Global revenues from installed energy storage systems are expected to grow from $605.8 million in 2015 to $21.5 billion in 2024, according to Navigant Research, as costs fall and deployment spreads across the commercial and residential sectors.
The latest studies show how growth in grid-scale energy storage is particularly strong in the US market, on the back of demand coverage requirements for utilities and increasing renewable power capacity.
According to a recent report by the Rocky Mountain Institute (RMI), PV solar-plus-storage has reached grid parity in some customer segments in Hawaii, and grid parity will likely be attained by 2030 — or even as early as 2020 — for tens of millions of commercial and residential customers in states including New York and California.
RMI is an independent, non-partisan, non-profit US research agency that supports the efficient and restorative use of resources.
“Solar-plus-battery systems will reach grid parity — for growing numbers of customers in certain geographies, especially those with high retail electricity prices — well within the 30-year period by which utilities capitalize major power assets,” RMI said.
Source: Rocky Mountain Institute’s The economics of grid defection
PV Insider has investigated how the costs related to energy storage are falling and how smarter technology is allowing PV operators to earn a better return on their Operations and Maintenance outlay.
“Many utilities [in the US] are adopting a positive view of energy storage,” said Ron Van Dell, president and CEO of ViZn Energy Systems.
This is in part due to the challenges with renewables and also the asset deferment that storage allows for in a distributed system.
Van Dell said that several segments of the energy storage market are strong, for example, the commercial and industrial, as well as thin-tied micro-grids.
“Utilities are beginning to adopt more rapidly, especially in regions that have a high percentage of renewable integration,” said Van Dell of the US market.
Recent examples of solar companies in the US investing in energy storage systems include SolarCity, which in April activated a fund including an investment from Credit Suisse. The investment is expected to finance more than $1 billion in commercial solar energy systems — including battery storage systems — for businesses, schools and government organizations across the US.
Demand Logic, a SolarCity battery storage system, will be installed to further reduce energy costs by using stored electricity to reduce peak demand and associated utility demand charges.
SolarCity and Credit Suisse finalized the deal in February and began funding the first projects in late March. The fund — believed to be the largest of its kind — is expected to finance more than 300 MW of new commercial solar projects over the next two years.
In November 2014, Stem, an advanced energy storage technology, software and data analytics company, was awarded 85 MW of local capacity procurement contracts by Southern California Edison (SCE).
Under the terms of this multi-year agreement, Stem will deploy its advanced, behind-the-meter energy storage solution at customer locations in the Western Los Angeles Basin to act as dispatchable capacity to enhance the local reliability of the region.
In another example in India, US-headquartered SunEdison recently purchased 1,000 of Imergy’s Energy Storage Systems (over 100 Mwh) to bring electricity to rural villages.
The SunEdison deal meant more than just a contract for Imergy, which specializes in a vanadium-based flow battery system. According to SunEdison, it will increase its equity investment in the battery storage company.
“This strengthens the supply relationship between the two companies as SunEdison begins deployment of its extensive rural electrification program in India,” SunEdison stated in March.
Ahmad Chatila, president and CEO of SunEdison, believes that energy storage is the “perfect complement to solar-powered mini grids” because it enables the solar power operator to provide dependable, 24/7 electricity.
Ingredients for growth
Energy storage is a global market and will increasingly become a larger part of the O&M spend for those solar plant operators with an international portfolio.
ViZn agrees with the industry models of Navigant Research, which estimates that grid-scale energy storage will generate more than $68 billion in revenue between 2014 and 2024.
“We anticipate the growth to be even larger as grid-scale energy storage is adopted,” Van Dell said.
“Both wind and solar benefit greatly from storage — solar from cloud chop and peak shifting, and wind from curtailment reduction, firming and power quality,” he said.
Expected growth in US energy storage sales is on a par with growth in the rest of the world, according to Jack Stark, chief financial officer of Imergy.
The growth drivers behind the markets are different, but there are some common themes, he said.
“For example, in Europe, it’s clearly a market where the penetration of renewables is driving the need to balance the intermittency and reliability of those renewables,” Stark said.
“In the US, you have renewable integration, but you also have demand management, peak load shifting and so on,” he added. “In India, Southeast Asia, and the South Pacific Islands, you have microgrids; and in mainland Asia, you have renewable penetration and a growing desire to get off of fossil fuels where storage can help balance the load to accomplish that.”
Energy storage enabling technology (ESET) is a portion of the energy storage value chain undergoing intensive scrutiny, according to Navigant.
Manufacturing innovations and higher volumes have enabled battery prices to fall as much as 40-60% in the past 18 months, according to Navigant.
Now that battery prices have responded to cost pressures, the rest of the balance of plant — or the ESET portion of the system cost — is under more pressure to deliver more consistent pricing. Once this happens, more transparency in overall energy storage systems (ESS) pricing is expected, allowing the industry to scale further, a Navigant report said.
Canadian solar and energy storage company Supervault Energy Inc has signed a license and development agreement to use certain UCLA-developed patented graphene technology for electricity storage as a battery alternative. Supervault is a joint venture formed in March 2015 that is 50% owned by Sunvault Energy Inc.
Sunvault Energy also has a solar technology chipset that allows for the generation, transfer and storage of energy within the same unit.
The UCLA created patented process can be used in the manufacturing of a Super – Super Capacitor, which is bolted on to Sunvault’s technology or used for systems with any battery-type.
The combination of these two technologies enables energy users to create, transfer and store large amounts of energy within the same unit.
The company believes its unique selling point is that it can cost effectively size these units to any power size, which revolutionizes the world of energy management, generation and storage.
According to Imergy’s Stark, the appetite for energy storage systems for PV solar plants is currently larger than that for wind energy.
“More and more you’re seeing situations where PV-plus-storage is cheaper than PV-plus-diesel or PV-plus-grid. Wind could be a big player over time, but it’s not yet, but we expect wind to gain more momentum in the near future,” Stark said.
Some of the financial benefits of energy storage are already paying off in certain areas of the US.
“When storage is added to PV in certain areas of the US, it’s cheaper than grid power. We’re seeing that in small microgrid applications in Hawaii and the Caribbean, for example,” he said.
The main purpose of the Dominion Solar project at Randolph-Macon College with ViZn, announced in April 2015, will be to smooth the variable output from the solar array and to maximize the usable amount of solar electricity.
The project will study the impact and benefits of community solar projects to help Dominion gain better understanding of the technology, said ViZn’s Van Dell.
Despite promising SCE investment in California, the grid-based energy storage market is still tackling inconsistency. Economies of scale have yet to translate into accessible system costs for the end user, according to Navigant.
Because energy systems are not only made up of a core storage technology — such as an advanced battery or a flywheel — they also consist of power conversion systems, software and controls.
This combination of hardware and software systems calls for systems integration expertise to deliver a fully “intelligent, bankable system” to the customer.
One of the technical challenges associated with distributed solar power is intermittency. ViZn supplies a storage system that does not rely on a ‘just in time’ generation-consumption model that, according to Van Dell, “wastes much of today’s solar and wind capacity.”
Many storage systems work similar to a UPS or a typical home or computer system, which Van Dell calls a “reactive power source” that is good for relatively short periods of time to bridge the gap between power cuts and restoration, or to carry the load until a backup diesel generator can be brought on line.
“The real need in the industry is to charge the battery during the sunny hours, and then discharge over a period of 2-3 hours during the evening peak hours, in essence storing sunlight for the high power evening demand,” said Van Dell.
The company’s grid storage battery is based on non-acid Zinc/Iron chemistry, enabling manufacturing with inexpensive construction materials.
The company said that its battery stacks are molded construction with proprietary elements that have overcome the “shunt issues historically afflicting flow batteries.”
ViZn’s two primary products are targeted at the microgrid market — the Z20 is an 80kw/160kwh system housed in a 20ft shipping container; the GS200 is a building block of the ViZn 1 MW assembly using five 20-foot shipping containers providing 3 MWh of energy.
“Financial benefits can be seen immediately in monthly bills,” Van Dell said. “If the solar and storage system is sized properly, the high cost of demand-charges can be reduced significantly as well. Just the energy deferment alone can see a return on investment in as short as four years in many cases.”
“On top of that, a storage battery has the ability to firm poor quality power, reduce or eliminate backup diesel, and generally take under-utilized wind and solar installations, making them more efficient to reduce energy curtailing,” he said.
According to Lux Research, lithium ion (Li-ion) battery technology is dominating the emerging grid-tied storage market. In one of its reports published earlier this year, it said that 90% of proposed grid storage projects in 2014 are set to be supplied by Li-ion technology.
In March 2015, the US held the top spot for the world’s grid-tied storage installed, with 418 MW across 250 projects, according to Lux Research. However, we illustrate Germany’s position on energy storage batteries, given it is a country with a high share of solar power.
Source: Lux Research, Inc.
“We are doing everything we can to reduce energy storage costs,” said Stark. “As a normal course of business, we address every component of our battery to look for opportunities to reduce costs and increase efficiencies – ranging from electrolyte to the power stack to our electronics. But our primary focus is to partner with a global contract manufacturer with access to the lowest-cost materials worldwide.”
Stark said that Imergy is “gratified” that FoxSemicon is its manufacturing partner and believes its partner will be instrumental in helping to continue to drive down the cost of our energy storage platform while delivering the high performance and efficiency.
“Cost was a major design requirement in the development of the ViZn flow battery,” Van Dell said.
“The alkaline zinc-iron chemistry is inherently non-toxic and non-acidic, which means less system complexity. The system is designed to use abundant, available and inexpensive materials that reduce the capital costs as well as O&M,” he added.
Many of the applications that ViZn storage performs do not directly relate to investment return, according to Van Dell.
“For instance, in a micro-grid, reductions in fuel costs are directly measurable, but the avoided maintenance — wear-and-tear and O&M associated with fossil fuel generation equipment — is difficult to measure. Energy captured that would have been curtailed and reduced demand charges are easy to measure, but capital deferment of infrastructure upgrades, because of the local capture and dispatch of power, is very hard to measure,” Van Dell said.
“For storage, the actual energy cost benefits and any demand charges avoided combined with any incentives are included in the typical IRR calculations. Energy savings begin right away, and environmental benefits are immediate and long-lasting,” he added.
Areas to improve
According to RMI Outlet, Rocky Mountain Institute’s blog, there are a few “easy to solve” challenges that could reduce costs, as well as an array of more fundamental challenges for the energy storage market, including the lack of standardization in a variety of key elements.
These are specialized interconnection protocols on how a battery is connected to the grid and what it is allowed to do, and lack of interoperability with other systems (how multiple batteries talk to each other, and how batteries talk to other things, like a solar plant or home energy management system).
RMI does not believe that solving one side of the energy storage equation — reducing costs — will automatically lead to the creation of a thriving energy storage ecosystem.
RMI believes that the US electricity system needs to evolve and allow energy storage systems to “compete with other energy resources on a level playing field.”
Source: Rocky Mountain Institute.
An orange bar that climbs above the dotted black line indicates a profitable business case under current cost and rate structures.
An orange bar below the dotted black line indicates it is not currently profitable to pursue that business case.
“For anyone following the energy storage industry, this makes intuitive sense: the frequency regulation market in PJM Interconnection territory (14 states) and the demand charge reduction market for commercial customers in California both currently offer cash-positive scenarios for energy storage companies, such as STEM and Coda,” RMI said.
But other opportunities, such as self-consumption in Arizona and rate arbitrage in California, currently have system costs that are too high and use case revenues that are too low to deliver a compelling value proposition.
RMI hopes to educate and work with utilities in the near-term to better understand how distributed energy storage can reduce costs on distribution systems to drive regulatory change and open up entire new markets for distributed storage.
“Cost-effective distributed energy storage is capable of helping electricity systems transform into low-carbon, secure and reliable backbones of communities large and small,” said RMI.
Source: PV Insider