Energy Storage Could Reach Big Breakthrough Price Within 5 Years

Editor’s Note: The Deutsche Bank report is not public, but was shared privately with the author.

Originally published on RenewEconomy.
By Sophie Vorrath

A major new Deutsche Bank report has predicted that energy storage – the “missing link of solar adoption” – will be cheap enough – and technologically ready – to be deployed on a large-scale within the next five years.

The solar industry report, published on Friday, said that while costs for the greater majority of available battery technologies remained prohibitive, economically competitive batteries were the “killer app” and the “holy grail” of solar penetration.

But with many costs already lower than published literature would suggest, Deutsche Bank believes this ultimate solar and renewable energy goal might not be far out of reach.

“Using conservative assumptions and no incentives, our model indicates that the incremental cost of storage will decrease from ~14c/kWh today to ~2c/kWh within the next five years,” the report says.

“When overall system cost decreases are considered, we believe solar + batteries will be a clear financial choice in mature solar markets in the future.”

Currently, according to Deutsche, the cost of a typical lead-acid battery may be as low as ~$200/kWh, while best in class lithium-ion technology was producing commercial/utility packages in the ~$500/kWh range at end 2014 – half the cost of the ~$1000/kWh 12 months prior.

“We believe 20-30 per cent yearly cost reduction is likely (for lithium-ion batteries), which could bring (them) at commercial/utility scale to the point of mass adoption potential before 2020,” the report says.

Deutsche points to the commercial-scale market as one of the first areas where battery deployment will flourish, due to clear economic rationale.

“Commercial customers are often subject to demand based charges, which can account for as much as half of the electric bill in some months,” Deutsche says.

“We think companies with differentiated battery solutions coupled with intelligent software and predictive analytics that work with the grid to avoid these charges and smooth electric demand will pave the way for mass adoption.”

The report also points to utilities as a major market for batteries on a large scale, as costs drop and distributed renewable energy generation deployments increase.

On the residential level, the report said households were still unlikely to go down the energy storage path in the short term, without proper pricing mechanisms in place, or access to solar plus storage energy packages.

But again, Deutsche sees this as as a major, untapped opportunity for utilities: “Over the next decade, we see a substantial opportunity for utilities to utilize smart grids through residential battery aggregation.”

Properly incentivised, the report says, utilities could begin to aggregate neighborhoods of solar + batteries to behave as a single source of load reduction.

“Batteries could be dispatched as needed to reduce peak demand across the system. In a high grid-
penetration scenario, this could reasonably lower the necessary capacity from conventional generation sources.

“In turn, we think it is reasonable to hypothesize that lowered capacity needs from lowered peak demand would simultaneously lower the need for large up front capital investment in peaker plants.”

Deutsche sites two likely scenarios that would enable this sort of utility-driven household battery deployment: Third party leasing companies and individuals work with the utilities; or a shift in regulatory framework that allows utilities to include residential solar in their rate base.

“Both of these scenarios would likely significantly improve reliability, enable microgrids to function as needed, and improve grid resiliency during emergency situations,” the report says.

So what sort of batteries will homes, businesses and utilities be using? As the table below shows, there is quite a range of key technologies that, according to Deutsche, have the potential to be longer-term energy storage solutions, subject to technological feasability and cost.

And while lithium-ion and other electrochemical based batteries are still the most commonly discussed – AES Energy calls lithium-ion as the chemistry of choice for the next decade – the Deutsche report details a wide range of potential new technologies looking to fill the need for on grid storage.

Flow batteries, for example, while a relatively new technology and probably not likely to make a big impact on the market for several years, are tipped by Deutsche to be suited to large-scale utility storage with potential for long-term adoption.

Typically consisting of two tanks of liquids (electrolyte) which are pumped past a membrane held between two electrodes to store and generate electricity, flow batteries have the advantages of ease of scaling, reliability, and long life.

Varieties of flow batteries include Iron-Chromium, Vanadium Redox and Zinc-Bromine. Deutsche notes that recently, EnerVault dedicated its first commercial flow battery-based energy storage system in California.

In Australia, Brisbane-based company Redflow is fast-tracking the rollout of the latest iteration of its unique zinc bromide flow battery to the residential and mining sectors, the costs for which, it says, are 40 per cent cheaper than its first generation products, and are now approaching grid tariffs in some markets.

Elsewhere, start-ups are raising funds to scale up manufacturing of products such as EOS energy’s hybrid Zinc cathode, aqueous electrolyte based battery.

Once fully ramped, EOS says the battery will have 75 per cent round trip efficiency, a 30 year lifetime, and a cost of $160/kWh. As Deutsche points out, zinc is a much cheaper material than lithium, but has problems with electrode
corrosion and build-up.

EOS has solved this problem by using a proprietary coating that creates a permanently conductive and non-corrosive surface.

Another start-up, Aquion Energy has raised more than $150M in equity and debt to deploy more than 1MW of sodium-
ion batteries at $300/kWh price point.

Aquion’s six-stack module, which is roughly the size of a refrigerator, can produce 10kWh, while its larger 100kWh cube module was recently deployed in Hawaii, where 40 units will be shipped during first quarter 2015.

Reprinted with permission.