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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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Plunging Battery Costs To Trigger Energy Storage Boom

Bloomberg New Energy Finance has forecast a veritable boom in energy storage installations in the coming years with investments hitting US$1.2 trillion by 2040. Falling battery costs will be the driver behind this boom, with BNEF projecting a 52 percent drop in utility-scale lithium-ion systems by 2030. Is this just another super upbeat forecast for the future of energy storage that won’t materialize? Possibly.

It is a fact that the cost of producing batteries for energy storage is falling. Cost reduction, after all, is a top priority for everyone from EV makers to utilities betting on energy storage as a future source of revenues. However, one fact needs to be noted, and it is that the space for cost reduction is not endless.

Indeed, one BNEF analyst told Bloomberg, “Costs have come down faster than we expected,” adding “Batteries are going to permeate our lives,” and he is right. But the fact that battery costs have fallen faster than BNEF expected does not necessarily suggest they will continue falling at the same rate. In fact, it is just as likely that the pace of cost reduction will plateau and eventually slow down, because no industry can keep the pace of cost-reducing innovation at breakneck levels.

BNEF forecasts that by 2040, there will be global energy storage capacity of almost 1 terawatts. That’s if costs of batteries fall as much as projected and if grids can withstand it. The grid problem is more of a potential one now, but as EV adoption rises it is likely to become a real problem in the future. Norway, the most EV-friendly country in the world perhaps has already felt the effect of EVs on the grid.

Earlier this year, Clean Technica quoted a representative of Norway utility Stratnet as saying “The power grid will probably cope, because even though the number of electric cars increase, electricity consumption is increasing at a slower rate. Even when all cars run on electricity, it will only increase electricity consumption in Norway by about 6%, and if charging is done intelligently, the load at peak will only rise a few percent. It’s actually worst on Thursdays, so please don’t charge your EVs on Thursday nights.”

The “if charging is done intelligently” part of this statement is the interesting one as is the “probably” referring to the grid’s ability to cope. Wired also analyzed this potential problem earlier this year, presenting arguments for both a bad-case scenario when EV uptake is very quick, harming the grid, and a good-case scenario when EV uptake stays at present rates, actually benefiting the grid by leveling out daily demand, Wired’s Nick Stockton wrote, and also acting as energy storage outlets themselves.

Related: U.S. Oil Production Is Set To Soar Past 12 Million Bpd

But what about energy storage installations’ effect on the grid? That should be all-round positive, except for utilities that generate power from non-renewable sources. They better start preparing because BNEF’s analysts projected energy storage may rise to 7 percent of the world’s total installed power generation capacity by 2040.

In more good news for renewables, while until about 2030 most energy storage installations will be utility-scale from about 2035 behind-the-meter facilities will begin to take over, which means they will probably be affordable by then, and Elon Musk’s concept of a household featuring a solar roof, a household battery pack, and an EV could become a reality not just for billionaires.

By Irina Slav for Oilprice.com

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  • Josh Gregner on November 11 2018 said:
    Why the fear mongering? You write:

    "But the fact that battery costs have fallen faster than BNEF expected does not necessarily suggest they will continue falling at the same rate. In fact, it is just as likely that the pace of cost reduction will plateau and eventually slow down, because no industry can keep the pace of cost-reducing innovation at breakneck levels."

    This is what was said about the cost of Solar for the past 3 decades. Until today, the cost of Solar keeps falling. Why? Because Solar and Batteries are more like computer chips than Oil wells. In other words, scale effects (incl. better production machinery, better chemistry, new materials used etc. make future generations for batteries cheaper automatically).

    So as long as we see more and more batteries purchased, costs will drop. And as long as costs drop, batteries will be financially viable in more and more places which will accelerate growth of demand for batteries.

    This spells disaster for fossil fuels: their business is not about establishing capacity but to sell a fuel that needs to be constantly replenished. This type of business won't last.

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