Speaking to industry figures and experts, Solar Business Focus found broad consensus that 2014 will not be the year of the pending storage explosion. But with the technology advancing, governments beginning to wake up to the need to give storage the right policy support and serious companies starting to show more than a theoretical interest in storage, the forthcoming year looks set to be a pivotal for paving the way for great things.
In a recent report on grid-connected storage, market analysts IHS offered a ‘most likely’ global scenario forecast that 6GW of installations would be added annually by 2017 (see Figure 1), with installed capacity expected to exceed a cumulative total of 40GW by 2022. Sam Wilkinson and Abigail Ward, the report's co-authors, tell Solar Business Focus that for solar, the fundamental issue is that accommodating an increasing proportion of intermittent solar power on the grid does not fit into utilities' existing business models. Wilkinson believes energy storage is "going to be fundamental in solar being able to achieve the contribution to the overall energy mix that it would like to”.
Leclanché’s lithium-ion cell pilot production line. The company’s residential storage system is due to be launched in April this year. Source: Leclanché.
Steve Minnihan, an analyst at US-based Lux Research, is broadly in agreement with the 6GW annually by 2017 forecast made by IHS, beginning with an upturn in the number and size of installations put in the ground this year, while use cases and the relative importance of the industry will vary from country to region to electricity network.
“I am forecasting that we are going to see much better momentum of projects [in 2014] than we've seen in 2012 and 2013, which were pretty abysmal years – there was an almost complete grinding to a halt of new projects,” he says.
“The vast majority of all the growth is highly concentrated into a few select geographic markets,” Minnihan adds. “If we take Japan, Germany, Italy, Spain, California and Hawaii as well, those comprise the bulk of demand on the residential, commercial and utility side. All these [storage] technologies are applicable to specific regions and markets where there are very positive conducive factors, be it regulatory, subsidies or exceedingly high electricity rates."
Projection of grid-connected storage installations to 2017. Source: IHS.
Residential – forecast, figures and regions
Minnihan expects residential and commercial energy storage to be the sectors that see the most activity over the course of this year – not necessarily in terms of megawatts installed or dollars spent; according to Minnihan, 2014 "is going to be one of the first years where we start to see movement beyond just pilot deployment" in both sectors.
“I have a rational optimism for the residential and commercial markets because we're going to see third-party companies that are offering distributed energy storage management as a package or as a service… in 2013 you really saw companies convincing utilities that this was a realistic approach. So we're beginning to see the actual tangible effect of a certainly very small but distributed energy storage set of assets,” Minnihan says.
US solar giant SolarCity has already begun adding energy storage to its range of services. The company, in conjunction with Tesla Motors, has rolled out DemandLogic, a lithium-ion battery storage system for commercial users as a pilot programme in parts of California, Connecticut and Massachusetts. SolarCity is also conducting a limited pilot deployment of 5kWh and 10kWh storage systems for residential customers in California (see box, below).
SolarCity's head of grid systems, Eric Carlson, says the company is participating early in the market because it sees energy storage as “inevitable” and “a required and obvious solution at very high levels of penetration [of renewable energy]”. Carlson believes successful early deployments will be vital in securing funding and gaining confidence in the concept.
An ASD Sonnenspeicher storage system being assembled. The company has seen only limited take-up of Germany’s storage subsidy. Source: ASD Sonnenspeicher
A pivotal year for utility-scale storage
While the grid-scale problem of dealing with intermittency might be created by the desire to add more renewables to the grid, its impact on solar in the immediate future is debatable outside of countries where the proportion of renewables on the grid is already unusually high.
Nonetheless, Haresh Kamath, programme manager for energy storage at the Electric Power Research Institute (EPRI), a non-profit organisation in the US funded by utilities, believes 2014 will be a "pivotal" year in utility-scale storage. He says effective energy storage could be the most flexible asset available to the grid in balancing the various needs of electricity infrastructure.
“This will be the year that storage has to really put up or shut up,” says Kamath. “People will be looking very carefully to see if we can make an economic case for energy storage, given that it’s relatively expensive – are the costs going to come down and are there going to be other benefits for the grid?”
Kamath says grid operators and others are “looking into the future” and realising that in five or six years they will have to find ways to make the grid reliable. “They are looking at energy storage as a flexibility resource to address that. Things have turned from the way people talked five years ago. People should no longer talk about the mitigation of the effects of renewables, because we’re talking about making the grid more flexible to accommodate more renewables.”
In addition to California, Hawaii and now Puerto Rico, which will all see utility-scale storage driven by regulation, other regions where the storage movement is gaining significant traction include the UK and Japan. Last year the UK saw the inception of Europe's largest flow battery trial in July consisting of a 6MW/10MWh flow battery installed in Leighton Buzzard, England, by German company Younicos, while Japan announced the world's largest battery trial programme, 80MWh in total of large scale batteries, a 60MWh vanadium redox flow battery at one site and a 20MWh lithium-ion battery at another.
Regulation and policy
Kamath believes regulatory policy and government support will be even more important to the growth of the industry in the immediate, Li-ion-abundant future than technological innovation and cost reduction.
While SolarCity's pilot programme was initially funded under a joint federal grant given to SolarCity and Tesla in California, the most well known support scheme for EES globally has been the cash subsidy offering residential PV users in Germany up to 30% of the cost of battery storage systems.
But take-up of this scheme has so far been patchy. Wolfram Walter, chief executive of German residential battery system maker ASD Sonnenspeicher, estimates only around 5% of his customers purchased storage through the scheme as it is too complicated for most potential beneficiaries to understand.
On the other hand, Markus Hoehner, analyst and co-chair of umbrella body the International Battery and Energy Storage Alliance (IBESA), believes that support schemes can serve a useful function just by raising awareness of the subject.
“If we look at Germany, the introduction of a government support scheme for PV battery systems has drawn attention on the topic from the end-customer side. The importance for market growth is much smaller than the impetus exercised by feed-in tariffs on the solar PV market but we have a lot of lessons learned here as well.
“The support scheme established in Germany is quite complicated to apply for, there is no run on that support scheme and market intermediaries will even tell you that a lot of investors are not taking [up] this support scheme - but they invest nevertheless.”
Similar subsidies exist for Japanese residential PV system owners purchasing Li-ion storage solutions, while California also offers subsidies for energy storage systems of up to 3MW in size. It remains to be seen how successful these schemes will be and whether such programmes might be introduced in other territories.
At the larger scale, two of the highest profile examples of a binding regulatory framework for energy storage have been launched in California, where a general procurement target is set for utilities, and Puerto Rico, where since 1 January this year developers of large-scale solar are required to install a certain proportion of energy storage at each project.
California's mandate, issued in the summer of 2013, states that utilities must put 1.35GW of storage onto the grid by 2024, of which 200MW must be procured in 2014, which in practice means this year activity will be restricted largely to acquiring projects and paperwork, according to Abigail Ward of IHS.
In Puerto Rico, meanwhile, projects must meet the minimum technical requirement of providing 30% of capacity for frequency regulation and 45% of power for one minute for ramping purposes. The policy has already been applied to six large-scale PV projects on the island recently approved by the regulator.
While the Puerto Rico mandate is stricter, it was determined on calculations of what the grid, proportionally closer to reaching its maximum capacity for adding renewable energy sources, can handle and provides developers with a clearer understanding of what is being asked of them than utilities in California have been given with their mandate, according to Haresh Kamath.
Kamath says the California target is based largely on solar and what the state electric grid management body, California ISO, predicts solar to look like by 2020. “Storage is there to address that but it’s not directly tied to that requirement,” he says. “It’s almost experimental.”
Of the Puerto Rico mandate, Kamath says: “On the one hand it’s an inflexible requirement. On the other, the vendors know exactly what they’re being asked to do. It may sound counterintuitive but it may make it easier to add storage in Puerto Rico than California. From an economic perspective that makes it more expensive for developers to deploy in Puerto Rico but at least they know what the requirement is so they can do their analysis relatively simply.”
Meanwhile, companies behind the Japanese battery experiments including Sumitomo Electric receive a large percentage of project funding directly through the country's Ministry of Economy, Trade and Industry (METI). A METI spokesman told Solar Business Focus that while taking the technology to the global market is one possible positive outcome of the trial, the main goal of the 60MWh flow battery experiment is to investigate the possibilities for smoothing electricity supply from renewable sources and accommodating more renewable energy on the grid.
As for other regions that have yet to tackle the issue, Wilkinson argues that in all of the developed countries surveyed by IHS, energy storage is “at least being talked about”. Minnihan believes there is also the 'wildcard' chance of at least one emerging economy becoming a big player in the market in the near future.
‘A dynamic market’
It is perhaps an indicator of just how far the energy storage industry, especially in the space where it meets PV has come that InterSolar Europe this year will host the newly launched Electrical Energy Storage show in its own dedicated hall.
Markus Hoehner, whose organisation will be hosting a pavilion-style area where IBESA members at all levels will have the opportunity to exhibit, believes storage is beginning to show up on investors’ radars and foresees growing interest.
“It is a very trendy topic; a lot of investors are really looking for targets to invest in. So generating capital is not a major issue here. The financially driven investors see a very dynamic market, with a good opportunity of growth. We assume that a lot companies will be bought, a lot of mergers and acquisitions (M&A) transactions in the field and in the coming years as well,” he says.
So while 2014 will probably not be the year that energy storage goes mainstream, the experts we spoke to gave us a strong account of a growing industry that is gaining a clearer and more definite idea of the challenges it faces and an undoubted sense that this momentum is continuing. Energy storage is rapidly becoming an issue that PV, utilities and grid operators would be remiss to ignore, especially as moving into the EES space, with its many potential applications, comes ever closer to making good practical and business sense.
Battery technologies: Lithium-ion dominates – for now
The EES market is likely to be dominated heavily by lithium-ion batteries in the coming year, mostly due to the readiness of the technology, driven in part by the crossover from electric vehicle (EV) manufacturers which have scale production of Li-ion batteries already within their capabilities. The closest competitor to Li-ion is the much cheaper lead acid, ruled out as a long term solution due to its short lifespan.
Within Lithium-ion several sub-chemistries are considered more useful than others, including lithium-ion phosphate, used in ASD Sonnenspeicher's systems and which Sam Jaffe of Navigant Research explains has a good power-to-energy ratio for short-term applications and is less combustible than some other lithium-ion chemistries. Jaffe also notes the long-term potential of another form of lithium-ion, lithium titanate, which has a "very long" life span.
Another lithium-ion technology which is considered to have good potential, including a high standard of safety, is lithium-ion titanate, as used in the 3.2kWh home storage system currently being trialled by maker Leclanché. The company has tentatively scheduled the system for launch to markets including Germany by April this year.
“The lead [of lithium-ion] is getting wider rather than shorter as the manufacturing scale builds up,” Jaffe says. “From a chemistry perspective, lithium-ion overall is clearly in the lead. Within the lithium-ion space, the sub-chemistry that’s in the lead, or most popular, is lithium manganese spinel (LMO), that’s what’s in the Chevy Voltz and the Nissan Leaf – most electric vehicles.”
However both Jaffe and Lux’s Steve Minnihan believe that while the price, performance, cycle life and safety of Li-ion positions it well in the short term, the lead that Li-ion enjoys in the race could very well be usurped over the next five to 10 years by newer chemistries and technologies, as Minnihan explains: "I don't have faith that Li-ion is going to remain the dominant technology in five years time, 10 years time, because it's too expensive a battery and too poor performance quality to be the technology that leads this market for decades."
In terms of battery manufacturers, Minnihan claims the space will be dominated by around 15 companies, (see Figure 2) with a handful taking the lion's share. Analysts expect battery costs to fall over the coming years.
Main competitors in lithium-ion storage market. Source: IHS
However, the fall in costs for battery production is expected to have nothing like as steep a gradient as PV. According to Sam Wilkinson of IHS, a steady reduction is more likely than the price collapse that has characterised the last few years in PV production (see Figure 3).
"We're talking about 10% to 15% price reductions a year, not the order of 30% or 40% a year that we saw in solar," says Wilkinson.
Energy storage pricing projection to 2017. Source: IHS
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