If 2014 was a mostly behind-the-scenes series of Eureka moments and 2015 was the year energy storage started to go mainstream, where does it go from here?
The obvious answer is out of the factories and into grids, micro-grids, businesses and houses the world over. It will happen at a different pace in different regions, and each market will have its own drivers – and barriers – to adoption. Here are seven distinctive takes on what the industry is predicting – and hoping for – in 2016 and beyond.
Analyst’s view: Cosmin Laslau, head of Energy Storage Intelligence, Lux Research
Business models start catching up with technology
More and more battery developers are looking to find solar partners, but for us one of the biggest questions looking to 2016 and beyond is the amount of vertical integration and cost curve savings that these guys can pull off. A solar player could buy a battery developer, or vice versa, and offer a fully integrated product that shaves a lot of costs off.
When we look at the use cases for storage, there’s not a killer application to justify solar-plus-batteries with a single use case. This is where benefit stacking between multiple services is tremendously important. That points to a couple of things. One of them is the importance of clever software. So in 2016 and beyond, we expect even more activity to be driven in terms of investment into start-ups, developing software for solar-plus-storage integration and use-case management, as well as potentially some acquisitions in this space or some serious internal R&D by the larger corporations.
We’re not seeing any major breakthroughs coming up in the near term that will rock the industry in terms of cost reductions. Probably the much more important thing will be financing arrangements and realising that in certain geographies, you want to deploy as many batteries as possible with financing because these are projects that can make sense for everybody involved and generate some pretty good revenues. So although things like the Tesla Gigafactory are going to do great things for cells and packs, and then we’ve got some balance of system (BoS) and installation costs that are also going to see some reductions, what’s really going to drive the bulk of activity in getting to the next level of deployment is financing and new business models.
Read the full interview with Cosmin Laslau here.
Regulation: Haike van der Vegte, senior consultant for new energy technologies at DNV GL
Market design and regulatory space will evolve
In Europe, we really get to much bigger integration sizes in 2016. We are in discussion with transmission system operators (TSOs) about defining new markets – for example for ultra-fast response applications, much faster than for the primary reserve market. There is a need for getting the benefits for providing even faster response times. The same goes for the distribution level where congestion issues and power quality are now accountable to the distribution network operator.
For multi-megawatt scales of storage systems, we want to see a move to a much more product-based market, where it’s not tailor made for each storage system that you buy. Specifically for behind-the-meter applications of storage, we really should aim for that product-based market where there is no risk that the technology you buy is not suitable. We have definitely seen some proposals out there that provide, for example, statements on lifetime of the system framed completely differently by different manufacturers. Also, if you would buy a system now I can promise you that you will get different ways that warranties and guarantees are defined. We work a lot on aggregation of smaller storage systems as well, and on finding the optimal dispatch algorithm to reap the benefit of such a system from different markets. The majority of such projects are still demonstration projects, where we aggregate the storage systems or demand response type of activities and make them work together as one, so we’re really learning a lot, but commercial application is not [going to be happening at scale] in 2016.
More interconnection [which has been discussed in Europe] definitely has its impact on the business case for energy storage. There are big challenges ahead of us when we deploy the kind of renewables we promised ourselves in Paris. So any way to improve the flexibility of the system is very much appreciated and necessary, including interconnection.
Residential solar-plus-storage: Benjamin Schott, director of business development for Sonnen (formerly Sonnenbatterie)
Nascent UK market can learn from German experiences
We see that a lot of markets are becoming more and more attractive, the UK, for example. I think Germany will have a strong year as well. Although we had prepared the value proposition of
SonnenCommunity, our new energy trading platform, to replace the subsidies, the government has decided to continue them. We are now, through the subsidy programme in Germany, at the level where [energy storage] is like a commodity, so we have standard processes now. It might be the case that in the future we will come to a model where the customer will not pay for hardware, it will be service-driven. However, I think that the trading and grid service markets, which are key to that, are not there yet. The UK, US and Germany are all very different markets, with different value propositions for energy storage in each. In 2016 we would like to see the UK take on learnings from Germany. At the levels of government and regulation, you [the industry] have to stay in discussions. And we already have fixed a lot of things in Germany about connecting a storage system to the grid. So I think there’s a lot of things the UK and other new markets can learn or transfer, from Germany.
Grid-scale storage: Roger Lin, marketing director for NEC Energy Solutions
Li-ion still king as grids explore flexibility options
We will see continued settling in the energy storage supply chain. Newer technologies will continue to gain both ‘mindshare’ and market share as they prove themselves in pilots and more importantly, commercial projects, but lithium-ion will continue to dominate the energy storage market this year.
This is due to the maturity of the supply chain and manufacturing infrastructure, and Li-ion’s already overwhelming share in portable electronic devices and in electrified vehicles.
The major lithium ion battery cell manufacturers will focus on their core offerings of lithium-ion cells and battery modules to large energy industry heavyweights focused on bringing grid-scale energy storage solutions to market. Here it is becoming more and more significant not only to reduce the capital cost of the energy storage equipment, but also to increase the strength of guarantees, warranties, service, and support that back the operation of such units.
As core battery costs continue to decline – LG’s supply of lithium ion cells to GM for US$145 per kWh is the most striking data point emphasising this reality – the responsibility for cost reduction shifts now to the balance of system (BoS) costs including enclosures, thermal management systems, control hardware and safety equipment, which today can more than double that number. Installation and commissioning costs will also be under pressure and we will see further refinement in equipment designed for quick and easy installation. Fully installed system prices will see perhaps 20% reduction in 2016, driven by a combination of all these factors, from US$800-US$1000 per kWh last year. The speed of expansion of the grid-scale storage market is also dependent on the value that can be earned in the markets. As markets are redesigned to place further value on the flexibility of resources, the speed and accuracy of their response, it seems natural that energy storage becomes more commonplace as one of the most effective options for improving the stability of the grid while simultaneously allowing it to become more sustainable.
Balance of system: Volker Wachenfeld, senior vice president for hybrid and energy storage integration, SMA Solar
BoS costs will come into focus
In addition to batteries, BoS costs are moving into the focus of interest. Reducing inverter costs in 2016 will not only be a question of economies of scale, but also of cost-optimised system design. Germany’s prolonged incentives for solar-plus-storage should help the country avoid a drop in market figures. Requirements do not seem to have changed significantly; only the curtailment level of PV power is reduced from 60% to 50%. As a consequence, the average level of installed capacity per household might increase a little bit. Using forecast data for energy generation will become more relevant to optimise the charge-discharge cycle. While we don’t yet know the effects of changes to net metering policy, North America has a small but sustainable market for residential energy storage, mainly covering back-up applications. This segment should be expected to increase significantly. Reduced system costs in combination with growing public awareness will drive this market – at least on an evolutionary level.
Successful system offerings by big players in PV and the wider energy market will differ from European solutions. The higher energy demand will require at least double the average installed capacity, equipped with inverters of at least double the size of average European values. The need to provide back-up solutions mean AC-coupled systems will be preferred based on power electronics with larger surge capacities to provide energy in blackout situations.
Emerging markets: Tim Hennessey, president of Imergy Power Systems, a California-based maker of redox flow battery systems
Micro-grids won’t be the only application in emerging regions
It’s very dependent on the market. If you said India’s going to skip the base load generation and [won’t have to build] lots of infrastructure and wires I think you’d be an idiot. Economies of that scale cannot exist on totally distributed islands of power. The same as the Western world, that 25% [peak] at the top where you have a lot of fluctuation and variation in demand is being exacerbated by renewables because of the lack of coincidence of generation and demand. That’s where the play for storage fits in, because that’s the expensive part.
In the smaller countries, in parts of Africa, or south Asia, you’re dealing with micro-grid - some base load but it’s not going to be a massive infrastructure, and you’re going to have distributed generation with renewables heavily integrated into that. So I think this year is going to see some of that evolve more.
But it’s all tied into overall general global macro-economics. If the markets are down, are they going to spend money on this? No. So the timing of this is up for guessing. You’re not going to see massive projects unless they’re subsidised out of Europe or the US; they just simply don’t have the wherewithal to do it on a capital basis. So it’s going to be in the control of the national governments, or the subsidies from World Bank, some of the programmes like Power Africa from the US. Tanzania, Rwanda, Cambodia, Thailand, Laos - they’re all looking at similar things.
I think this year is going to be the education year, the year of let’s do some of these projects, let’s structure some to learn how to do this the right way but let’s start doing this in all earnestness because the time is now, the time is right to do this. If I go back 10 years, you see these surges of “yes, yes, yes” and then it just doesn’t get there. Now, we’re seeing a different picture because PV is economical, it really makes sense.
Adding to that the firmness piece from storage, if we can combine those two, the levelised cost of energy will drive those kind of projects. So this year is going to be when we see the initial [projects] on scale in developing countries and that will evolve quicker after this year. So I’d give it a two to three year window to see this really ramp up on a really large scale.
Read Aloke Gupta of Imergy's recent guest blog for Energy Storage News, "Where micro-grids, emerging markets and flow batteries intersect".
Storage is now: Tesla statement to PV Tech Power
There is a common misconception that energy storage is coming in the future, but that’s not true. Economically viable, proven residential, commercial and utility-scale energy storage is here today. The demand is too.
Of all the fossil fuel consumed in the United States, one third is used in transportation and another third goes to electricity production. In the US, the electric power sector alone produces over 2,000 million metric tons of CO2 which is like burning 225 billion gallons of gas. The EPA [Environmental Protection Agency] says it would require 1.6 billion acres of US forest to negate the environmental damage.
What if we could move the electricity grid off of fossil fuels and towards renewable energy sources? Once we’re able to rely on renewable energy sources for our power consumption, the top 50% of the dirtiest power generation resources could retire early. We would have a cleaner, smaller, and more resilient energy grid.
This article originally appeared in Volume 6 of PV Tech Power, Solar Media's downstream technology journal for the solar PV industry, with a section dedicated to Storage & Grids. Subscribe to read for free here.
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