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.
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.
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