The secret to cost effective energy storage | RenewEconomy

The secret to cost effective energy storage

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There are a few “secrets”, or realities that get lost in the simplistic cost decline per kW story.

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Solar Business Services


“Battery costs to reach $230 kWh by 2017/18″ the headline reads. Cue – phones running of their hooks with consumers wanting these cheap batteries that have just been announced.

Collective solar industry groan.

Now you all know I am as optimistic as anyone about energy storage and try as I may I can’t (in my own head) separate the growth in electric vehicle sales and the inevitable flood of lower cost energy storage for stationary applications.  There are deep and close connections that will flow both ways. But there are also a few “secrets”, or realities that get lost in the simplistic cost decline per kW story.

Humour me for a second.

Inevitable lessons from history

Firstly, the release of a new paper tracking ev sales and battery cost declines is great news. It has a good collection of (hard to get) data points  and looks logically at the probable cost trajectories. We know from history that in hyper growth, disruptive technology markets things inevitably happen faster than everyone predicts (ummmm solar pv??) – and this paper bears that out. So, in all probability we will see prices around this level around this time frame, if not sooner.

That’s good news.

Pure cost versus price

However, the “cost” of a battery  is not necessarily reflective of what Mrs Jones will pay for it, obviously. In an ev for example, it vanishes into the cost of the vehicle. Tesla reportedly pays around $180 kWh for its batteries for example, which equates to around $15,300 in pure storage cost in a $100,000 plus car. I reckon Elon wants to make some money but I also reckon he’d happily sell Tesla’s at a more competitive price if he could, but the packaging and associated technology costs blow it out.

Likewise, in a home energy system, it vanishes into the cost of a package (housings, fuses, control gear, BMS, inverter, charger, installation etc). The typical home energy storage package in Australia is priced around $2000 kWh, although stationary LiPo battery costs are way below that. Once again, the “all in” cost changes the equation. There good news here is there’s a lot of room for savings to be made – in the same way BOS costs in solar systems have evolved rapidly.

The report suggests that the target price for ev-to-ICE vehicle parity (in the US) is around $150 kWh for the battery so we are clearly close. When it comes to home energy storage the all-in magic number is around $350 kWh in Australia, I reckon, with our electricity prices. But there are a host of variables that can substantially impact the magic number in different markets.

The reality is that current Australian home energy storage prices are virtually an economic proposition already in a small, discrete set of circumstances. But not a lot of people are in that situation. Yet.

It is also the case that despite the high purchase price of electric vehicles, I can already see that owning a Zero electric motorcycle is a sound economic proposition, once insurance, registration, fuel and maintenance costs are factored in. But not a lot of people buy performance motorcycles based on their economics.

The real world

But here’s the big crunch; the real world has a crap load of troublesome “expectations”. These expectations translate into things like availability, support, performance, wow factor, reliability and service and apply almost in equal doses across electric vehicles and home energy storage.

Performance is a crucial issue in electric vehicles and why everyone who drives a Tesla or a Zero gets all gooey-eyed, struggles for adequate expletives and harangues me to buy them (or desperately want to buy one), despite the front end economics. Their performance levels are absolutely undeniable at the all important seat of the pants level.

However, in home energy storage markets performance is about lifetime deliverable energy cost. Home owners really want (although they may not know it)  reliable, trouble free, long life and that is not about $/kWh at the capital cost end. It’s a combination of  package cost, lifespan, deliverable energy and the system’s intelligent ability to do what it should to realize savings. With minimal involvement. And probably, a nice app. Homeowners will only get all gooey and start raving on Facebook about their new investment when their energy bills are substantially reduced and their day to day involvement is hugely simplified.

Sound familiar? Yes indeedy, its the same learning curve we have seen for solar in Australia. A few years ago everyone thought cheap was the answer. Today consumers increasingly realize that an insanely cheap solar system, supplied by a liar, installed by a buffoon, made of the cheapest knock off components you can find is actually a huge pain in the backside that can end up costing you a lot of time and money.

Consequently, the price per kWh for a battery (even in a package) is hugely misleading in the home energy storage market. A higher priced battery with five times the cycle life and three times the depth of discharge level that works reliably (for example) will win every single time, hands down. However, trying to unravel, compare and sell these minute, technical details to Mrs Jones, in a way that allows her to simply compare offers,  is extraordinarily complicated.

The Australian market is already full of complete and utter bullshit in this regard, and tragically, some consumers will be disappointed in the real world.

The upshot

Sadly, news reports on battery costs will get Mrs Jones on the phone too early in the same way Dr Green used to when he announced his latest break through on PV at UNSW in years gone by. They’ll cost the industry time and money and that is frustrating.

But here’s a tip – Mrs Jones early adopting cousin doesn’t give too hoots about the economics. She wants in. Now. And she is ready to pay what it costs, so pick a great package and have a standard, efficient offer ready, because some people are buying these things today. Oh, and perhaps get a good answering machine.

So, the battery cost decline story is great news and history is already starting to repeat itself. That’s awesome and we should all be preparing ourselves.

However, don’t fall into the trap of looking at costs per kWh in isolation or underplaying the fundamental, crucial importance of the difference between an electric bike that goes so fast you have to have one and what Mrs Jones really wants and needs in her home energy storage system.

The perfect supplier in that case is some one who has an outstanding blend of price, cycle life, packaging, service and simplified intelligence.

Can’t wait.


Source: Solar Business Services. Reproduced with permission.

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  1. barrie harrop 6 years ago

    Why am i not surprised.

  2. Bob_Wallace 6 years ago

    Why should Tesla lower their price? They have a waiting list of people who want to buy at the current price.

    Profits from the MS are helping to finance the Gigafactory, Superchargers and M3.

  3. Miles Harding 6 years ago

    An efficient package manufacturer is needed to build a modular battery system in sufficient volume that the present high non-battery system component costs don’t dwarf the cell cost.

    One of the suggestions from Tesla is to take the car battery modules and build a flat wall mounted battery (and inverter, I presume) that can be easily mounted in existing buildings, only standing 100mm out from the wall. They are talking plug and go connections.

    Convenience and the right price will make it very difficult for the existing niche manufacturers to sustain their exclusive pricing.

  4. Mike Dill 6 years ago

    A known global company like enphase or solar city will get this market kicking. both have announced products for delivery ‘soon’. I will be buying once they show even a small value proposition.

    • Pedro 6 years ago

      I sell enphase among other solar products and there is building excitement around their energy storage solution. Management of power production, consumption data is key combined with algorithms to maximise self consumption and minimise power export.

      I am quietly optimistic that a much smaller battery bank and grid interactive inverter can supply a load and demand most of the time. The question really is, what level of grid support will the end user be happy with? I am guessing that 4kWhr of storage could supply the night time load 70% of the time and 1kW of interactive micro’s could meet demand a similar amount. The grid only really kicks in to supply larger loads or when battery capacity is depleted at night. The enphase energy storage system as I see it by passes all the normal fat built into a standard grid interactive battery back up system. If they hit the market at the right price they should do well. At present a small enphase battery pack system has its limitations and would not be able to supply power in the event of a blackout.

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