For faithful followers of EiD, the year could not come to an end without a good story on energy storage. Nick Butler provides an excellent blog on the Financial Times website about recent developments.
Energy storage — the shape of things to come
Storage — whether of grain or of knowledge through the printed word — has been a crucial element in human development. Of all the many technical advances that are transforming the energy business none is potentially more important than storage: it give us the ability to control the way, and crucially the timing, of energy consumption. Used on a major scale it could help to make heat and light available to those outside the commercial economy and could radically alter the energy mix.
Two excellent recent research reports summarise the current state of the art in the field and offer some predictions. The first is from Lazards and is the latest in a series assessing trends in the costs of different mechanisms. The second is from Moody’s and concentrates on the advances being made in reducing the cost of batteries.
In discussing storage it is important to demolish two myths. First, the technological advances are not about to transform the energy system to the point where a major proportion of consumers defect from existing distribution systems. Second, it does not require a dramatic breakthrough for making it on a significant scale to become economic.
On the first, by far the most likely next step is the integration of storage mechanisms into existing grids and other distribution systems in ways that manage peak loads and thus contribute to reducing the necessary generating capacity or other forms of supply.
On the second, the story is one of gradualism. The core technologies are known and are advancing all the time. Some are already commercially competitive. You are probably reading this on a computer that holds power for much longer than was possible only a decade ago. There could well be developments that would change the entire energy system as we know it — but a eureka moment is not necessary. Incremental change is already underway. The Moody’s paper notes that battery costs have fallen by 50 per cent in the last five years. The Lazards one reports industry expectations of a further significant decrease over the next five years and says that if the projections being made materialise, “some energy storage technologies may be positioned to displace a significant portion of future gas fired generation capacity in particular as a replacement for peaking gas turbine facilities”.
The reports are complex but worth the effort if you are an energy consumer. For those in the industry and for investors they should be essential reading because continuing advances in storage could overturn established business models very quickly. Many of the technologies already have a strong industrial base, which is helping to reduce production costs. Many more are still at the early stage of commercialisation, building on research in universities across the world. I hope to write more about some of the breakthroughs in the next few months.
There are multiple storage technologies — from lead acid batteries to flywheels — each with particular applications. Pumped hydro systems leverage flows of water. Lithium batteries can balance power to maintain frequency standards. Lead acid, sodium, zinc, lithium ion and flow batteries can help manage the challenges of intermittency. There are also uses at the production and at the consumption end of the supply chain — or “behind or in front of the meter”.
Some of the techniques, such as pumping water, have been in use for centuries. Others, such as lithium ion, are not yet commercial but the pace of improvement in costs is impressive.
Storage can be used in conjunction with any form of supply from coal to hydro and any use from transportation to heating. In every case, it improves efficiency by allowing consumers to use energy when they want rather than only at the moment of production. Economically, the greatest impact and the most significant benefits will accrue to the renewables sector where a greater proportion of supply is currently wasted and where intermittency forces users into substantial back-up costs. Advances along with falling costs promise to make solar the power source of choice in the 21st century. If governments want to decarbonise the economy it is hard to think of a better use for public money and subsidies than research in storage.
The key conclusion of the two reports is that storage is getting cheaper at a rate that is liable to challenge at least part of the existing energy system within five years. The conventional alternatives that are under threat from this sort of competition start with gas turbines but extend to expensive plans to upgrade transmission lines and distribution systems.
When serious and objective financial institutions start saying such things, investors and companies involved in the old energy economy would be foolish not to take notice.