The Price of Li in Vegas
Alright, so it’s Reno, not Las Vegas, but the important thing is the price, not the place. After that, the most important thing is scalability, and there is reason to believe storage technology is about to start scaling in a big way. For the moment, the most desirable place will probably be your car or garage. Lithium (symbol: Li) comes third on the periodic table, after Hydrogen and Helium, the elements that fuel the sun, and now this cosmic trinity can feed your vehicle. But that’s not all.
The factory pictured above is scheduled to begin production in 2017 and reach peak output by 2020. And if you are wondering where Tesla will get its lithium have a look at this recent article. But, of course, even though cars, on average, spend 95 percent of their time doing nothing, and garner most of the battery storage headlines, there are plenty of other ways to store power and light which you must otherwise use or lose, even if it is renewable.
You may be asking yourself: where does the price need to be for various applications to take off and when will that occur? “For the past century it has been cheaper to schedule coal, gas and hydroelectric generators than to store energy in batteries,” said Hugh Bromley, an analyst for Bloomberg New Energy Finance. “That is starting to change as technology costs are pushed down the learning curve, largely due to the experience and scale nurtured in the consumer electronics and electric vehicle industries.”
According to Boston-based Lux Research, storage is a $33 billion global industry that generates nearly 100 gigawatt-hours of electricity per year. By 2020, Lux expects that figure to rise to $50 billion while generating 160 GWh, which would mean nearly one-third of the total would come from the Reno area. Lux figures that EV battery prices will drop to around $175 per kWh, at which price a 60 kWh battery capable of going 200 miles would cost about $10,000, leaving plenty leftover to build an average (USA) $32,000 vehicle.
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Image Source: UtilityDive
Bloomberg predicts that roughly 2 gigawatts of storage will be installed this year, mostly in the U.S., Germany, Japan and South Korea. GE says that the costs will fall in half by 2020; the company has 40 megawatt-hours of systems in operation and will install another 65 MWh over the next year. Their general manager for storage, Pratima
Rangarajan says: “We are ready to go to the next stage, which is the scaling stage.”
GE Gets Current
In fact, GE is so gung-ho about the prospects it has formed a new division, GE Current. Their website trumpets the new arrival: “Introducing Current, powered by GE, a digital power service built to transform the way we use energy. THE FUTURE OF ENERGY IS HERE. Current, powered by GE, will meet the unique needs of a wide range of utility, Commercial & Industrial and municipal customers . . . Current will deliver a combination of financing with GE's physical and digital capabilities across energy efficiency, solar, storage, and onsite power.”
In other words, batteries aren’t just for cars, phones and calculators anymore; they have begun to make their presence felt in buildings and even at the grid level, which matters to investors because that is the biggest machine on earth. It is not only the biggest, it is the most important and it is on the verge of a massive overhaul, which means that trillions are at stake.
The National Academy of Engineering declared the electric grid to be the single greatest engineering achievement of the 20th century. The grid does have one flaw, though. “The grid is the biggest supply chain on the planet – and it has zero inventory,” says battery luminary and MIT professor Donald Sadoway. “The electricity that powers the lights in this building was generated just moments ago. . . . It doesn’t have to be raining when you’re taking a shower because we’ve got cisterns,” Sadoway says. “If we had something analogous to that for electricity, it would make the supply chain so much more stable.” Related: Iran May Not Be That Attractive To Oil Industry After All
According to the Energy Storage Association, “Wholesale markets are leading the rush for storage.” Executive Director Matt Roberts says “the New York ISO, MISO, SPP, ISO New England, ERCOT, and the California ISO already have or are in the process of instituting ‘market structures that value the services energy storage provides.’. . . And there are gigawatts of projects already on planners’ horizons.
“With this increase in storage, a new paradigm is emerging for balancing generation and load because ‘energy storage falls on both sides of the equation,’ explained Black & Veatch Management Consulting Division Manager Benson Joe. ‘This leads to the question of how energy storage will be used.’ ”
Multi-Purpose Batteries Produce Value Now
Source: Rocky Mountain Institute
Storage is a broad and somewhat complicated topic because it refers to numerous technologies and applications. The sector is developing rapidly and so it may seem bewildering to investors to know what to bet on and, perhaps more importantly, who to bet against as cost-effective, scalable storage is going to upset a number of well-oiled and hitherto well-stocked apple carts. Related: NatGas Glut Mirrors The Problems Facing Oil Markets
At the epicenter of the discussion is the recent paper from the Rocky Mountain Institute (The Economics of Battery Energy Storage -- October 2015) which spells out 13 distinct services batteries can provide, as pictured above. The ideas produced in this report were digested by 2,000 attendees at the Energy Storage North America conference in San Diego (ESNA 2015 – Oct. 13-15. A review and analysis of those discussions by RMI spokespeople is available here. Highlights include:
1) Batteries deliver the most value when they are placed near the load.
2) Over the last few years, most industry conversations have focused on the cost of energy storage. Due to recent announcements on battery costs and a new focus on storage’s ability to deliver multiple services, the focus of the conversation is now shifting to value stacking.
3) [A] well-utilized energy storage system that delivers a stack of value to different stakeholder groups is much more complicated than financing a solar system, since the revenue stream is more complex. What makes storage so valuable to the grid—its ability to deliver multiple services to multiple stakeholders—also makes it difficult to finance because each of those services carries with it a different risk profile.
4) In most cases . . . behind-the-meter energy storage will have the most significant role to play in the grid of the future.
5) The energy storage market is only in its infancy and is poised for huge growth in the coming decade. In 2013, 56 MW of storage was deployed. To date in 2015, that number is 230 MW, and over 290 MW is forecast for 2016.
Another recent, insightful report comes from the Clean Energy Group. (It is cited and analyzed by Stephen Lacey at Greentech Media here. “The report was written for two reasons: first, to show that affordable housing can be a viable market for installers, and second, to show that solar-plus-storage is viable as a resiliency tool to protect against outages. ‘As we worked to examine the economics of these systems in the multi-family affordable housing sector, we began to realize how persuasive the economics for solar-plus-storage projects can be -- effectively meeting a building’s common area electricity demands from clean energy while providing resilient power for free, in many instances,’ wrote the authors.”
This is good news for a number of reasons, and may even fly in the face of seemingly bad news from regulators in Hawaii who just issued a ruling that will end net energy metering (NEM) for all new solar customers. This is no small matter and probably an industry test case as Hawaii leads the U.S. in solar hook-ups, with 16 percent of residents in Oahu having PV on the roof.
Hawaiian Electric (HECO) has proposed two different tariffs instead of the NEM program which, in effect, reduces the value of excess PV production to wholesale from retail pricing. However, even at 15 to 28 cents per kWh, rooftop producers shouldn’t complain. (Hawaiians pay the highest rates in the U.S. at around 38 cents vs. the national average around 12 cents per kWh.)
“These options [the proposed tariffs], compared to NEM, are bad news for traditional PV customers for one main reason: typical solar customers in HECO only directly consume about half of the energy that their PV systems produce. The rest of the solar kilowatt-hours are exported to the HECO grid. With NEM, the number of solar kilowatt-hours consumed on site doesn’t matter, but under both of these new tariffs, exported energy is worth either less or nothing depending on the tariff.
“But here’s the good news: demand flexibility and battery storage can help capture the full value of rooftop PV for future solar customers. With this ruling, innovative third parties have an opportunity to bundle distributed energy resources in ways that make them more valuable to customers and the grid. The rapidly-evolving, high-PV situation in Hawaii provides opportunities for demand flexibility and battery storage to lead towards a more-integrated grid that reduces costs and enhances reliability for both customers and the utility.” (Source: RMI)
Chart of SolarCity Shares
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SolarCity may be the chief beneficiary which could explain why their shares are only down by half from the peak while those of Sun Edison have fallen 75 percent. How is this possible when just a few months ago solar YieldCos were the talk of Wall Street? Has income gone out of favor? Has the collapse of oil prices put out the renewable energy fire? In both cases the answer is probably no. SunPower shares are even for the year, and shares of First Solar are up, which could be related to the fact that both these companies are profitable; the same cannot be said for the first two names. (So, there is a hint that investors should heed.) Related: How Long Can OPEC Hold Out?
The crisis facing PV (as well as wind) project developers in the absence of any place to store the power is that the price collapses due to oversupply. Recall that “The grid is the biggest supply chain on the planet – and it has zero inventory.” Who is going to want to invest in the next array that drives the price to zero? Batteries (and other storage options) will eventually solve this problem. However, like the sun itself, this won’t happen overnight.
Chart of SunEdison Shares
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The last word belongs to RMI, who have done so much to clarify the discussion first around grid defection and now around the value of storage: “Homes with solar PV, smart controls, and a battery deployed in response to HECO’s new tariffs are capable of delivering all 13 of these services. Moreover, our research shows that batteries deployed for solar self-consumption typically are only used for one-third of their useful life. That means they can be re-dispatched to deliver other services to the grid much of the rest of the time.
“Batteries deployed in response to HECO’s tariff could deliver a stack of other services to HECO such as frequency response, voltage support, and distribution upgrade deferral, and the revenue associated with these additional services could further improve the economics of solar PV systems paired with smart controls and batteries.”
Who knows, perhaps eliminating net-metering is that best thing that can happen to solar energy. Now, in the winter of their discontent, it would be ironic if weak utilities cut their own throats by getting rid of subsidies altogether, inadvertently speeding up the adoption of PV plus storage. Speaking of handouts, the initiation of a carbon tax would in fact put an end to the world’s costliest subsidy which seems only to benefit the fossil fuel industry. Miles that come from feeding sun and wind to your garage are cheaper and cleaner. And power that can be stored during peak hours is worth more than power that can’t, for everyone involved.
It doesn’t have to be a Tesla for the batteries to matter as EVs have just reached the million unit milestone; and the top sellers are:
Nissan LEAF (approx 200,000)
Chevrolet Volt (approx 100,000)
Tesla Model S (approx 85,000)
Toyota Prius PHV (approx. 74,000)
Mitsubishi Outland PHV (approx 70,000)
Mitsubishi i-MiEV (approx 50,000)
BYD Qin (approx 39,000)
BMW i3 (approx 30,000)
Renault Zoe (approx 30,000)
Ford Fusion Energi (approx 24,000)
By Henry Hewitt for Oilprice.com
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