Energy storage has reached a tipping point, so much so that around 320GW of new large scale power plants that might have been planned in the 10 years to 2023 will now no longer be needed.
According to a new report from Deutsche Bank, the growth of distributed energy – locally provided renewables such as rooftop solar and battery storage – will soon outstrip new centralised generation capacity additions across the world.
In fact, it could happen as early as 2018, marking a fundamental shift in the nature of the world’s energy systems, recognising that the old centralised model will be quickly replaced by a system based around localised energy production and storage.
Deutsche Bank estimates that the market for stationary energy storage – used in electricity grids – will rise six fold in the next five years, from 1GW and $4 billion, or 40GW or $25 billion by 2022. Note the big fall in spending per GW as the price of storage plunges.
“This increased penetration of distributed generation should drive the need for intelligent distribution networks comprised of nanogrids, microgrids and virtual power plants (VPPs),” the Deutsche analysts write.
To put the 320GW into context, it is more than six times the installed capacity in Australia’s electricity grid, and about 14 times the size of its coal fleet. It represents the once-anticipated new build of coal fired power stations in India, that many say will no longer happen.
The shift in emphasis from centralised to distributed energy has long been predicted, although it is given scant attention in the latest Finkel Review. Some analysis, such as that by the CSIRO, predict that half of all generation will come from consumers by 2050.
Deutsche Bank says the global shift is likely to be accelerated by moves to reduce the scope of solar feed in tariffs, encouraging yet more consumers to add battery storage.
“Regulatory environment will likely be a critical driver of storage adoption rates and contrary to consensus views, detrimental solar policies could potentially act as a significant growth catalyst for storage sector.” (Meaning low feed in tariffs will encourage more people into storage).
It notes that in several European countries, the difference in the price of feed-in-tariffs and price paid for electricity from the price of power consumed from the grid is significantly wide. It didn’t mention Australia, but that is also significant difference.
This shift is being accompanied by big cost reductions in battery storage, particularly in the cost of lithium ion cells.
It lithium-ion cell costs have already plunged from $US900/kWh in 2010 to $US225/kWh in 2015 – a similar trajectory to solar, and are tipped to fall to $US150/kWh by 2020. Tesla/Panasonic li-ion costs are already below $US200/kWh for cells and around $US225/kWh for the entire battery pack.
In says that in California, for example, combining a solar-panel system with a commercial-scale battery installation (500kWh) can deliver a 20 per cent return on investment with state subsidies, and still 12 per cent without subsidies, from peak shifting alone.
Indeed, Deutsche suggests the demand for “peak shifting” will grow from just 500MWh in 2015 to 40GWh in 2025, a growth of 55 per cent per year, driving a $3.9 billion battery market in which lithium-ion should dominate due to its superior cell performance and costs.
Deutsche Bank estimates that global battery consumption will jump from 70GWh in 2015 to 535GWh by 2025, and the energy storage market from less than 3GWh to more than 80GWh over the same time.
In the US alone, residential solar PV plus energy storage nanogrids are expected to reach 1.8GW by 2025, with a third or more of these aggregated into virtual power plants, of the type that AGL is trialling in South Australia with 5MW of capacity.