How power storage technologies are about to disrupt the energy industry
Blog: Capgemini CTO Blog
Back in November 2017, Capgemini’s World Energy Markets Observatory report praised Australia, which was emerging as the focal point of international battery storage market and spearheading the move to battery technology to bolster the energy grid. Earlier this year, Australia laid the foundation of this energy strategy. Tesla deployed the largest lithium-ion battery in the world to reinforce the fragile South Australian energy grid. Following this first success, other similar projects have already started in the country.
Beyond Tesla’s commercial success, these new generation batteries might solve a challenge as old as the production of electricity itself: energy storage. And down the line, the utilities market won’t be the only one to benefit from this revolution.
What are new generation batteries doing for energy grids?
South Australia went through several tough years. Extreme weather and strong storms caused large-scale damage to the energy grid, proving the weakness of the infrastructure and the inability of “back-up” gas plants to be reactive enough to prevent widespread blackouts. To cope with this extreme situation, the local authorities pledged to provide a cleaner, cheaper, and more reliable energy supply by 2025. Part of this strategy involved investing in storage solutions, and the related state government tender was won by Tesla.
Made up of hundreds of smaller “Powerpack” batteries (the flagship products of Tesla in the battery industry), this gigantic battery park is 30% larger than a football field and was built in just 63 days – instead of the 100 days that Elon Musk promised, because he was confident enough to bet the entire cost of the installation on Tesla’s ability to deliver it that quickly.
Three times bigger than its closest competitor, this lithium-ion battery storage installation has a power voltage of 100MW and can store up to 129MWh of electricity. All in all, this facility will have two main functions:
- Ensuring grid stability: Most of the power capacity will be used to provide grid stability and system security. As it can respond to grid faults within milliseconds. It will provide emergency services as needed (in the event of a major system fault or transmission failure) to last about 10 minutes, which is more than enough to keep the grid stable while the actual back-up gas generators take over.
- Managing the varying renewable energy sources: About a third of the capacity will be dedicated to load shifting by the wind farm nearby.
The battery is directly connected to a wind farm and expected to store and produce enough electricity to supply 180,000 Australian homes. But some batteries are built directly with embedded energy production features. For example, a British company called United Sun-Systems designed a battery that converts heat from the sun into electricity at up to 150kW per hour, and stores it before distributing it as needed.
Six months later, the results from Tesla are a telling example of the potential of batteries. The Tesla battery reduced grid service cost by 90%. When an issue occurs, or maintenance is required on the power grid, the operator calls for FCAS (frequency control and ancillary services), which consist of large and costly gas generators and steam turbines kicking in to compensate for the loss of power. Thanks to this new generation battery, the South Australia state has seen a decline in FCAS costs in the first month of use, estimating the savings at over $30 million in just a few months.
The business case in favor of power storage batteries will only get better in the next few years, as explained in the 2017 edition of Capgemini’s World Energy Markets Observatory. Battery costs have already decreased by 80% from approximately $1,000/kWh in 2010 to approximately $227/kWh in 2016. Between 2025 and 2030, battery pack costs should also fall below $100/kWh. Plus, it is highly likely that regulatory measures (linked to air pollution) and financial incentives will encourage this change and accelerate this delay. Between now and 2020, over 29.4 GW of new storage capacity is forecast to be deployed worldwide across all sectors at a compound annual growth rate of 60%.
Companies in the sector are well aware of this potentially huge market. This explains why, for example, Daimler plans to invest $1 billion in two large battery factories and Tesla Motors keeps making huge investments in its massive battery factory. It is just a matter of time before the global utilities market becomes significantly impacted. According to Morgan Stanley, the market for the demand of energy storage is expected to grow exponentially, from about $300 million a year to as much as $4 billion in the next two to three years.
What game-changing impact will this have on the utilities market?
- A boost to the renewable energy market
Batteries are expected to leverage our current sustainable energy sources and take the whole renewable energy market to another level. In a recent study, “Renewable Energy Storage: The Next Big Power Play,” Morgan Stanley underlined that the increasing efficiency of the current battery technology (mainly lithium-ion ones) is deeply overlooked by specialists and is in fact an “underappreciated disruptor.” The experts believe that energy storage is the perfect answer to two of the main challenges created by the increasing share of renewable energy in our energy mix: power supply and demand mismatch and unpredictability of power output.
In a nutshell, such massive energy storage can store energy produced by wind farms and solar panels when the wind blows or the sun shines and maintain levels by releasing the loaded power when they do not. It seems simple, but it is in fact a step change in the way we think about energy and especially about grid management. The base load/peak load paradigm could disappear as energy storage units will be able to fill the gaps between supply and demand without needing to modulate energy production.
- A chance to pave the way for energy self-sufficiency
In terms of infrastructure, it is also a big deal. Imagine a remote island with no fossil fuel generators that rely on massive infrastructure to have stable energy supply from the continent. Tomorrow, these places could rely only on solar panels or wind turbines, and stabilize their energy grid thanks to one of these giant batteries. Local networks could therefore overtake regional and massive networks as we know them today.
Furthermore, the same Morgan Stanley report argues that the price of both solar and wind energy, as well as new storage units, has reached a point where renewable energy can finally become a reliable, rather than an unpredictable, source of energy.
Energy storage solutions coupled with renewables could provide nothing short of self-sufficiency in energy supply. Many countries or remote regions no longer needs to rely on fossil fuels to provide stable and reliable energy to its people. This is thanks to a renewable microgrid provided by these new batteries. It would enable countries to be progressively less and less dependent on petrol and gas that are known for their volatile pricing.
- Reshuffle the cards for the global energy market
Ultimately, the strategic interests of countries that rely mainly on fossil fuel exportations would be jeopardized, reshuffling the cards on a worldwide scale. Many experts predict that the future financial flows will progressively phase out from petrol exporting countries to the ones that have the most important reserves of lithium (South America, Central Africa, or the hinterlands of China). At the same time, Tesla’s “Gigafactory,” the largest battery factory in the world located in Nevada, will soon be in competition with at least twenty similar projects in Asia. In Japan, Panasonic and AESC (Nissan-NEC) are determined to remain world leaders in this area, as well as LG Chem and Samsung in South Korea. For China and some developing countries, such as India, batteries are also a way to break free of dependence on Western engine technologies. With its skyrocketing electric car market (400,000 electric vehicles sold in 2016 – a world record), there is definitively a lot at stake for China, having identified batteries as a priority in its strategic plan “Made in China 2025.”
All in all, this will not only challenge economies that rely heavily on fossil fuels for energy, but for all the current players in the energy market.
I am absolutely convinced that in a couple of years, the energy storage technologies will be the cornerstone of our energy grids. It is a logical consequence for the energy production shift we are already experiencing. As people start to produce their own renewable energy, local networks will have to take more responsibilities for balancing capacity and demand. This is especially true for the UK as we are spearheading this renewables trend. As National Grid recently pointed out in its annual Future Energy Scenarios, decentralized generation will reach 65 per cent of overall UK generation capacity by 2050, consequently boosting the already high growth of electricity storage even in its most pessimistic scenario. This is definitively good news for the environment, probably for the customers too, but it is one of the biggest challenges the energy industry has ever faced.
To discuss more on this subject, feel free to connect with me via my profile or on social media.