As the cost of lithium batteries falls and investment spurs new innovations and new battery types, the prospect that batteries might solve the grid-scale storage problem is becoming more likely.
Wind, solar and wave power might steal the headlines for the energy transition, but a key component to completing the move to greener energy sources is storage. Unlike fossil fuel generation, renewable energy is intermittent, it’s there when the wind blows and the sun shines, sometimes to excess, and can dramatically fall in the wrong weather conditions. National grids need a way to store up excess power when it’s generated so it can release it to balance the load on the grid when renewables are less productive.
The solution lies in batteries, but both capacity and capabilities are nowhere near what’s needed. The International Energy Agency has forecast that to reach net zero emissions by 2050, global energy storage capacity needs to increase sixfold to 1500 GW by 2030. Batteries need to account for 90% of that increase, rising 14-fold to 1200 GW by 2030, including both utility-scale and behind-the-meter battery storage.1
Battery technologies
In less than 15 years, battery costs have fallen by more than 90%, one of the fastest declines ever seen in clean energy technologies.2 Lithium-ion batteries are the most common type as they maximise energy density - essentially storing more energy in a smaller space - particularly nickel-cobalt-aluminium (NCA) or nickel-manganese-cobalt (NMC) types.
Companies are also actively researching solutions like lithium-sulphur and solid-state electrolyte type batteries for their energy density and looking at sodium-ion as a safer more cost-effective alternative, even though it is less energy dense.
However, grid-scale storage is more than just a set of batteries, they are complex systems that monitor energy in real-time, managing the flow and balancing the load on the grid. Without sophisticated solutions in place, uptake of renewables will reach a bottleneck at the point that the grid becomes reliant on them. Supply and demand
Grid-scale battery deployment faces two key hurdles - over capacity in the market and their difficult investment case. Consultancy firm Bain estimates that the market for grid-scale storage could expand from around $15bn in 2023 to between $200bn and $700bn by 2030, and $1trn-3trn by 2040.3 But the push to grab a slice in that market has led to the over-capacity that is driving down prices.
China, the global centre for battery production, is already producing enough lithium batteries to satisfy world demand and its industry has announced plans for a further 5.8 terawatt-hours (TWh) of capacity by 2025, more than double the current global capacity of 2.6TWh.4 That will make competition more fierce, creating a market where those who can wait for demand to catch up with supply will be left standing. The other route to survival for battery firms will be to carve out a niche in innovative technologies, whether sodium-ion or solid-state solutions.
The pros and cons of project-level investment
However, amidst the push and pull of supply and demand, individual grid-scale storage projects need to source investment and the nature of these projects has made that difficult. These solutions are a long-term commitment; projects typically run for 20 years or more with battery upgrades. According to EY, they are also highly localized and carry more risk than some other clean energy investments; “success requires understanding the dynamic interaction of regional variations, electricity market design, technology and financing — as well as an acceptance of volatility.”5
Many projects use a colocation model of financing, which places batteries alongside a renewable power generator, offering the security of the more stable revenues from renewable power generation.
Renewable energy, however, and associated storage projects, are inherently more volatile. The rise of negative energy prices have shown the difficulty in scenario planning and modelling for a sector that’s subject not only to the vagaries of the weather but also to the political appetite to support sustainability.
The key factor in favour of grid-scale storage is a big one, though. It’s not something that could happen, but something that has to happen. Energy demand continues to grow and even if countries were to abandon the goal of net-zero by 2050, renewables are needed to feed that demand. Renewables also have a powerful supporter in tech multinationals, who are keen to run their ever-expanding datacentres on clean energy.
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