Why battery storage may put peaking gas plants out of business

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In global energy markets, debate rages around the likely make-up of energy supplies in the near, mid and long-term future. The percentage of renewables and the need for “back-up” is chief amongst them.

The introduction of battery storage – both as an economic addition to home and business use, and to avoid expensive upgrades of poles and wires in electricity networks – is adding a new element to the equation.

But here’s a new take on the storage issue from Navigant Research. It suggests that battery storage could make gas-fired peaking plants virtually redundant, by combining storage with combined cycle plants, which are usually used for baseload or intermediate applications.

Sam Jaffe, an analyst with Navigant, told a conference organised by the Institute of Energy Economics and Financial Analysis in New York last month that peaking plants currently account for nearly all of peak demand requirements in the US. And this has been largely the case in energy markets such as Australia too.

The reason for this is that peaking plants are quick to respond to changes in demand. But they are expensive and more polluting – and even more expensive in Australia where gas prices are high.

But Jaffe suggests pairing a large combined-cycle gas plant with a large battery pack – say 1GW and 400MWh of storage.

What you get, says Jaffe, is a “duty cycle that today’s batteries can meet, a more efficient use of fossil fuels and a lower fuel cost.

“Additionally you make the grid more flexible, allowing more renewables to penetrate without fears of destabilisation.”

Of course, that’s just one of a number of applications for battery storage that is being mooted for electricity grids.

Storage – be it battery or in the form of salts for solar thermal – is being paired with renewables such as wind and solar to provide the same service. The ability to pair it with an existing gas plant, however, creates some interesting options. It also means the amount of fossil fuel plant needed in the current system, or in a renewables-based system, will be significantly reduced.

Battery storage is already being deployed at network level in Australia, with the likes of Ergon Energy and others finding it a cheaper option that to upgrade poles and wires, with the added benefit of improving grid stability and allowing more locally-based renewables to be incorporated.

Some suggest that battery storage is likely to fall in price so quickly that homes and businesses will find it economic to add to rooftop solar, for instance, within years – even to leave the grid entirely if they choose – and if the grid tariffs basically gave them no other option.

And battery storage is now being more widely used in off-grid applications, with new software allowing it to combine with solar, wind and other renewable options to allow incumbent diesel generators to be switched off completely, and to help balance solar suppliers to industrial consumers such as miners.

Jaffe’s presentation included a couple of interesting graphs.

The first is the forecast revenues over the coming decade. This graph shows the stationary storage market booming from, basically, a standing start to more than $4 billion a year.navigantThe second graph shows the EV market, which Navigant predicts will follow a similar trajectory. Together, the two sectors will be worth as much, if not more, than the well established consumer electronics markets.

navigant EV battry copy 2

And this graph here shows how lithium ion has grabbed such a dominant share in each of the main consumer markets to date. Jaffe says that could continue in the EV and stationary storage market.

navigant storage shareAnd this last one is another graph that looks a lot like the solar market. Steep price falls triggered by increase in manufacturing and demand. Navigant notes that Tesla, which is building the first “giga-factory” with Panasonic, currently sources its battery cells from its partner for around $180/kWh.

Jaffe expects costs for cells and packs will continue to decline in 2014 and 2015, maybe at a rate of 10-15 per cent per annum. That means that once the giga-factory is established, Tesla will be producing battery cells at $110-$150/kWh.

navigant battery prices


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  • john

    Ergon used to go start up Diesel gen sets to supply energy when demand was high and they did not want to pay the price so now they have put in place a heap of battery back up packs which are cheaper than Diesel Gen sets.
    This is exactly what is happening as the paper points out.
    Yes the Long Term Energy Cost is higher than base price however it is a lot lower than the buying price which can be 2 to 5 times higher than the selling price.
    Mind I did notice a few very high peaks from the NEMO in the last few months which are hard to understand as the Peak Price for dispatch has been rather low for the last few years.

  • Jouni Valkonen

    The problem here is that the system price of electricity is determined by the marginal cost of peaking generators. If peaking generators are displaced, then all baseload generators will go out of business on “free markets” (sic), because the marginal cost of baseload power is not sufficient for paying the capital costs and profits.

    This is probably the reason why utilities are resisting installing and creating markets for grid storage and distributed storage.

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    • JeffJL


      That makes no sense. So we get rid of peaking generators and we will lose all base load generation?

      • Jouni Valkonen

        Yes, the economics of current grid infrastructure is designed as such that peaking generators are keeping the average price of electricity at acceptable levels. The marginal cost of baseload generator covers only the variable fuel costs. It does not include capital costs and profits.

        Basically, if we do not need peaking generators anymore, then we can as well to go all the way to 100 % renewable electricity.

        Germans already find out that there is no viable co-existence of renewables and baseload power. And last year German baseload utilities generated around 5 billion euro losses. Therefore Germans are getting rid of baseload power by around 2030. As they decided earlier to get rid of baseload nuclear power by the end of 2023.

        • JeffJL

          Would not then the average cost of electricity stay the same, just the marginal cost be increased to cover the variable fuel costs? Base load suppliers would still be in business, just that renewables would become more competitive?

        • Ronald Brakels

          Perhaps you are thinking of a different country than Australia.

    • Ronald Brakels

      In the National Electricity Market the price of electricity is not determined by the marginal cost of peaking generators. It is determined by the prices generators bid for their electricity. The generator who makes the highest bid, and has any portion of their electricity used, sets the price for all generators who bid less. This tends to encourage competition to keep prices down to a level where generators make normal profits, but is far from foolproof.

      The marginal cost of peaking generators is only relevant in that peaking generators won’t bid lower than that amount as they won’t cover their costs if they do and will lose money. So it creates a floor price that peaking generators will not go below, but does not determine electricity prices.

  • Roger Brown


  • Roger Faulkner

    I’m not sure this article makes it clear that when hybridized with combined cycle gas turbines (CCGT), the batteries enable the gas turbines to shut down when not needed. It takes about 6 minutes to spin up a simple cycle gas turbine (these are much less efficient than CCGT plants), and more like 30 minutes to get a CCGT up to full power (partial power can be produced before that). The batteries supply power during the startup, allowing the turbine to be turned off completely.

    In order to use gas turbines for load-following, they must already be spinning (known as spinning reserve). Simple cycle gas turbines can load follow faster and over a wider range, producing 50-110% of their rated power, but at only 30% conversion efficiency. CCGTs can load follow from about 70-100% of rated power, but react slower to follow loads that vary more minute to minute rather than the faster regulation (~10 seconds) possible with a CCGT. Many utilities in the US actually follow load with steam turbines which is especially inefficient, but can be faster responding than even simple cycle gas turbines. At this very short time scale, only flywheels, batteries, and capacitors are fast enough, and right now Li-ion batteries are ahead, with lots of competition. So Li-ion batteries can both replace the fast-responding peaker turbines for following load short term, and give enough time to turn on CCGT plants to meet large increases in load on the half-hour time scale.

  • howardpatr

    It has recently been reported that some research has shown that future batteries could be developed with aluminum rather than lithium.

    It is so discouraging to have a government that seems so against renewable energy technologies that it clouds its ability to appreciate how things will change.

  • Tim Brown

    Can the batteries be used to replace coal fired power, using gas peaking to fill the gap between renewables and demand?