Misconceptions over the true value of energy storage are developing because of a “narrow focus” on the initial costs of the technology, a report has concluded.
Published today, the World Energy Council study contends that because discussions about storage regularly revolve primarily around the questions of investment costs, its broader, longer-term benefits are often overlooked.
The report says the true value of energy storage should be recognised by taking into account both its cost and revenue benefits.
Based on analyses of a number of storage costings across the technology spectrum, the report concludes that the widely used levelised cost of energy methodology is hindering the progress of energy storage. Reasons for this include arbitrariness of the methodology, which does not allow for differences in application cases, and incompleteness as only limited account of revenue is taken, the report said.
With this in mind the report made a number of recommendations. Among these it advised would-be investors to look beyond costs – that “cheapest is not always best”.
It also said storage projects should be assessed on a case-by-case basis because revenue streams may differ geographically and likely vary over time. “Examine storage through holistic case studies – generic cost estimates are not sufficient,” the study advised.
Christoph Frei, secretary general of the World Energy Council, said: “Too often the industry only talks about one half of the profit formula, namely cost. Policymakers should recognise the wide span of market places that can benefit from energy storage. These range from bringing down the cost of home solar systems, enabling the electric car industry to grow, helping electricity suppliers to manage problems when the grid goes down or there is grid overload to taking advantage of market price fluctuations and selling electricity across borders.
“To take full advantage of the growing wind and solar electricity shares, policymakers must review electricity market design so as to incentivise the build-up of storage capacity and ensure reliable and affordable electricity supply.”
Looking ahead, the study forecast energy storage costs would fall by as much as 70% over the next 15 years.
It said solar storage would become more competitive as new battery technology drives prices down. While batteries are currently too expensive for large-scale use, improving technology is cutting costs, which means storage systems could replace some plants and avoid the need for new ones, as well as reduce demand for oil, the report added.
Frei said: “Energy storage is a critical catalyst of the energy transition whose benefits are still undervalued. The costs have already come down, but will have to fall further for a much broader roll-out and use in household and E-mobility. The investment community has good reason to be excited about the innovation and business models that will emerge from new opportunities.
“There is a bright future for energy storage with significant innovation potential. With the cost of capturing and storing wind and solar energy coming down, its deployment across the world will increase. The market is right to be enthusiastic about storage of energy, not just because of the cost reductions that it brings, but also because of additional revenue and other benefits that specific technologies in specific contexts can deliver.”