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Published on December 18th, 2013 | by Giles Parkinson

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Utility-Scale Battery Storage Costs Dropping



Originally published on RenewEconomy

The cost of battery storage is falling quicker than most analysts presume and could be competitive with gas-fired generation –  even in the US, where gas prices are low – within the next 18 months.

That’s the prediction of Steve Hellman, the president of battery storage start-up EOS Energy Storage, which intends to launch its zinc-air battery next year with a price of $200-$250/kWh.

EOS has grabbed the attention of the renewables and the mainstream energy industry with its battery product, which undercuts the pricing of lithium-ion batteries by a significant margin.

EOS actually predicts its storage will be available at around $160/kWh, but that is for D/C battery system. It needs extra costs and additions to be integrated into the A/C system on which major grids operate. Its attractiveness, Hellman says, will be its ability to provide   capacity at prices that compete with current options.

In a recent talk with a US analysts and investors hosted by UBS, Hellman gave a fascinating insight into how he sees the battery storage industry evolving in coming years. Its attractiveness, Hellman says, will be its ability to match gas on upfront capital costs. After that, it has no fuel cost.

“In 2014-2015 energy storage will actually be less expensive or competitive with gas,” he said. “Basically, in utility scales, that’s tomorrow … energy storage will be your default approach for solving standard peak capacity challenges. It will be much more usable as peaking capacity than a traditional generator.”

Not that Hellman thinks that the major energy grids are suddenly going to dump gas and swith to battery storage. These transitions will take time, he notes. But NRG, the largest private generator has already invested in the company, and EOS has been approached by the likes of Con Edison, ENEL, GDF Suez, and National Grid.

Screen-Shot-2013-12-17-at-8.52.19-am(Just to put Hellman’s claim into a little context –  he began his career with commodities giant Glencore, where he built six successful companies in oil production and refining. His bio says that Hellman (pictured right) then created his own energy trading company which grew to $8 billion revenues, and built a shipping company of 27 tankers, an energy technology company, and a $150 million real estate company. He speaks Russian and Chinese. He hasn’t just wandered in from an environmental NGO and he’s not a nerd that just emerged with a good idea from a test lab).

Hellman says there was a common myth that people would want to install battery storage to make money by buying cheap off-peak power and selling expensive on-peak power.  In effect, however, the amount of energy lost in such a round trip would probably offset any gains made.

“That’s not your fundamental value proposition,” he says.  It would instead be in its ‘capacity’-like properties, able to be quickly installed in constrained regions, rapidly respond to demands of the grid, and clip scarcity price events. He says the immediate outlook did not suggest merchant build in any meaningful manner in the near term, but development will remain focused on urban utility contract-backed opportunities, such as the 1.3GW mandate from the California Public Utilities Commission, and a similar one in Long Island.

“Ultimately, we view energy storage as a business problem, not as a technology problem. The business problem we are trying to address is: how do you decouple supply and demand on the electricity grid?

“The grid overall is this gargantuan infrastructure that is basically attempting to instantaneously match supply and demand. Though there is variable demand, you have full control of supply. As soon as you introduce the intermittency of generation sources such as wind and solar, you have intermittent supply and demand. This problem becomes a lot more difficult for grid operators without storage to buffer supply and demand.

“There are also very complex infrastructure problems that need to be resolved where storage can play an important role. There is pressure from end users, who would like to lower electricity costs by using micro-grids. Storage becomes a critical component for this. In sister sectors like transportation, for example, energy storage is of course the key to transitioning to an electrically charged transportation grid and electric vehicles. Energy storage plays a crucial role for this transition.

“These factors are leading to an enormous amount of innovation in this space, but they all converge around a certain set of major requirements. To become viable, energy storage needs to be extremely inexpensive in terms of capital costs. It needs to be very long lasting because like other capital assets on the grid you need to be able to amortize those costs over a long period of time.

“You need to have high efficiency as these business cases are built around energy value propositions. The ratio of energy out of a battery to energy or the round-trip efficiency becomes critical to that business problem and at energy storage in its classic paradigm, which is distributed energy storage. In other words, getting energy storage as close as possible or even inside the load centers so you can not only time shift energy, but you can debottleneck and get downstream from bottlenecks on the transmission and distribution system.”

If, as Hellman suggests, battery storage can match gas-fired generation on both capital costs and levellised cost of energy, then energy storage value proposition becomes a “triple play” with three different sources of revenue.

Screen-Shot-2013-12-17-at-1.11.01-pmThe first is on capacity: a device with 4-6 hours storage should be entitled to capacity payments, a storage facility behind the metre is reducing demand charges or is monetising the capacity value, and is also playing that off-peak, on peak arbitrage.

The second is locational capacity,, the most important: The ability to be modularized and placed in areas of the grid that require the most attention but traditional sources of generation, and th transmission and distribution system, are either impossible or too expensive to install.

The third area of growth Hellman sees is behind the meter micro-grid, pairing with distributed generation in order to create a fully autonomous type of environment.

This, he says, is good news for the traditional utilities. “Many think energy storage is somehow a threat to the utility paradigm. It’s actually not.  The energy storage – in so far as it can provide locational capacity – can resolve problems for utilities in a very cost- effective fashion, allowing them to better optimize their capital spend for example.

“Over the long-term and in even in this micro-gridding configuration, energy storage is an opportunity for utilities that actually embrace it and understand how to make that paradigm function to provide those services to customers rather than encouraging customers to take the technology risk, the development risk, the operating risk and so forth.

“The utilities understand this technology better. They will have a lower cost of capital and a better ability to take advantage of this emerging opportunity even on the customer side of the meter going forward. So we see it as a benefit. Not just on the grid, but behind the meter as well in terms of the traditional utility business model.”

But he says that energy storage will provide a new way of designing an electricity grid, particularly for emerging countries that actually are perhaps mired in energy poverty.

Micro-grids become a realistic solution for that problem together with distributed generation. Even in developed countries as you see energy storage and distributed generation become more and more prevalent, ultimately the future is an overlay on top of loosely interconnected micro-grids that can actually add robustness, lower costs and robustness for all kinds of energy consumers.

“The winners in this process are going to be electricity consumers, technology providers, developers and ultimately those utilities that are able to and have a mechanism for embracing change, which is inevitable in any case as the sector grows.

On some other issues, Hellman says:

EOS batteries are designed to achieve 10,000 cycles. If it was charged at night and discharged during the day, that would correspond to one cycle a day. So 10,000 cycles equates to something like a 30-year operating life for its batteries.

Hellman said EOS technology was specifically designed for grid-scale.storage but it was looking to see if it could be adapted for electric vehicles. He was not confident of the future of lithium ion battery technology, because of its cost and because of its lack of stability.

He said the challenge with lead acid is that it is very cheap, but it doesn’t last very long. “It doesn’t really fit the requirements for utilities style solutions. It’s not a bad stop-gap technology, but it’s probably not a great long- term technology.”

However, he noted that there are so many different applications for energy storage on the grid and off the grid that there will likely be a large number of technologies that emerge as being very commercial and having a lot of value added in this whole process.

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About the Author

is the founding editor of RenewEconomy.com.au, an Australian-based website that provides news and analysis on cleantech, carbon, and climate issues. Giles is based in Sydney and is watching the (slow, but quickening) transformation of Australia's energy grid with great interest.



  • Bob_Wallace

    (I have no idea why that comment got stuck in the Spam folder.)

    Anyway, we’re in pretty close agreement except for pump-up needing mountains. Germany has been looking at abandoned mines. There’s plenty of elevation change there.

    Canada is building a pump-up at an old open pit mine site and the UK is using an old rock quarry. (I don’t recall if it’s building or studying, but the idea is the same. There are sites that don’t require mountains.)

    Switzerland purposed new pump-up at five different sites a few years back but decided that there wasn’t ample demand to justify at the time. And there certainly are mountains in Scandinavia.

    Belgium is working on a pump-up “island” in the sea.

    http://cleantechnica.com/2013/01/17/belgium-plans-artificial-island-for-wind-energy-storage/

    My guess is that batteries will win the day. So much easier to site. But if they don’t pump-up is a proven technology that we can fall back on.

    On the price difference issue. It’s not that price differences are high “some days”. It takes regular ‘everyday’ price differences to make the math work. The storage system must be selling their services regularly in order to be profitable.

    It doesn’t work very well if all that capital is sitting unused for days/weeks at a time and earning nothing.

  • Marion Meads

    GM’s 16 kWH battery pack is sold for $1,900 through the parts dealership. And it is an excellent, very safe, Lithium ion battery pack. That is $118/kWH! Of course, there is a catch, this is GM to dealer pricing not retail. But one of these days, I might play with it when opportunity arises. Currently, my local Volt dealer is selling them for $2,500 as replacement part (no need to return the old pack though). That is still cheap, at less than $157/kWH, and it is here now!!! Will have to call up my electronic engineering friend who is assembling and programming PLC’s to see if we can assemble something for solar battery storage.

    • http://soltesza.wordpress.com/ sola

      That sounds suspiciously low for an automotive lithium-ion battery. Are you sure you didn’t miss a zero from the end?

      • Marion Meads

        I will find the link. I read about this one in Volt forum.

      • Marion Meads

        Here’s the Volt’s battery online price: $2,305.88
        The link below does not take you automatically. but click the Hybrid Components on the left side of the interface and it will display the Volt Battery pack to the right:
        http://www.gmpartsonline.net/parts/2012/Chevrolet/Volt/Base/?siteid=215055&vehicleid=407591&section=HYBRID%20COMPONENTS

        Here’s the GM-Volt discussion about the battery pack that some sources say $1,900.
        http://gm-volt.com/forum/showthread.php?70545-Volt-replacement-battery-for-only-2-300

        • Marion Meads

          We can’t believe the prices either. Maybe there is a big conspiracy going on brainwashing us that the prices of the batteries are expensive when actually they should be cheap. We might actually order one to play around.

        • Bob_Wallace

          At $2,305.88 that’s $139.75/kWh for the Volt 16.5 kWh battery.

          High retail cost.

          • Marion Meads

            A retail price of $139.75/kWH capacity High?
            So Mr. Bob, where can we find a cheaper retail price than this? We will buy that battery pack in a heart beat.

            This CleanTechnica article states their storage system costs $205-$250/kWH.

          • Bob_Wallace

            You listed two retail prices.

            I used the higher to calc a kWh price.

            Even based on the highest price this is cheaper than what people are talking about.

          • Brian Setzler

            That is a really low cost, and I think we’ll see a lot more plug-in hybrids if the cost is really that low. But keep in mind that there are a lot of additional costs in a grid scale system. You’ll need an inverter, a cooling system, and the grid interconnection. Also, the Volt’s battery pack won’t last for 10,000 cycles. And the Volt limits its state of charge range to about 65% to achieve its current lifetime, so it’s effectively a 10.8 kWh battery pack.

            Batteries have to be a lot cheaper for grid storage than for electric vehicles. 33 kWh is a gasoline gallon equivalent, but once you factor in the efficiency of an internal combustion engine, it’s probably closer to 12 kWh (obviously there are a lot of variables). So if gas is $3.60 a gallon, then electricity is worth about $0.30 / kWh in a car. Grid scale storage costs probably need to be closer to $0.05 / kWh. So lithium ion batteries will be absolutely dominant in transportation before they are economical for grid applications I think.

          • Bob_Wallace

            You’re pushing things with 33% efficiency in an ICEV.

            Based on 38 mile range and an expectation of 100,000 miles the Volt is probably good for about 2,500 cycles.

            I doubt that the storage technology we use for EVs will get used for grid storage. EVs put a very high premium on weight/size and the grid, not so.
            I won’t be surprised if flow redox batteries become a major player in grid storage. Apparently they are around 8 cents/kWh and it is expected that cost can be cut. One company says that they can cut it significantly.
            EOS Systems claims they can store (all in price) for about 10 cents with their zinc air battery.

            And Ambri claims that it will start manufacturing this coming year. If they aren’t blowing smoke their liquid metal batteries should be very cheap and have very long cycle life.

          • Brian Setzler

            Well the Prius engine can hit 38% efficiency, and I figured it was only fair to compare to a good engine. Of course, the Prius engine wouldn’t be suitable in a non-hybrid vehicle, and 38% is peak, not average. So I basically made up a fairly optimistic number. But the gasoline equivalent value is way more than $0.30 / kWh because I also didn’t take into account regenerative braking.

            Anyway, the whole point was that vehicle energy storage is worth a lot more money than grid energy storage. It’s the reason why I have no faith in the ideas to use electric vehicles for grid storage while they are parked.

            Redox flow batteries are fantastic. I think vanadium is slightly too expensive of a material for true grid scale (GW) applications, but it may still be commercially successful in the types of applications EOS is targeting. My favorite is hydrogen bromine, but I’m not sure if the bromine safety issue is too problematic.

          • Bob_Wallace

            OK. I don’t think of the Prius as an ICEV. I suppose one could say that under ideal conditions an ICE could run in the mid-30% efficiency range.
            I also don’t see EVs being used for grid storage. There’s talk of used batteries being used by utilities, but I suspect that may not happen, at least on a large scale.

            I think we’ll have 200 mile range EVs before long and when the EV has 100,000 miles on it and the owner is ready for a new ride it’s more likely to be sold to someone who can easily live with a 160 mile or less range. I suspect once we get to 200 mile ranges batteries may never be replaced but the cars sold on the portion of people who need a cheap commute car.

            Here’s a grid storage option to watch. Interesting because it’s tied into Oak Ridge Labs.

            “One of the major barriers preventing the widespread adoption of large-scale energy storage has been cost. WattJoule is engineering a new product platform based on the flow battery concept where electricity is stored in a liquid. WattJoule’s liquid is mostly water and is inexpensive to make in large quantities. Flow battery systems today suffer from a number of limitations that have been hard to solve until several recent breakthroughs in the field. WattJoule is both licensing and developing a portfolio of critical patent-pending technology that, in combination, will dramatically lower energy storage cost to $150 per kilowatt hour in its first generation product.

            “This technology allows us to practice high-power, high-efficiency operation that enables low-cost energy storage across a number of chemistries,” said Greg Cipriano, VP Business Development and Founder of WattJoule. “The heart of our new redox flow battery is a greatly improved electrochemical cell, where we can produce 10 times more power, for the same volume, over commercial flow battery systems. This high-power operation significantly reduces the amount of expensive material needed and this dramatically reduces cost. It also enables greater dynamic power range, which opens up a large spectrum of applications for one product platform that no other company can provide.”"
            http://www.prnewswire.com/news-releases/wattjoule-licenses-exclusive-rights-to-breakthrough-energy-storage-technology-236363031.html

    • ChristianHJW

      Excuse me, but this very low price must be incorrect. If GM would be able to sell a 16,5 kWh battery pack at retail cost of 2 TUS$, all EV makers would buy from them, including the Japanese. I expect this price is for a single module, max. 1 kWh, not for the full pack.

  • Jouni Valkonen

    It is good to remember that EOS batteries are not yet on markets, so that information is useless for predicting the future price evolution of storage batteries.

  • Hans

    For a grid operater the cost per stored kWh is most interesting.
    With 10000 cycles a capacity price of $160/kWh translates in 1.6 dollar cents per stored kWh.

    This of course neglects imperfect capacity, interest costs, maintenance, additional equipment etc. So actual cost will be probably be at least twice as high. But still, if the promises prices these costs are the right order of magnitude to be used comnercially.

    • Bob_Wallace

      There’s a video on the EOS web site that claims they can store energy and deliver it back for ~10c/kWh. That’s an ‘all in’ cost including even profit for the battery owner.

      10c is good for some grid use. But it’s not cheap enough for longer term bulk storage. The Swiss have said that to build new hydro pump-up they need a 5c difference between peak and off-peak prices on a regular basis.

      • Jouni Valkonen

        $100 per MWh is cheap enough for roof-top solar storage. So it will mean total energy REVOLUTION.

        • brink

          this discussion thread makes no sense, you are all ignoring what application the battery is being used for if it is large grid trust me they are not $250kWh installed. Stop having discussions without any context or qualifiers

          • Hans

            Of course we are just speculating on the basis of very little information from a company who want to sell a product, i.e. the info is not very objective. Therefore the numbers we come up with only indicate an order of magnitude, not an exact value. As long if everybody is aware of that there is no problem.

            So what is your opinion exactly? Will it be cheaper of more expensive when applied to large grid storage, what is your argumentation other than :”trust me”?

      • Hans

        I posted a detailed reply, but it seems to be stuck in a spam filter. The short version:

        At the German spotmarket there all already price differences larger than 10c/kWh within some days. This would make the technology commercially viable if EOS deliver what they promise. Once they get going, production upscaling and learning will decrease prices further enabling new applications.

        In Europe there is not so much room for new pump-up storage, so alternatives are needed anyhow.

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