Energy Storage Spotlight
Tidbits on Energy Storage Costs and Cost Drivers
Welcome to the Energy Storage Spotlight, which presents articles that reflect interesting and unexpected findings based on research conducted for the Electron Boomerang Energy Storage Market Research Service.
Certain battery chemistries (like lithium iron phosphate, or LFP) and certain battery cell designs (like those that use thin electrodes) are better suited for use in high power applications than others. However, these power batteries often cost more, on a $/kWh basis, than batteries that must be charged and discharged at lower rates. Despite this higher $/kWh cost, power batteries offer the lowest-cost solution in many high power applications. This is one of many reasons that a battery’s $/kWh cost alone does not determine whether it is the best option for a given grid-tied energy storage application.
By definition, high power applications involve battery discharge or charge times that are short. Accordingly, power batteries are capable of charging and discharging nearly their full capacity in a short amount of time. For example, a power battery solution may be able to discharge 90% of its capacity in 10 minutes, whereas a less expensive “limited power” battery solution might only be capable of discharging 8% of its capacity in that time period.
It is not uncommon for rooftop solar PV systems, at least occasionally, to produce more power than is needed to meet the electricity demand of the buildings below them. When this happens, the building can either feed the excess electricity back to the grid, or it can store it on-site for use later the same day, after the sun has gone down. The latter approach, referred to as self-consumption of solar energy, is a growing opportunity for behind the meter energy storage in areas where electricity prices are high, and the incentives for feeding excess electricity back to the grid are low.
This then raises the question, how large should the energy storage solution be? Capturing 100% of the excess solar energy produced on any given day might require a fairly large energy storage solution, which could be expensive. On the other hand, purchasing a smaller solution would mean wasting some of that excess solar energy. At first glance it appears that a large energy storage solution makes sense: if a building can save money by consuming more of its solar energy on-site, it might as well maximize the savings by using energy storage to shift as much excess solar energy as possible. However, in many cases it turns out that the opposite is true, and a smaller solution provides a better economic return.
The uninterruptible power supply (UPS) industry is going through changes. After decades of dominance by valve regulated lead acid (VRLA) batteries, lithium ion (li-ion) batteries are starting to move in. Although li-ion batteries are more expensive up front and require more complex battery management systems, they are expected to last much longer than VRLA batteries in the field, resulting in lower costs on an annual basis. This annual cost advantage, combined with the higher energy density and lower cooling costs of li-ion batteries, could lead to a steady transition away from VRLA batteries in the coming years.
Beyond changing the cost equation for UPS systems, li-ion batteries also have the potential to introduce new business models for the use of UPS systems in commercial and industrial buildings. This is because some li-ion batteries last longer than VRLA batteries when frequently cycled, creating the possibility that a single li-ion battery system could provide not just UPS services, but additional, revenue generating or cost saving services as well. UPS manufacturers are perfectly positioned to take advantage of this emerging opportunity to supply multi-service, rather than single-service, UPS systems.
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