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Magazine Feature

This article was originally featured in the edition: 2018 Issue I

Storage Will Play Key Role In Power Grid Evolution

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The performance and affordability of new energy storage systems will earn them a pivotal role in the evolution of energy grids and double-digit growth potential through 2025, analysts say

Energy storage is fast becoming the technology around which both legacy electric power utilities and renewable energy advocates can agree: batteries are the future.

Energy storage has come a long ways in a short while. In 2016 the amount of utility-connected storage totaled a bit over 1.3 GW, according to researchers at IHS Markit, who project that grid-connected storage will reach 8.8 GW by 2025, with storage of all types growing to 52 GW that same year. Find complete details in the latest analysts report, "IHS Markit Technology Smart Grid and Energy Storage."

Part of the reason for the rapid ascent of energy storage is technological advancement paired with market forces that are driving down prices. Its growth is also due to benefits that cut across traditional, centralized energy generation boundaries and the territory of renewable power generation platforms that stress the advantages of energy independence made possible by decentralized distribution strategies.

Consider the UK's Energy Storage Network and its call for 2 GW in storage capacity by 2020 to frequency balance power loads "“ that goal will likely be reached in 2017, almost three years early. Mainstream governmental agencies in the UK including its Business, Energy and Industrial Strategy (BEIS) agency and regulator Ofgem (Office of Gas and Electricity Markets) support storage as well, according to James Court, a spokesperson for the Renewable Energy Association (REA). Court said recently that the differences between policy makers and regulators mostly settle along two lines: one camp sees storage as a short-term necessity whilst the rest tend to view it as a future requirement. All agree that utility-scale storage is needed.

According to IHS Markit Senior Analyst for Solar and Energy Storage, Julian Jansen, the emergence of storage as a distinct and important component of global energy markets has been building for some time. Jansen's group has monitored stationery storage as a distinct market since 2013, and as part of the renewable energy/traditional utility "˜overlap' years before energy storage grew to require individualized study.

Jansen said the relatively rapid growth of energy storage in recent years came about for many reasons including the evolving nature of the technology (batteries, power management software, manufacturing capacity and so forth.) These factors enabled dramatic price decreases beginning in 2012.

Jansen explained that prior to five years ago, even with widespread market appreciation for the role that storage could play for all types of energy grids and infrastructure, there were practical limits as to how much storage could be added to any systems due to costs, efficiency concerns and the fact that most battery-based systems five years ago were simply not cost-competitive according to many across the industry. This started to change as battery makers saw more opportunities for their products and companies working as system integrators sought to make buying a "˜complete' solar photovoltaic (PV) power plant no more taxing than any other major purchase.

High efficiency energy storage offers residential plant owners the opportunity to optimize their investment by storing power generated during peak solar irradiation periods for use at night or other non-generating periods. Storage also represents an opportunity to condition power frequencies for seamless integration into the home environment with all its sensitive computer controlled systems. For utility-scale energy providers, storage enables them to "˜bank' power for peak demand periods, and to also condition energy fed in from renewable power plants.

The decline in residential and commercial-grade storage costs has been precipitous. IHS notes that since 2012, the cost of Lithium-ion battery cells has fallen about 70 percent at the same time that cells have become safer and efficiency has increased. Battery cell lifetimes also grew longer and the software/hardware to manage power systems and optimize performance has increased many times their 2012 levels.

At the same time, HIS analysts decry the tendency of some market watchers to oversimplify this transition and the emergence of storage as a significant power electronics market. The linkage of storage growth wholly to the rise of intermittent renewables (wind power, photovoltaic (PV) energy, etc.,) is a mistake, says Jansen. He notes that to one needs to only look at the overall picture of how energy generation and consumption is changing to fully appreciate the phenomena. For example, even in markets with relatively low PV penetration and low electricity costs, legacy utility companies appreciate that energy storage has benefits for them, whether it is a better way to achieve frequency balancing, load leveling, or as a reserve power resource for unexpectedly high demand periods.

"Energy storage can be seen as a key enabler for widespread penetration of intermittent renewables; however, explicitly linking energy storage only to renewables oversimplifies the picture. Especially as energy storage costs are coming down, the technology increasingly provides crucial balancing services and helps support constrained transmission and distribution networks," Jansen remarked. "While microgrids have been a buzzword for years, it's really now that battery energy storage has come down so much in cost that we can expect widespread adoption of microgrids for renewable integration, reduction of diesel consumption and the ability to island local electricity networks," he stated.The expectation that storage will emerge as a significant component across global energy markets is creating economic opportunities; IHS projects that storage spending will grow significantly. Jansen's group focuses on grid-connected storage options, noting that this segment alone (about 17% of the projected 2025 market,) will be valued at USD $7 billion in eight years"”a 16 percent compound annual growth rate.

While many factors contribute to the rise of storage in both traditional and renewable energy systems, falling battery prices and increases in quality, ruggedness, power density and reliability have been major factors, Jansen noted. One of the biggest changes has come in the way that lithium-ion (Li-ion) batteries have improved while costs fell 70 percent since 2012. Researchers predict Li-ion costs will fall below USD $200/kWh by 2019. "Really, it's a range of factors, but by far the greatest is investment in Li-ion manufacturing capacity and R&D to improve performance, reduce cost, increase energy density, etc. This is particularly driven by investments to take advantage of the growing EV opportunity and the respective need for Li-ion batteries, which is the strongest driver for the future. We are also seeing heavy support and drive in countries such as South Korea and especially China into future battery manufacturing capacity," Jansen remarked.

As storage emerges as a "˜next step' in the evolution of power generation and consumption, some may wonder if growth projections can be realized without the subsidies that enabled the global renewable energy surge. While the discontinuance of subsidies did affect residential solar/PV markets, simultaneous quality increases of photovoltaic components plus better grid-scale financing options led to the growth of utility-scale PV plants. Market forces that drove down the cost of solar panels are, in a similar fashion, affecting batteries and power management systems. Since energy storage benefits both traditional and renewable energy consumers, the lack of subsidies does not appear to adversely affect the viability of storage as a market, Jansen said.

"The discontinuance of subsidies has been one major factor (in the decline in PV growth across Europe and elsewhere,) but by no means, the only one. Other major factors are: (1 AD/CVD duties from late 2013 that reduced module availability and maintained higher prices in Europe than in other regions, making solar less competitive without subsidies. (2 Retroactivity measures for older installations (reducing project IRR) in several countries that generated widespread investor lack of trust on renewables, which moved investment to other areas, and finally (3 it takes time to move from a FIT scheme to a tender scheme. In addition, even in countries with very good solar irradiation and high electricity prices, that is, countries with good conditions for so-called grid parity, the legal framework did not allow for such tenders or for creating independent IPP; it has taken time to change laws to bring new opportunities for solar projects," he remarked.

Making storage an important aspect of future energy generation and transmission is emerging as a key success metric for groups interested in both renewable and traditional energy. The REA's James Court called energy storage "˜The Great White Hope' for restoring growth in the UK energy sector after many renewables segments, and in particular solar PV, have been hit by support cuts from the government coupled with investor insecurity that cutbacks tend to create. Storage systems"”approved by renewables advocates as well as mainstream power utilities, could turn that around, many believe. In markets not as penetrated by photovoltaic and other renewable systems like the United States, Jansen said even faster growth is expected. "Fundamentally, in many US states the drivers (for storage growth) are unrelated to renewable growth and are what enables the US to be the leading market for energy storage growth in the short-term future. Key factors include: Early growth in the PJM market driven by the ability of energy storage to provide frequency regulation; the creation of energy storage mandates or targets in states such as California or Massachusetts (with many states looking to follow-suit); the very specific rate structures in the US and especially in California that have enabled the C&I market to emerge; for future growth in the residential sector the revision of NEM policies / structures will be crucial; the needs for peaking capacity, which are more pronounced than in Europe (the Aliso Canyon gas leak is the best example here.) Finally, there is generally a greater risk appetite by investors in the US, as well as greater funding available for start-ups. This can often enable companies to put together business models and scale up more quickly," he said. While focused on utility-scale storage requirements, Jansen also noted that the ability to store energy more efficiently and cheaply will impact residential markets as well.

"In the residential sector energy storage remains closely linked to solar PV -- the maximization of self-consumption and the customer taking control of their energy supply are the crucial drivers here. However, as companies such as Sonnen continue to build up VPPs and aggregating residential systems to provide demand response services a wealth of potential business models seems likely."

"In the long-term I believe that in the residential sector it is not about selling hardware (i.e. boxes with batteries,) but about selling integrated energy solutions to customers supporting the transition towards a distributed, low-carbon and digital energy system. Customer empowerment is key for the residential sector," he concluded.




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