SE: Renewable energy / new storage technologies market disruptive

The benefits of large-scale electricity storage technologies such as pumped hydro, compressed air storage and batteries are multiple. Such technologies can store low-cost renewable energy when the system experiences oversupply, then release this electricity to the grid when it is more needed, such as at night in the case of solar or when the output of wind falls below demand. This has benefits for the climate as low carbon electricity can be used as needed. It also directly benefits renewable deployment as issues surrounding grid and security of supply are addressed. Last but not least, it is potentially positive for consumers as the wholesale price advantage of renewables can be passed on, while the need for excess backup capacity provided from fossil plant is reduced.
Energy storage will be disruptive to the core of the electricity market

Due to the low marginal cost of releasing energy from a storage site, the commercial characteristics of electricity storage share some similarities to those of renewables. Once deployed, electricity storage will have the potential to take any opportunity to generate revenue. In reality this means that as with renewables, a relatively small amount of electricity storage deployment will have a large effect on incumbent generators. This may have long-term and far-reaching implications for the operation of the electricity market.
Taking Europe as an example, electricity storage will further squeeze the already embattled fossil generation sector by outcompeting such plants for the most valuable peak market prices, which generally occur at times of low renewable generation. In fact such plants will be forced to source revenue in-between periods of renewable generation and dispatchable electricity storage.
Many in the electricity supply sector regard the deployment of electricity storage technologies as too expensive and therefore not a significant competitor in comparison to fossil generation, but developments in the automobile industry may directly result in the deployment of large amounts of battery electricity storage, regardless of the investment preference of electricity generators.

Where will electricity storage come from?

The technologies leading to the electricity storage revolution have been developed and deployed in a wide variety of commercial activities. For example automotive industry development has led to advances in both batteries and flywheels. Similarly, technology and expertise developed for the hydrocarbon and gas storage sectors are critical to the advancement of compressed air electricity storage.

Such external development may create unexpected and disruptive market linkages, where the activities in one sector have a profound knock-on effect in the electricity sector. That is to say that the commercialisation of a technology in one sector may greatly affect the economics of the electricity sector.

The case of the electric car – A second life

The development of electric cars is driving down the price of battery electricity storage while simultaneously increasing supply. The large scale investment into lithium-ion and lithium-polymer batteries for transport is resulting in tumbling production cost, higher capacity, and increased efficiency. The price of lithium-ion batteries has already fallen by 40% since 2010. These trends are expected to continue.

The lowering cost of batteries for electricity storage is one effect of the arrival of the electric car. More importantly the sale and eventual retirement of electric cars will provide the electricity storage sector with a readily available and growing stock of high capacity batteries.

Every electric car contains a large integrated battery unit. However these batteries will not be able to perform indefinitely. At present most manufacturers provide a guarantee for the battery unit of around 10 years. The battery pack of cars is expected to retain 70% to 80% of its capacity after 5 to 10 years of operation; at this point the loss in capacity will require the packs replacement.

The replaced battery packs are still fit for use in other sectors, and will be well suited to having a second life as system-scale electricity storage. Used vehicle batteries will migrate to where they have the largest potential to generate income, and it is highly unlikely that they will simply be disposed of. The liberalised electricity market offers ample opportunity for low capital and operational cost automotive battery packs to have a profitable second life. In this way the disruptive deployment of large scale electricity storage is to a large extent inevitable. The increase in the electric car market and subsequent reuse of battery packs in the electricity supply sector offer huge potential to revolutionise electricity storage deployment.
The scale could be huge

The potential scale of electricity storage from used automotive battery packs is staggering and growing exponentially. The International Energy Agency (IEA) anticipates four million electric cars to be in use by 2015, rising to 20 million in 2020. As an example the Nissan LEAF, a popular electric car, has a relatively modest battery with a capacity of 24 kWh, while Tesla Model S, a luxury car has a much larger capacity of 85kWh. For simplicity we can assume the average electric car sold has a capacity of 40 kWh, with a loss of 20% capacity before replacement. If the used battery packs from the stock of 4 million electric cars from 2010 to 2015 are used in the electricity sector, electricity storage deployment of 128 GWh would result.

To put that in perspective 128GWh would be sufficient to store and release nearly all of Germany’s peak summer solar capacity on a daily basis. A fraction of that electricity storage capacity deployed in Germany would greatly increase the efficiency of renewables, shaving the price peaks and thus removing much of the need for backup plant from the system. Including cars expected sold by 2020, the number rises to 640 GWh of potential electricity storage. It appears evident that the electric car revolution will be followed by an electricity supply revolution, which is advantageous for renewable deployment and damaging to fossil incumbents.

The fundamental shift that electric vehicles will bring to the electricity supply sector is already materialising. In February this year, Nissan along with other partners opened the World’s first large-scale power storage system which utilises used batteries collected from EVs. This prototype storage system will measure the smoothing effect of energy output fluctuation from the nearby solar farm and will aim to establish a large-scale power storage technology by safely and effectively utilising the huge quantities of discarded used EV batteries which will become available in the future.

As previously reported, electric vehicles connected to the grid during peak times can be managed to provide a large-scale distributed storage network as it is. The combined effect of the EV fleet and retired automotive battery packs is an enormous - and constantly growing - storage system that may pave the way for complete decarbonisation of the electricity sector in some countries.

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