What market trends should be keeping an eye on in 2018?
There’s been a change in the storage industry. Last year we were most prominently talking about the customer side-of the meter, when products like the Tesla Powerwall attempted to sell small-scale storage to the consumer market. This year will be remembered as the first time that we really saw some movement on the utility side of the meter. It has a much larger volume than the consumer side of the meter ever had, but utilities are notoriously conservative and are slow adopters of new technologies. We’re just beginning to see some real indication that major utilities in the country are looking at major storage projects to compete with gas powered peaker plants. If this trend continues, it is probably going to considerably enhance the market for storage going forward, perhaps at a faster pace than any of us had originally anticipated.
Can you break this down between market and technologies?
The big technology question in storage is whether lithium-ion has effectively captured the market and is going to lock out all competing technologies through the near future, particularly flow batteries among others. It has always been assumed that because of its cost structure, lithium-ion technology would be the battery of choice for applications requiring storage of four hours or less. For storage projects that require four hours or more, flow batteries and other types technologies would be able to compete because of their inherent lower cost at scale. In 2017, it was a real surprise that lithium-ion seemed to be the technology of choice for four-plus hour storage projects and that is really due to two things: the rapid decline in cost for lithium-ion batteries, and the fact that people are just getting comfortable with this technology.
If flow batteries can achieve some sort of traction in the marketplace, there may well be a longer-term, viable economic alternative to lithium-ion batteries on large storage projects, although that depends on new technologies getting a good footprint in the market in the next couple of years. If they’re not able to do that, I think you’re going to be seeing almost all electrochemical energy storage devices used for storing electricity on the grid based in lithium-ion rather than other chemistries.
Now, what happens longer term? What are the technologies that will eventually supplant lithium-ion? There are the new technologies coming down the pike that will deliver higher energy and power density than current lithium-ion. Solid state batteries and eventually lithium-sulfur batteries are still a few years away. You might also see some zinc, sodium and sulfur batteries starting to get some play. But for the foreseeable future I expect this to be a battle in the marketplace between lithium-ion technology and flow battery technology. The real question is whether or not lithium-ion is able to close out the other technology competitors in the marketplace over the next of couple years, and that’s going to be a very interesting story to follow.
Which role does solar-plus-storage play in the future energy mix?
Solar-plus-storage certainly will play an important role for all the reasons that have long been identified. We’ve seen high penetration of storage on the grid for frequency regulation, especially in the mid-Atlantic grid operator PJM Interconnection’s frequency regulation market, which is really the first market to really open itself to short-term energy storage technologies.
Longer term, we’re seeing larger state-wide storage targets come up in the news. For example, Andy Tobin, commissioner of the Arizona Corporate Commission, recently spearheaded a proposal for the biggest storage mandate in the country – 3 gigawatts of storage in Arizona by 2030. That’s largely driven by Arizona’s concern with its ability to really integrate an abundance of solar into a more reliable and consistent energy resource on the grid. Commissioner Tobin sees storage as being the future, and his impressive proposal reflects more than twice of California’s current storage mandate despite the difference in state size – that’s really driven by solar-plus-storage.
Will utilities include storage in long-term resource plans in the up-coming years?
Xcel Energy recently received bids that had a median cost for solar-plus-storage at $36/MWh, that has or will make other utilities take notice. By comparison, I think the current cost of operating a gas peaker plant is generally assumed to be close to $87/MWh. If Xcel is able to build solar-plus-storage projects at less than half the cost of the assumed price of generating electricity through gas peaker plants, that’s really going to start getting the attention of utilities around the country. Jurisdictions such as Colorado, Arizona and California have an abundance of solar as well as wind some in cases, making them natural first adopters. Adoption will be slower in areas where renewables are less prevalent but I think that the positive economics of solar-plus-storage is now catching the attention of the most skeptical folks in the utility sector.
What is the most effective way an energy storage project / company can differentiate itself from its competitors?
Cost is really the bottom line for buyers. When it comes to technology, sales teams need to understand that any customer buying a long-term asset is going to be very concerned about reliability, and will look towards proven technologies that are likely to perform over a decade or more. I think that is the challenge for some of the flow batteries manufacturers in the market right now, just because there haven’t been enough deployments for people to get that kind of confidence. We’ll have to see over the next few years whether or not enough flow batteries will enter the marketplace such that buyers will begin to get that confidence. Right now, we’ve appeared to have passed that critical stage where lithium-ion is seen as a mature technology that is reliable in the field. Moving forward, technologies will compete primarily on cost and, to a lesser extent, the long-term reliability of the technology itself.
What topic will be most exciting to discuss at ees North America?
Aside from the rise of the storage on the utility side of the meter, an important story for storage in 2018 will be the demise of the partisan approach to storage used in conjunction with renewable energy resources. For years, it has been assumed that the advocates of solar energy and storage tend to come from the progressive side of the political scale –people who are concerned with environmental attributes of energy generation. To some extent, that continues to be the case. The interesting thing about what has happened with the storage mandate in Arizona is that the story of solar-plus-storage is clearly moving beyond partisan politics, as Commissioner Tobin is an influential Republican spearheading this shift. Storage is no longer just an environmental story – it’s a story of producing cheaper electricity that in turn helps create a more reliable grid. We’re going to have to invest in the grid in order to upgrade it, repair it, and keep it modern. In order to do that on the most effective basis, storage and other renewable resources serve as excellent tools to enable the efficient use of other grid assets, and this is something that is finally getting the attention across the political divide.