There are good technical reasons for developing low-cost, long-duration energy storage systems, although market opportunities remain uncertain
RESOURCE CHALLENGE
The world’s dominant battery chemistries use materials that may be too precious to waste on long-duration, gigawatt-scale storage
COMMERCIAL FORCES
Scaling up alternatives to lithium-ion could be hard because of the diversity of technologies available
KEY QUOTE
The long-duration bridge will be molecule, not electron based
A new arrival is set to land at Amsterdam’s Schiphol airport in the first quarter of 2023. Mainland Europe’s second-largest airport is set to take delivery of a batch of battery systems to replace existing diesel power units.
To the uninitiated, the container-based batteries being installed by ESS, a manufacturer based in the United States, look much like any number of large-scale, energy-dense lithium-ion battery systems now being deployed worldwide.
The ESS Energy Warehouse units are quite different, however. They belong to a family of long-duration storage technologies that could be crucial to the global energy transition, but which today face an uncertain commercial outlook. Instead of using relatively hard-to-find materials such as lithium, cobalt and nickel, ESS’s technology, called a flow battery, stores energy using a mix of iron, salt and water.
This low-cost mix means so-called “Energy Warehouse” batteries can store large amounts of energy inexpensively, allowing them to discharge electricity for longer than lithium-ion equivalents. ESS says the products can provide up to 12 hours of energy.
A lithium-ion battery with a similar power rating would struggle to get to half of that time cost-effectively because its storage materials are more costly.
VARIABLE FUTURE A renewables-dominant grid could require long-term storage as backup during periods of dunkelflaute
INCREASING DEMAND
Analysts see growing demand for long-duration energy storage, which is an ambiguous term generally encompassing technologies with discharge times ranging from several hours to a few days. In December 2022, Wood Mackenzie, a market research firm, estimated that storage systems offering between eight and 100 hours of energy at a time had attracted $58 billion in commitments from governments and the private sector.
If all this money were to end up being invested in projects, it could lead to 57 gigawatts of new long-duration storage capacity—three times the energy storage capacity installed worldwide in 2022, Wood Mackenzie says. While it is unlikely all these projects will come to fruition, there is a strong technical case for installing long-duration storage reserves.
Nothing so far has been found that beats lithium-ion as a power source for consumer electronics and electric vehicles, but when it comes to energy storage—where energy density is not as crucial—the list of options is vast.
COST-EFFECTIVE STORAGE
The key is using a cheap storage medium. In pumped hydro plants, which make up the bulk of energy storage capacity today, that medium is water. Excess renewable energy is used to pump water from one reservoir to another that is higher up.
To unleash the stored energy, the water is allowed to flow back to the lower reservoir through a hydro turbine to produce clean electricity. This form of energy storage is cost-effective and efficient, which is why pumped hydro is so widely used. However, it is limited by geography and land use. There are not that many places, particularly in Europe, where you can build two large reservoirs within a short distance of each other and with a significant enough drop between them.
Conscious of this, innovators are working to come up with other cheap ways of storing large amounts of energy. They range from flow batteries such as those sold by ESS to towers where blocks of concrete are lifted and dropped like the water in a pumped hydro plant. Other concepts aim to store energy as heat in sand, compressed air in tanks, or even as chemical potential in iron-air compounds—in other words, rust.
UNCERTAIN OUTLOOK
With a materials-based imperative to move away from lithium-ion and plenty of seemingly low-cost alternatives available, the future for these long-duration technologies would seem bright. But there are significant commercial uncertainties that surround the market.
In old-style grids, dominated by fossil fuels, matching supply and demand was simply a matter of adding or removing coal, gas or diesel generation to or from the system. Only with the advent of renewables, and with less fossil capacity available, has it become important to capture excess energy when it is produced—and so far, most of the grid support needed has been met with only modest amounts of storage.
The frequency and voltage imbalances that variable renewables can cause on the grid can be corrected within seconds or minutes using battery systems. Lithium-ion batteries, which have plummeted in price as manufacturing scales up to meet electric vehicle demand, are well suited to such applications.
NOVEL TECHNOLOGY
The low cost of lithium-ion means the batteries can be used cost-effectively for when up to four to six hours of energy is needed, although in practice such situations do not arise that often as grid management techniques also advance.
Beyond the six-hour point, long-duration storage assets should take over from a financial standpoint, but question marks remain over whether it makes sense to invest in a novel technology that might only be used a few times a year.
Low utilisation rates could make it hard for long-duration storage assets to recoup their initial costs. One way around this would be to pay a premium for the extra flexibility of having assets that can deliver several hours of clean energy when needed, but markets are not set up to do this at present.
The picture will change as renewables increasingly dominate the grid, making the system more susceptible to periods when wind and solar generation is insufficient. Yet this is where another problem for long-duration storage becomes apparent.
Apart from pumped hydro, none of the technologies vying for this space have been deployed at scale. While they might be theoretically cheaper than lithium-ion, their cost-effectiveness will only become evident once they go mainstream.
CRITICAL MASS
Reaching this level, however, will require large amounts of capacity of a single technology. Given the vast array of technologies available in the long-duration storage space (see table), and the lack of market support currently available to any of them, the future of these technologies is clouded.
“Pumped hydro is the only truly large-scale long-duration energy storage technology deployed and will continue to dominate out to 2030,” says Kevin Baxter of Wood Mackenzie. Almost all other long-duration storage technologies face significant pressure to reduce costs, he says.
“Only those novel long-duration energy storage technologies that mature and prove economic competitiveness quickly enough to meet market needs are likely to become part of the solution to a reliable zero-carbon power system,” Baxter says. “We forecast consolidation will start to appear from the end of this decade or the early 2030s.”
COST CURVES
While long-duration hopefuls duke it out for supremacy in a vaguely defined, poorly supported market, competing short-duration technologies will be racing down the cost curve—making them also an increasingly viable option for long-duration services. Foremost among these is lithium-ion battery storage.
Concern over the availability of lithium-ion materials is justified, with supply shortfalls prompting a 7% rise in battery prices last year—the first such rise in a decade, according to analyst firm BloombergNEF. However, there is considerable debate over the extent to which materials availability will be a showstopper for the lithium-ion battery industry.
Among the more pessimistic outlooks is a 2021 study by Simon Michaux of the Geological Survey of Finland. It estimates equipping the world’s transport fleet with lithium-ion batteries would require 48% of global nickel reserves and almost 44% of available lithium. Furthermore, “There is not enough cobalt in current reserves to meet this demand and more will have to be discovered,” says the study.
NEW RESERVES
Lithium-ion proponents remain unfazed by such predictions. They argue growing demand for lithium-ion battery materials will spur the exploitation of new reserves, as has happened historically with oil and gas. Rising demand is also expected to prompt increased lithium-ion battery recycling, which is already taking off in China, and drive the development of chemistries that are less reliant on scarce materials, such as lithium iron phosphate.
“There’s plenty of material in the crust of the Earth,” says Nadim Maluf of Qnovo, a company that uses software to improve the performance of lithium-ion batteries. “The question is accessibility and the economics of extracting and refining it,” he adds.
Increased lithium-ion battery manufacturing for the automotive industry could see the cost of the technology dropping to $60 per kilowatt-hour by the end of this decade, he says. At such a price point, it could be cost-effective to use lithium-ion for storage applications of up to 24 hours, Maluf says.
MARKET LEADERSHIP
By 2030, as per Wood Mackenzie’s forecasts, long-duration storage technologies might still be battling for market share, with little chance to have built up economies of scale. While even Maluf doubts lithium-ion could be competitive for 24-hour-plus applications, long-duration storage also faces a challenge in multi-day use cases.
Today, delivering uninterrupted energy for days on end is a mission for fossil fuels, nuclear power or hydro plants. Fossil fuels are being phased out in the energy transition and it may be hard to scale up nuclear and hydro capacity significantly because of high capital costs plus licensing and permitting challenges. Around the end of the decade, however, a new low-carbon fuel is set to enter the fray. Green hydrogen, produced from water using renewable electricity, is already getting massive attention from policymakers and investors.
SEASONAL STORAGE
There is considerable uncertainty over the likely size of the green hydrogen market and what use cases it will ultimately address. One of the potential applications, however, is to act as a replacement for natural gas in peaker plants. In this scenario, green hydrogen could act as a source of seasonal energy storage, filling in for low renewable generation during days or weeks when there is little wind or sunshine.
If this happens, some believe there may not be much call for more exotic technologies to deliver stored energy beyond 24 hours. “I have a view that the long-duration bridge will be molecule, not electron based,” says Bruce Huber of Alexa Capital, an independent corporate finance advisory firm specialising in energy technology and infrastructure. “The molecule is the most bankable,” he says.
“We’ve spent 100 years perfecting how to store molecules and do that very efficiently.” The growth forecasts for green hydrogen mean that, like lithium-ion batteries, it could come down in price much faster than novel long-duration storage technologies. As a result, Huber advises “a degree of investor caution” in long-duration storage companies. “I could say this space is more tuned for longer-horizon investors.”
IMPROVING COSTS
Naturally, there is a high degree of uncertainty in weighing up the market potential of one nascent asset class, such as green hydrogen, with another, such as novel long-duration storage. For some, furthermore, long-duration storage’s diversity is an asset. “We’re going to need a little bit of everything,” says Julia Souder of the Long Duration Energy Storage Council, an industry body.
The council predicts a need for 140 terawatt-hours of long-duration storage capacity globally by 2040. The cost-effectiveness of long-duration storage will improve as renewables penetration drives demand, with costs dropping under $100 per megawatt-hour once renewable power serves around 60% of grid requirements, Souder says. “That’s already happening in places around the world,” she says. Nevertheless, she adds, “I think we all can do a better job in creating this marketplace, to show the unique attributes of these projects.
MAJOR ROADBLOCK
Despite Souder’s optimism, it is hard to escape the sense that a lack of standardisation could prove a major roadblock to scalability in long-duration storage.
From Betamax and VHS videotapes to thin-film and crystalline silicon solar panels, history is littered with examples of products that may not have been technically ideal yet dominated the market purely through manufacturing scale.
Plus, even if green hydrogen fails to take off as expected, it is unclear whether long-duration storage will be much needed in future grids where there is ample demand-side capacity. “I’m not sure there will be a market for large, centralised storage other than pumped hydro,” says Jill Cainey of Erne Energy, a consultancy in Australia.
“Long-duration storage doesn’t seem to have changed over ten years.”
IMAGES
Biel Morro, Unsplash & Ehud Neuhaus, Unsplash