Enabling the Required Growth In Energy Storage

Prof. Carmine DifiglioIICEC Director

Sabanci UniversityENERSTOCK2018, 25 April, 2018

We’ve Seen the Rapid Growthof Energy Storage

Source: European Energy Storage Technology Development Roadmap, 2017 Update

By 2015, 150 GW of energy storage: 96% being pumped hydro.

While Small, Energy Storage that is Not Pumped Hydro is Also Growing

Source: European Energy Storage Technology Development Roadmap, 2017 Update

BLUE: Electrochemical Storage

GREEN: Electromechanical Storage

YELLOW: Hydrogen Storage

PURPLE: Thermal Storage

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But Storage Growth Must be Much Larger: Considerthe Projected Growth of Variable Renewables

27Vision for deployment to 2050

The ETP 2014 publication explores the future role of daily electricity storage technologies under a range of sensitivities regarding future costs and performance of storage and competing technologies, including flexible thermal power generation and to some extent, demand response (IEA, 2014b). Three of these variants are reproduced

in this roadmap:

z the 2°C Scenario (2DS)

z a "breakthrough" scenario, with aggressive cost reductions in storage technologies

z an "EV" scenario, where demand response from "smart" charging of the electric vehicle fleet in the 2DS provides additional flexibility to the system.

The IEA ETP 2DS describes how technologies across all energy sectors may be transformed by 2050 to give an 80% chance of limiting average global temperature increase to 2°C. It sets the target of cutting energy-related CO2 emissions by more than half by 2050 (compared with 2009) and ensuring that they continue to fall thereafter. The 2DS acknowledges that transforming the energy sector is vital but not the sole solution: the goal can only be achieved if CO2 and GHG emissions in non-energy sectors are also reduced. The 2DS is broadly consistent with the World Energy Outlook 450 Scenario through to 2035.

The model used for this analysis is a bottom-up TIMES (The Integrated MARKAL-EFOM System) model that uses cost optimisation to identify least-cost mixes of technologies and fuels to meet energy demand, given constraints such

as the availability of natural resources. The ETP global 28-region model permits the analysis of fuel and technology choices throughout the energy system, including about 500 individual technologies. The model, which has been used in many analyses of the global energy sector, is supplemented by detailed demand-side models for all major end uses in the industry, buildings and transport sectors.

Large regional variations exist – reflecting differences in renewable resource availability and alternatives for decarbonisation elsewhere in the energy system – with respect to the level of variable renewable electricity generation, which ranges from 20% to 55% worldwide. Storage will compete with other options to provide the flexibility needed to accommodate these resources, which sets the context for the vision for storage technologies in this roadmap.

Box 8. Energy Technology Perspectives (ETP) 2DS

Figure 6: Share of electricity generated from variable renewables (%) by region in the 2DS

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From IEA Energy Technology Perspectives “2 Degree” Environmentally Sustainable Scenario

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More Variable Renewables Will Require Increased Energy Storage

From IEA Energy Technology Perspectives “2 Degree” Environmentally Sustainable Scenario

28 Technology Roadmap Energy storage

Figure 7: Electricity storage capacity for daily electricity storage by region in 2011 and 2050 for ETP 2014 scenarios

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Three scenarios for electricity storage deploymentThe ETP 2DS scenario serves as a reference case, determining the capacity expansion of power generation technologies from now to 2050 to meet low-carbon objectives. The flexibility of the resulting system is then explored using a linear dispatch model where the cost of operating the electricity system is minimised by determining the dispatch of generation and storage technologies during every hour in a given year. This approach permits a detailed assessment of the storage needs within the power generation fleet from the 2DS under a range of conditions with other technologies

competing to provide the same services. Full detail on the modelling and scenario assumptions can be found in Annex B.

The 2DS assumes the cost of technologies providing daily storage for arbitrage applications in 2050 will be that of the lowest-cost technology providing this service today: PSH. In the ‘breakthrough’ scenario, aggressive reductions in specific energy (per MWh) and power capacity (per MW) storage costs facilitate an increased deployment of storage. Finally, in the electric vehicle scenario, charging strategies for offsetting peak demand are widely employed and the need for additional large-scale storage in the six- to eight-hour duration range is reduced. The resulting electricity storage capacities in 2050 are summarised in Figure 7.

Cost targets in a "breakthrough" scenario

The "breakthrough" scenario is designed as an estimation of the highest penetration of daily electricity storage in the 2DS scenario. This scenario assumes aggressive cost reductions in electricity storage technologies for arbitrage applications, where these technologies become competitive with the least expensive option currently providing arbitrage services.15 This result translates to a levellised cost of energy (LCOE) for daily bulk storage of approximately USD 90/MWh

15. Currently a combined cycle gas turbine operating at load Currently a combined cycle gas turbine operating at load factors of 30% to 60%.

(Figure 8). The LCOE includes the cost of the initial technology infrastructure investment, operation and maintenance, and electricity used to charge the storage facilities.

At this LCOE, electricity storage technologies provide all the flexibility requirements in all regions in the 2DS. These cost reductions, however, are highly ambitious – for PSH and CAES, significant reductions in civil engineering costs have already reduced the overall cost of PSH. As these costs account for nearly half of the initial capital investment, improvements in the turbine technology itself would have a relatively low overall impact. However, because of the high initial capital investments required for these facilities, potential

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cost reductions could be found in lowering the cost of capital for new large-scale storage projects. For battery technologies, these cost reductions could

be very aggressive, considering their energy specific costs (per kWh) would need to come down by a factor greater than ten.

Figure 8: LCOE in the "breakthrough" scenario in 2013 and 2050

Figure 9: Investment needs for energy storage in different scenarios, 2010 to 2050

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Competition with demand-side response

A large-scale rollout of demand response technologies could compete against electricity storage in many applications. The 2DS anticipates a large rollout of EVs. The "EV" scenario assumes that

25% of the daily electricity requirement from EVs is controllable load, available for demand response services. Again, this represents an extreme case: while the energy storage potential in EVs might be used for grid optimisation, home-to-vehicle or vehicle-to-home applications might be more prevalent than vehicle-to-grid.

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Storage Investment Is Not Expensive

From IEA Energy Technology Perspectives “2 Degree” Environmentally Sustainable Scenario with Breakthrough Technology Assumptions

Cumulative investment through 2050 is a small fraction of the trillions of USD that must be spent on generation, transmission & distribution.

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Structure of the IEA Energy Technology Perspectives Model

Helps explain why ETP projections are relevant to the international energy R&D community: detailed specification of advanced energy technologies.

Many Applications of Energy Storage• Generators & renewables integration– Time shift, supply capacity

• Grid Managers (ISOs, etc.)– Load following, supply reserve, voltage support

• Transmission & Distribution– Congestion relief, transmission support

• Micro-Grids– Reliability, accommodating renewables

• Consumer Energy Management– Cost management (time of use), increased self

consumption of solar PV, quality & reliability

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Many Applications of Energy Storage

40 ELECTRICITY STORAGE AND RENEWABLES: COSTS AND MARKETS TO 2030

Figure 10: Potential locations and applications of electricity storage in the power system

Source: IRENA, 2015a based on EPRI.

ELECTRICITY STORAGE TECHNOLOGY CHARACTERISTICS AND SUITABILITY FOR DIFFERENT APPLICATIONS

ESS can enhance the integration of higher shares of VRE generation as they support local VRE power generation in distribution networks, support grid infrastructure to balance VRE power generation, and aid self-generation and self-consumption

of VRE by customers. ESS are expected to become widely deployed as the energy transition progresses (IRENA, 2015a; IRENA 2016b; IRENA, 2017a). Wider availability of current and future cost estimates will support a better understanding of the role of ESS in the global energy transition and through the various functions they will have in supporting future electricity systems at the various levels (Figure 10).

• A compelling business model is needed to justify storage investments, particularly in deregulated electricity markets where there is:–Uncertainty about investments by other

sub-sectors (from production to energy service consumption); &–Uncertainty about government regulations,

incentives or investments.

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Key Requirement

• To fill in for intermittent renewables, energy storage has to compete with natural gas peaking plants to meet demand.

• PHS, CAES or batteries typically have higher capital costs than natural gas peaking plants.

• Solutions:– Reducing cost (R&D, technology learning & scale)– Providing multiple services

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Key Challenge: Cost

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R&D, Technology Learning & Scale

71ELECTRICITY STORAGE AND RENEWABLES: COSTS AND MARKETS TO 2030

Figure 30: Cost reduction drivers of battery electricity storage systems

Liquid Electrolyte:Li-Metal Liquid

Increasingproductioncapacities

Lower prices New materials

Newapplications

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Research &development

Improvedbatteries

Source: International Renewable Energy Agency.

Li-ion is a relatively new technology and its cost reduction potential is large and based on a number of drivers. The main technical factors that are likely to significantly influence Li-ion technology costs are an increase in the scale of production capacity, improvements in materials, more competitive supply chains, performance improvements and the benefits of broader operating experience feeding back into product design and development (Figure 30). These drivers are not exclusive to Li-ion, as other storage technologies are likely to experience a similar dynamic as their deployment

grows. However, with the dominance of Li-ion batteries in the EV market and the synergies in the development of Li-ion batteries for EVs and stationary applications (as seen with Tesla’s EV and stationary battery offerings), the scale of deployment that Li-ion batteries are likely to experience will be orders of magnitude higher than for other battery technologies. This does not translate into order of magnitude cost savings, but this scale-up of Li-ion batteries will result in significant cost reduction opportunities.

Global manufacturing for Li-ion cells has ramped up considerably, and plans to further expand capacities continue. The annual manufacturing capacity for Li-ion batteries today, for all chemistry types, may be 100 GWh or more and may possibly exceed 250 GWh by 2020 (Enerkeep, 2016). Li-ion production capacity expansion is under way from current

established players and a number of new entrants, primarily driven by Chinese stakeholders. Apart from so-called megafactories, an increase from approximately 29 GWh in 2016 to 234 GWh by 2020 is envisaged (Benchmark Mineral Intelligence, 2017).

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R&D, Technology Learning & Scale Working for Li-Ion Cells

74 ELECTRICITY STORAGE AND RENEWABLES: COSTS AND MARKETS TO 2030

Beyond mere increased deployment and economies of scale from a larger manufacturing base, continuous innovation and technological improvements are likely to have a large impact on the cost decline potential of Li-ion BES systems. Much of this comes from material improvements, new materials and innovative design. The two most relevant are the following:

• Solid-state Li-ion batteries: Proposed in the 1980s, these cells feature a solid lithium metal anode instead of alloys, as in the case of NMC or NCA chemistries. The solid-state approach promises much higher energy density than other Li-ion technologies. Initially, researchers struggled to satisfactorily control dendrite growth during charging, resulting in undesired safety issues. With new technology, however — most notably, polymer electrolytes — these restrictions appear to be surmountable and several companies, including Bosch, are currently working on their commercialisation (Handelsblatt, 2015). The current conductivity of solid electrolytes, nevertheless, usually

is significantly lower than that of liquid ones, resulting in intrinsically lower power capability and reduced efficiency. Solid-state designs also have been proposed for other chemistries apart from Li-ion, although concepts based on Li-ion have been the most prevalent (J. G. Kim et al., 2015).

• Increased energy densities: Higher energy density enables the manufacturing of batteries of equal capacities, using less active materials, and thus unlocks cost savings in much the same way higher efficiency solar cells do for solar PV modules. Since the 1990s, the energy density of the very small Li-ion consumer electronics cells increased by a factor of more than two (Figure 32). This means that for the same amount of energy, less material is required and fewer production steps may be needed, resulting in lower costs. Energy density improvements can therefore contribute to further price decline.

Figure 32: Development of specific energy and energy density compared to costs per watt-hour for consumer lithium-ion cells between 1991 and 2005

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Source: Dick and van Hoek, 2010.

• CAES, batteries, flywheels, etc., can provide ancillary services to the grid.• Besides filling in for intermittent

renewables:• Second-to-second or minute-to-minute

regulation of the grid’s frequency.• Fast ramping capability to cover

unexpected gaps between supply & demand.

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System Wide Benefits of Storage

• Siloed power industry structure does not allow all storage benefits to accrue to one investor.• Reduces incentives to invest.• Solutions:– Regulatory reform to recognize system-wide

benefits of storage.– Stacking benefits to accrue to the system owner

would help.

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Key Challenge: Industry Structure

• Consequently energy storage tends to be underpriced.

• Grid operators may be in the best position to maximize the system wide of storage but incentivizing the optimal level of storage is complicated.

• The current regulatory landscape is just beginning to recognize the problem & provide solutions.

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Siloed Energy Markets do Not Easily Price Storage Externalities

• Various countries & states/provinces are experimenting in ways to incentivize system-wide benefits.

• For example, in the UK, winning capacity auction bids included ½ GW of storage.

• Energy companies & manufacturers are integrating storage technologies into the services & products – a sign of a maturing market.

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Progress is Being Made

• Distributed generation & micro-grids provide other markets for energy storage, particularly batteries & storage technologies with similar scale.

• For residential & commercial PV rooftop installations, electricity storage should be a particularly cost-effective option if net metering is not provided.

• Germany, Austria & Italy led the growth for “behind-the-meter” storage.

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Distributed Generation

• While progress is being made, in general, current policies do not monetize storage benefits & provide a rational basis for storage investment.

• Use of storage by grid operators is limited by the lack of clarity in market rules & regulations.

• Adequate markets do not exist for flexibility & ancillary services.

• Other incentives needed to stimulate behind-the meter installations (at least, not discourage it).

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Policies Still Limit Storage Potential

• Power sector market rules & regulations should monetize the system-wide benefits of energy storage.

• Power sector market rules & regulations should not penalize energy storage (for example, by offering netback purchase of residential solar PV).

• Power sector market rules & regulations should consider the importance of energy storage at the grid, distributed power & consumer levels.

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Needed Actions to Enable Energy Storage (I)

• Industry should integrate storage into its power sector services & help governments & regulators understand how market rules & regulations affect the uptake of energy storage & increase system efficiency.

• The exact pathways to accomplish this are specific to each power sector market so this is complicated & messy.

• The technology R&D community should have a greater role in informing industry & market managers of the barriers that their technologies might face & ways they can be accommodated.

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Needed Actions to Enable Energy Storage (II)

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