Renewable energy is being installed globally at an ever-increasing rate and is driving opportunities for energy storage across all global markets. Here are some key considerations, challenges and use-cases for this important new technology.
For the purpose of this article, energy storage refers to lithium-based battery energy storage systems (BESS), due to the low levelized cost of lithium-based technologies compared to other technologies.
Challenge: High Costs
The cost of battery technology needs to come down considerably for mainstream adoption in all markets. Recent published cost trends project reductions in battery cell cost as a function of the ramping-up of production scale, combined with higher efficiencies. This is broadly analogous to cost trends that impacted (and are still impacting) the levelized cost of electricity supply from photovoltaic (PV) power plants. As modules become more efficient and module manufacturers scale up, costs drop.
However, there is a chicken and egg syndrome at play with energy storage in which the surge in demand required to ramp up battery cell production and bring down costs may not take place as rapidly as anticipated because costs remain too high for mainstream adoption. Further because the industry is anticipating lower costs in the future, large scale investment in storage technology is relatively limited.
Laclanché provided the battery energy storage solution and Younicos provided the energy management software for the world’s first megawatt-scale renewable energy plus storage system on the island of Graciosa in the Azores. Credit: Younicos.
Examples of a PV plant power output curve modified by installation of a BESS for ramping support (renewables integration) and frequency response (grid support). Credit: Sgurr
The development of batteries for the electric vehicle market may be set to break the chicken and egg conundrum for stationary energy storage, due to developments in battery technology, increasing manufacturing capacity and eventually the secondary use of car batteries.
Use Case: Renewables Integration and Grid Support
Both installed capacity and investment in battery storage are increasing in two main areas: renewables integration support in small or isolated grids, and grid support services for larger distribution or transmission grids. Developers are looking to make use of spare grid capacity available at renewable plants, made available by the intermittent nature of the generation.
In both these cases BESS can provide more value than merely the time-shifting of renewable generation from wind and solar PV. The value comes from the ability to support stable grid operation through being able to respond to the intermittency of renewable generation much more quickly than is possible through conventional means, providing services such as frequency response, voltage regulation and ramping support.
This enables much greater integration of renewables onto a grid and reduces reliance on conventionally fueled thermal baseload and flexible generation sources to provide spinning reserve and other grid balancing services. The application of BESS for the provision of grid balancing services provides a vital stepping stone on the route to mainstream adoption through the bulk time-shifting of renewable generation.
Potential applications and revenue streams vary widely on a country-by-country basis, due to the large variations in regulatory frameworks, grid codes and balancing service provisions. This makes it important for other storage applications to exist such as behind-the-meter storage for system charge management over and above more common applications.
Key Concept: Capacity, Power and Time Matter
For the sake of simplicity, this article assumes that charging and discharging power are equal, and thus abbreviated as (dis)charging. In reality these could be different depending on the application, although this is not common for utility-scale BESS.
Adequately sizing both the energy storage capacity and (dis)charging power is a key requirement when determining the technical specifications of any battery system. Experience suggests that power is often overlooked in energy storage, even though these two values are inherently linked by the time that it takes to fully (dis)charge a battery system.
The battery capacity (in kWh) expresses the amount of energy stored in the battery cells and broadly depends on the number of battery cells in the system. The (dis)charging power on the other hand, (in kW), expresses the rate at which the battery can be (dis)charged by the power conversion system (PCS). The time it takes to fully (dis)charge the battery system can be determined by dividing the capacity by the power.
The optimum ratio of capacity and power varies for different storage applications. Frequency response, voltage regulation and ramping support services all have in common that the (dis)charge time requirement is small; typically, less than an hour. Therefore, the ratio of (dis)charge power is relatively high compared to storage capacity. In contrast, BESS (dis)charge time requirement for bulk time-shifting services is much larger; typically, in the order of several hours. For this case, the ratio of storage capacity is relatively high compared to (dis)charge power.
This fundamental principle of capacity, power and time is key to understanding the technical specifications needed to obtain the benefit of a range of revenue streams, as well as the implications on BESS costs. BESS technical specifications should always be considered using at least two of these three parameters, although information that has been widely disseminated typically does not go into detail about this key concept.
Examples of three combinations of BESS (dis)charge power and time. The shaded areas represent the energy storage capacity, all three equivalent to 1 MWh.
This differentiation is reflected in the financial drivers for these two contrasting types of services. Frequency response services are commonly remunerated based on the number of hours over a given period that (dis)charging power is available for providing response, with a minimum (dis)charge time requirement. In contrast, bulk time-shifting services are generally paid based on the energy delivered.
The Revenue Stacking — A Crucial Piece of the Puzzle
The ability to use a single or multiple aggregated BESS to provide multiple services is referred to as “revenue stacking.” With revenue stacking, developers can extract more value from the BESS and grid connection, because they now have two or more sources of income based on their project. However, understanding the revenue stack is difficult and comes with relatively little understood contractual and financial risks, as well as additional technical and operational complexity.
The relative power and storage capacity requirements have important cost implications. These are often overlooked as quoted battery cell or BESS costs only consider the costs per unit of energy storage capacity ($/kWh) or per unit of power ($/kW). The cost of the battery cells (per unit of energy storage capacity) and the PCS (per unit of power) should both be considered, as well as the Balance of Plant costs. Although this adds a layer of complexity, this is crucial in gaining a full understanding of the relationships between the intended services, technical specifications, capital costs and revenue streams.
The technical and commercial aspects of relative power and storage capacity need to be considered in order to derive a business case for energy storage that provides optimal return on investment. When adding storage behind-the-meter using an existing grid connection, at a wind farm, PV plant or large industrial consumer, storage can provide additional revenue or cost reduction opportunities. Grid support services such as frequency response will allow a higher proportion of renewable energy to be connected to a grid.
Diligent specification, evaluation and optimization of these arrangements, as well as compliance with relevant permitting, regulatory and subsidy frameworks, are key to manage risk and increase investor confidence in this emerging market.
Thomas Houlding is a renewable energy consultant in SgurrEnergy’s solar team and is based in Glasgow.