There are many signs that batteries are becoming the preferred option for new investment in electricity storage. While many battery technologies are being developed, lithium-ion batteries are the best known because they are found in mobile phones, tablets, and electric toothbrushes. And in electric cars.
Because the batteries are such a high part of the costs of an electric car, there are strong incentives to improve production processes, reduce supply costs and improve performance. Tesla’s Gigafactory, which started construction in 2014, will be a step change in the supply chain for batteries – with clear ambition to dramatically lower battery costs.
The availability of cheaper batteries has coincided with developments in the power systems of nearly all countries deploying renewables. Photovoltaic and windfarm output is dependent on the weather, so other forms of generation are needed to ensure demand is met. Coal plants would have historically been able to absorb such fluctuations, but the UK and other countries are closing their coal fleets.
As well as matching generation with demand, grid operators need to maintain system frequency and voltages and, particularly for more islanded systems like Great Britain and Ireland, this is now leading to the use of new technologies as an improved way to provide power at short notice and to replace the conventional methods, which may currently be at lower cost, but with slower performance.
Increasing fluctuations in wholesale prices caused by intermittent renewables are also proving a driver to developers of storage to capitalise on its ability to buy power when prices are cheap and sell back at a higher price, even if there are some losses in the total conversion cycle.
In the UK, the Low Carbon Network Fund has funded a number of projects that include energy storage, but two in particular illustrate the mould-breaking nature of the technology:
• UKPN’s Leighton Buzzard 6MW 10MWh lithium-ion technology;
• SHEL’s Shetland 1MW 3MWh lead-acid.
More recently, and without any particular market support, in January AES commissioned a 10MW battery adjacent to its Kilroot power station in Northern Ireland, largely targeting price differentials.
The revenue streams available to large battery projects are strongly influenced by licences and electricity market rules and regulations. In principle, the revenues can come from four main activities:
1. Consuming electricity (charging up) when there is surplus of electricity.
2. Supplying electricity when in discharge mode (combined with consumption, this effectively time-shifts power use).
3. Playing a role in the local distribution network (to avoid or defer line or transformer upgrades, or to reduce demand charges or system charges, which are measured at times of peak demand).
4. Providing a range of reserve services to the transmission system operator, such as frequency support.
Currently, an operator of a large-scale battery is not able to simply access all of these because of our market structure, even allowing for the limitations on whether these value streams are additive. But that has not stopped progress. Simon Bradbury, principal consultant at Poyry, says: “With the right market structures in place, battery projects can be highly attractive.”
It is also worth mentioning that like all distribution-connected power units, there are a range of embedded benefits available. These now represent a considerable factor in overall project economics.
Interestingly, we have seen a shift towards a commercial framework over the past two years, which encourages early adopters to develop large-scale battery projects which can now achieve satisfactory returns within the current market rules. The market risks are a particular concern to investors, who want certainty, and the contracts offered by the transmission system operator can provide mitigation – whether this is equitable, or it is realistic to expect longer contract duration, is a moot point. It is certainly a step in the right direction and National Grid is to be applauded for its innovative approach to using advanced technology for new services.
With ever more renewables scheduled to come on line, there is a growing realisation by policymakers that batteries offer a realistic and economic route to decarbonisation. Undoubtedly, the drivers are there – large-scale batteries may play a key part in achieving renewable deployment – but the path to gigawatt deployment of battery storage in the UK will have many trials and tribulations.
To misquote Mark Twain. it would be fair to say of batteries that “rumours of their growth are somewhat exaggerated” – but on the other hand the prospects look very exciting.
Phil Hare, Poyry Management Consulting