The number of battery energy storage systems (BESS) for fixed applications, including utility scale and distributed applications, has begun to grow significantly, according to the survey of apricum, a clean technology consulting agency. According to recent estimates, sales are expected to grow from about $1 billion in 2018 to between $20 billion and $25 billion in 2024.
Apricum has identified three main drivers for the growth of Bess: first, positive progress in battery costs. The second is the improved regulatory framework, both of which improve the competitiveness of batteries. Third, Bess is a growing addressable service market.
1. Battery cost
The key prerequisite for the wide application of Bess is the reduction of related costs during battery life. This is mainly achieved by reducing capital expenditure, improving performance or improving financing conditions.
2. capital expenditure
In recent years, the largest cost reduction of Bess technology is lithium-ion battery, which has dropped from about US $500-600 / kwh in 2012 to US $300-500 / kWh at present. This is mainly due to the dominant position of the technology in mobile applications such as “3C” industries (computer, communication, consumer electronics) and electric vehicles, and the resulting economies of scale in manufacturing. In this context, Tesla plans to further reduce the cost of lithium-ion batteries through the production of its 35 GWH / kW “Giga factory” plant in Nevada. Alevo, an American energy storage battery manufacturer, has announced a similar plan to transform an abandoned cigarette factory into a 16 gigawatt hour battery factory。
Nowadays, most energy storage technology start-ups are committed to adopting other methods of low capital expenditure. They realize that it will be difficult to meet the production capacity of lithium-ion batteries, and companies like EOS, aquion or ambri are designing their batteries to meet certain cost requirements from the beginning. This can be achieved by using a large number of cheap raw materials and highly automated technologies for electrodes, proton exchange membranes and electrolytes, and outsourcing their production to global scale manufacturing contractors such as Foxconn. As a result, EOS said the price of its megawatt class system is only $160 / kWh.
In addition, innovative procurement can help reduce the investment cost of Bess. For example, Bosch, BMW and Swedish utility company Vattenfall are installing 2MW / 2mwh fixed energy storage systems based on lithium-ion batteries used in BMW I3 and ActiveE cars.
The performance parameters of battery can be improved through the efforts of manufacturers and operators to reduce the cost of battery energy storage system (BESS). The battery life (life cycle and cycle life) obviously has a great influence on the battery economy. At the manufacturing level, by adding proprietary additives to the active chemicals and improving the production process to achieve more uniform and consistent battery quality, the working life can be extended.
Obviously, the battery should always operate effectively within its designed operating range, for example, when it comes to the depth of discharge (DoD). Cycle life can be significantly extended by limiting the possible depth of discharge (DoD) in the application or by using systems with higher capacity than required. Detailed knowledge of the best operating limits obtained through rigorous laboratory testing, as well as having an appropriate battery management system (BMS) are a major advantage. The round trip efficiency loss is mainly due to the inherent hysteresis in cell chemistry. Appropriate charge or discharge rate and good discharge depth (DoD) are helpful to keep high efficiency.
In addition, the electrical energy consumed by the components of the battery system (cooling, heating or battery management system) affects the efficiency and should be kept to a minimum. For example, by adding mechanical elements to lead-acid batteries to prevent dendrite formation, the degradation of battery capacity over time can be alleviated.
4. Financing conditions
The banking business of Bess projects is often affected by the limited performance record and the lack of experience of financing institutions in the performance, maintenance and business model of battery energy storage.
Suppliers and developers of battery energy storage system (BESS) projects should try to improve investment conditions, for example, through standardized warranty efforts or through the implementation of a comprehensive battery testing process.
In general, with the decrease of capital expenditure and the increasing number of batteries mentioned above, investors’ confidence will increase and their financing cost will decrease.
5. Regulatory framework
Battery energy storage system deployed by wemag / younicos
Like all relatively new technologies entering mature markets, battery energy storage system (BESS) relies to some extent on a favorable regulatory framework. At least that means there are no barriers to market participation for battery energy storage system (BESS). Ideally, government departments will see the value of fixed storage systems and motivate their applications accordingly。
An example of eliminating the impact of its application barriers is the Federal Energy Regulatory Commission (FERC) Order 755, which requires isos3 and rtos4 to provide faster, more accurate and higher performance payments for mw-miliee55 resources. As PJM, an independent operator, transformed its wholesale electricity market in October 2012, the scale of energy storage has been increasing. As a result, two thirds of the 62 MW energy storage equipment deployed in the United States in 2014 are PJM’s energy storage products. In Germany, residential users who purchase solar energy and energy storage systems can obtain low interest loans from KfW, a development bank owned by the German government, and get up to 30% rebate on the purchase price. So far, this has led to the installation of about 12000 energy storage systems, but it should be noted that another 13000 are built outside of the program. In 2013, the California regulatory authority (CPUC) required that the utility sector must purchase 1.325gw of energy storage capacity by 2020. The procurement program aims to demonstrate how batteries can modernize the grid and help integrate solar and wind energy.
The above examples are major events that have aroused great concern in the field of energy storage. However, small and often unnoticed changes in the rules may have a strong impact on the regional applicability of battery energy storage system (BESS). Potential examples include:
By simply reducing the minimum capacity requirements of Germany’s major energy storage markets, residential energy storage systems will be allowed to participate as virtual power plants, further strengthening the business case of Bess.
The core element of the EU’s third energy reform plan, which came into effect in 2009, is the separation of power generation and sales business from its transmission network. In this case, due to some legal uncertainties, the conditions under which the transmission system operator (TSO) will be allowed to operate the energy storage system are not fully clear. The improvement of legislation will lay a foundation for the wider application of battery energy storage system (BESS) in power grid support.
AEG power solution for addressable service market
The specific trend of the global electricity market is causing an increasing demand for services. In principle, Bess service can be adopted. The related trends are as follows:
Due to the fluctuation of renewable energy and the increase of power supply elasticity during natural disasters, the demand for flexibility in power system is increasing. Here, energy storage projects can provide auxiliary services such as frequency and voltage control, grid congestion mitigation, renewable energy tightening and black start.
Expansion and implementation of generation and transmission and distribution infrastructure due to aging or insufficient capacity, as well as increased electrification in rural areas. In this case, battery energy storage system (BESS) can be used as an alternative to delay or avoid infrastructure investment to stabilize the isolated power grid or improve the efficiency of diesel generators in the off grid system.
Industrial, commercial and residential end users are struggling to cope with higher electricity charges, especially due to price changes and demand costs. For the (potential) residential solar power generation owners, the reduced grid price will affect the economic feasibility. In addition, power supply is often unreliable and of poor quality. Stationary batteries can help increase self consumption, perform “peak clipping” and “peak shifting” while providing uninterruptible power supply (UPS).
Obviously, in order to meet this demand, there are various traditional non energy storage options. Whether batteries constitute a better choice must be evaluated on a case by case basis and may vary greatly from region to region. For example, although there are some positive business cases in Australia and Texas, these cases need to overcome the problem of long-distance transmission. The typical cable length of medium voltage level in Germany is less than 10 km, which makes the traditional power grid expansion a lower cost alternative in most cases.
In general, battery energy storage system (BESS) is not enough. Therefore, services should be integrated into “benefit superposition” in order to reduce costs and compensate through a variety of mechanisms. Starting with the application with the largest revenue source, we should first use spare capacity to seize on-site opportunities and avoid regulatory barriers like UPS power supply. For any remaining capacity, services delivered to the grid (such as frequency regulation) can also be considered. There is no doubt that additional services cannot hinder the development of major services.
Impact on energy storage market participants.
Improvements in these drivers will lead to new business opportunities and subsequent market growth. However, negative developments in turn will lead to the failure or even loss of economic feasibility of the business model. For example, due to the unexpected shortage of some raw materials, the expected cost reduction may not be realized, or the commercialization of new technologies may not be carried out as expected. Changes in regulations may form a framework in which Bess cannot participate. In addition, the development of adjacent industries may create additional competition for Bess, such as frequency control of renewable energy used: in some markets (e.g. Ireland), grid standards already require wind farms as the main power reserve.
Therefore, enterprises must pay close attention to each other, predict and positively influence the battery cost, regulatory framework and successfully participate in the global market demand of fixed battery energy storage.
Post time: Mar-16-2021