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Grid energy storage: The next big thing for Li-ion?

By Myles McCormick
Published: Friday, 22 April 2016

Though unlikely to rival the electric vehicle industry for size, grid energy storage is likely to become one of its largest end-markets for lithium-ion batteries. Questions remain as to what size the market will reach, however.

The scope for growth in demand for lithium-ion (Li-ion) batteries continues to drive the excitement around lithium production.

Centre-stage in the frenzy is the expected surge in demand for Li-ion-powered electric vehicles (EVs), fronted by Tesla Inc. and its enigmatic CEO, Elon Musk.

But an oft-forgotten sister market, also expected to propel Li-ion demand, is grid energy storage.

The renewable energy sector is slated to grow exponentially over the coming years – with wind energy expanding at a compound annual growth rate (CAGR) of around 10% and solar energy at around 17% – making the necessity to find ways of flexibly storing the power produced ever more pertinent.

Albemarle Inc., one of the world’s 'Big Three’ lithium producers, predicts that over the next 15 years, approximately $1.4 trillion worth of future US infrastructure will be underutilised without storage. In its view, Li-ion powered grids provide the answer.

But questions remain as to the potential of Li-ion-based grid technology, not least due to difficulties in turning a profit. And even when it does take off, experts maintain that when stood alongside EV technology, grid storage will always remain the Cinderella of the Li-ion story.

Albany Wind Farm_Lawrence Murray
Renewables are expected to drive growth in use of Li-ion batteries in grid energy storage. (Source: L. Murray)
Storing up growth

According to Dean Frankel of New York-based Lux Research Inc., in 2015, around 700 MWh (megawatt-hours) of energy storage systems using Li-ion chemistries were deployed on the grid.

Albemarle has suggested that, driven by growth in renewable energy, a need for resources to provide system flexibility and balance supply and demand, lithium carbonate equivalent (LCE) used in grid energy storage should increase by a CAGR of over 30% between 2014 and 2024, a higher rate than either of the other two key markets for Li-ion – transportation and consumer devices, with touted growth rates of 20-30% and over 15%, respectively – although this is from a far lower starting point.

Making money

But despite the big numbers predicted in terms of growth, prohibitive costs remain the central issue for the development of these systems.

"Right now, the entire stationary energy storage market place is struggling to find consistent, profitable applications to drive revenue," Frankel told IM.

"The costs for energy storage systems, and in particular Li-ion storage systems, have come down significantly over the past three years, but finding applications that drive consistent revenue remains a challenge," he added.

Frankel expects rate structures for utilities to change, however, "such that they start to value the services energy storage can provide", with utility providers finding more ways to own and operate energy storage or compensate owners of energy storage systems across the grid.

One way in which he expects energy storage systems to begin making more money is through the use of virtual power plants – "virtually connecting many energy storage systems wirelessly through smart software management to act in tandem with one another and aggregate load, so that they can have a powerful impact on the grid".

Lux predicts Li-ion batteries will reach more than 10 GWh (gigawatt-hours) of installed systems annually by 2025, but notes that "they will not capture all [of the energy storage market] as there will be alternative chemistries deployed, like flow batteries and molten salt, among others".

Others remain more sceptical.

"I’m not a big fan of grid storage involving Li-ion batteries," Jon Hykawy, CEO of Canada-based research group, Stormcrow Research, told IM. "I find that the proponents always cherry-pick their data and manage somehow to argue that the Li-ion battery is the only winning path and I believe this is garbage."

In Hykawy’s view, the two most important parameters are capital cost per kWh (kilowatt-hours) of power produced and operation and maintenance costs – how much does it cost to build and how much does it cost on a day-to-day basis to run? In neither of these areas does Li-ion battery technology come out trumps.

"There are large-scale pumped hydro projects out there, as working examples today that have capital costs of $100-$200/kWh energy being delivered to the grid. The future projections for lithium batteries are hoping to achieve $200-$500/kWh by 2025," he said.

As well as this, Hykawy maintains that the success of Li-ion batteries in one application (i.e. EVs) is not necessarily transferrable to another (i.e. energy storage).

"Simply having faith that, since lithium batteries can make a Tesla run – where weight and volume are critical factors – that they are going to back up a huge wind farm or a nuclear plant – where cost is just about the only thing that matters – would be foolish."

Playing second fiddle

Despite the issues that remain, there is little doubt that grid energy storage will grow substantially in the coming years. But it is unlikely to reach the lofty heights of EVs as a Li-ion end market.

"I just don’t think it has the same scale potential," Robert Bayliss, managing director at Roskill Information Service, told IM, noting that whereas EVs already have an industry to transform, grid storage is indirectly reliant on the growth of renewables such as wind and solar, before it can transform anything.

Frankel agrees that stationary storage will remain a significantly smaller market for Li-ion than EVs, but said that it will approach and eventually surpass the consumer electric segment.

 

 



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