Markets - 14/November/2017

Key takeaways at a glance

Essential knowledge and key indicators of the prospects for grid scale electricity storage technologies

KEY TAKEAWAYS ON GRID STORAGE

Power system operators have for decades included modest volumes of stored electricity in the mix of options for balancing supply and demand, provided the value of the stored electricity has been greater than the cost of paying for it.

The value of stored electricity is not necessarily increased by the uptake of high proportions of renewable energy.

Balancing supply and demand can be done without using stored power, which rules out paying for storage solutions at any cost, also on power systems supplied with electricity from a mix of variable and dispatchable renewable energy sources.

Storing electricity is always more expensive than using the same electricity directly. The fundamentals of electricity storage economics are non-negotiable and are not changed by the falling price of batteries or abundant supplies of low-cost solar and wind.

No storage technology can deliver sufficient electricity over several days to make up for a deficit of wind and solar supply, with the exception of pumped hydro, which is geographically limited.

Storage can potentially increase the range of options for meeting any or all of four principal requirements for reliable supply: the provision of bulk power; the provision of system services; management of variability to reduce price peaks; and the relief of grid congestion.
stored electricity-01

At a 40% load factor, typical cost of around $1400/kW and assuming a 30 year life of the hardware and 6% borrowing rate on the cost of capital involved, storage merchants need to sell their discharged electricity for around €40/MWh more than the price they paid for it, just to break even.

For storage merchants, the wider the price spread between buying electricity when it is cheap and selling it when market prices rise, the better the financial proposition. For electricity consumers, the narrower the price spread maintained by the market, the lower the average price of their electricity.

When a storage facility has the opportunity to multi-task and supply electricity for several needs on a power system, the “revenue stacking” that follows can mitigate the inherent economic disadvantage under which storage labours.

The extra cost of electricity generated and stored by homeowners, compared with grid scale operations, feeds through to the economy and is paid for by society, one way or another.

If the green energy transition is to be fast and affordable, managing variability by occasional use, for short periods, of some of the paid for thermal generation already in place can be a compromise worth making.

A green grid that strongly connects power systems delivers the reliability that storage is perceived to provide.

TEXT Lyn Harrison & David Milborrow ILLUSTRATION Hvass & Hannibal

Read the full five-part report on grid-scale electricity storage: 

Part I: The not so essential role of electricity storage 

Part II: What storage is for and what it cannot do

Part III: Storage has to multi-task to earn its keep

Part VI: No sign of a silver storage bullet

Part V: Grid scale storage not essential but nice to have

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