are raising funds to scale up manufacturing of products such as EOS energy’s hybrid Zinc cathode, aqueous electrolyte based battery.

Once fully ramped, EOS says the battery will have 75 per cent round trip efficiency, a 30 year lifetime, and a cost of $160/kWh. As Deutsche points out, zinc is a much cheaper material than lithium, but has problems with electrode
corrosion and build-up.

EOS has solved this problem by using a proprietary coating that creates a permanently conductive and non-corrosive surface.

Another start-up, Aquion Energy has raised more than $150M in equity and debt to deploy more than 1MW of sodium-
ion batteries at $300/kWh price point.

Aquion’s six-stack module, which is roughly the size of a refrigerator, can produce 10kWh, while its larger 100kWh cube module was recently deployed in Hawaii, where 40 units will be shipped during first quarter 2015.

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  • https://openair.net.au Open Air

    Wondering how much projections like these actually subdue battery sales in the short term. If prices are going down by 30% per year, then surely it’s better to wait a couple of years before buying your 10 or 15 year storage system.

    Heartening news, at any rate. As the penetration of renewables into the grid increases, power quality and stabilisation technologies will become paramount.

    • nakedChimp

      fringe cases already save money going with batteries and early adapters will always pay a premium and then you also get subsidies in some countries to bring the scale up and the cost down.. should work out OK.
      For everybody else who has or want’s to wait.. just wait a bit 😉

    • Alastair Leith

      Doesn’t it say 15% yearly decline from current battery cost? (Below the table) Similar cost curves for solarPV and in IT procurement. You buy what you need and can afford at the time.

      • doug r

        Yup. It’s like CFLs. You buy what you can afford and brag about how long you’ve been buying them. I got CFLs older than my 20 year old.

        • Alastair Leith

          and now you replace all your CLF and put LEDs in.

    • http://mysmartelectricdrive.blogspot.ca/ Smart Electric

      Quote “If prices are going down by 30% per year, then surely it’s better to wait ”

      So, you are still using an IBM PC with 10MB disk drive? 😉

      Computer prices drop every year, yet companies replace their systems on average every 3 years, because waiting doesn’t make financial sense.

      Same with any fast moving technology. Waiting only makes it take longer to learn and apply techniques which can then pay off as things get cheaper. If you just wait and wait, you’ll find your competition has gone ahead.

  • Joseph Hanna

    What was the title and who was the author of the DB report?

  • Deutsche_Bank

    The underlying Deutsche Bank Markets Research study is called “Crossing the Chasm”. Its authors are Vishal Shah and Jerimiah Booream-Phelps. It was published on March 2, 2015 for customers first and will be made available to the public later via Deutsche Bank’s responsibility portal at https://www.db.com/responsibility. In the meantime, you can have a look at Deutsche Bank’s 2015 solar outlook at http://ow.ly/JUQum and follow us: https://www.twitter.com/DeutscheBank

    • Alastair Leith

      Thanks for posting DB, this report has proven elusive for non-customers.

      • disqus_S9er4I4yBS

        I do not understand it. The report “Crossing the chasm” is on solar energy grid parity, not on energy storage, as far as I can see….

  • Ian

    It seems to me that if the numbers on figure 48- Emerging Battery Companies are right, particularly Alevo’s lithium iron phosphate battery at $100 / kWh, then batteries are already at a competitive price. I understand that the Alevo battery also has a very long life- more than 10,000 cycles without much degredation. Does anyone have confirmation on that cost for Alevo’s battery?

  • Kaveh R. Khalilpour

    Referring to Fig 43, isn’t the BOS cost expected to change in the future, even a little?
    Looking forward to reading the full report when it is available to public.

  • http://www.facebook.com/luis.a.de.sousa Luís de Sousa

    This is a very good article with a nice roundup on emerging storage technologies and methods. Just a pity the mess up with units, that stems from the report itself.

    What is left to explain is how can solar technologies penetrate further in the European market if nearly every member state government has enacted legislation and/or taxes effectively preventing it.

  • Aaron

    That’s great and all, but Tesla is already selling utility scale battery systems for $250/kWh.

    • http://mysmartelectricdrive.blogspot.ca/ Smart Electric

      Yes, that is a breakthrough price for DC power. But, that price quoted by Elon on Twitter is for battery only.
      Grid needs AC output, so inverters and other equipment are necessary.
      Compare that to pumped hydro which directly produces high voltage AC which can feed the grid…

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