The Long Duration Energy Storage Search – How Close are we to Low Costs and Zero Carbon?

As renewable energy continues to proliferate, a gap in the market is appearing for long duration energy storage demand that lithium-ion, coal-plants and pumped hydro will not be able to satisfy.

At the AGU this week, former Mayor of New York and Presidential candidate Mike Bloomberg spoke of the progression made on reducing carbon-based power plants, with 2018 being the first year that tipped over to negative growth. Despite efforts across the EU and U.S., China still has 147GW under construction. However, all is not lost. Despite efforts to continue producing cheap but polluting energy, China has set a 1100GW 2020 cap. If the country follows global trends, the next decade will see an accelerated rate of carbon-based plant closures and decommissions.

Solving the problem of variability

With plant closures, comes big opportunities for new, zero-carbon solutions. The renewable market has already started taking shape. However, as wind and solar continue to flourish, so do the issues around variability. Some energy markets such as Australia and California are already dealing with mismatches between renewable supply and daily usage patterns, resulting in negative pricing and curtailment issues.

Lithium-ion batteries are accepted in short-duration, high-priced storage applications such as hourly balancing, peak-demand shaving and ancillary services. Grid economics for longer duration storage, however, require solutions that can deal with multi-day, multi-week and multi-month balancing, Figure 1 shows the batteries service requirements needed given varying renewable energy penetration.

Today, Intraday (2-12 hours), Interday (12-24 hour) and Seasonal (monthly) balancing needs are typically serviced by using either carbon-based power plants or pumped hydro. Due to limitations of lithium-ion, decommissioning power plants, and the fact that pumped hydro is limited due to geographical, ecological and cost requirements, a gap now exists for a low-cost, adaptable, and carbon-free alternatives for long duration energy storage.

Solutions for a renewable world

The “storage” gap in the market means over the next two decades, ~$662 billion of investment is needed for stationary energy storage systems, including solutions for the 6-100+ hours range. To be competitive, they need to achieve a levelized cost basis with least-cost generation alternatives and scale well. Solutions will compete with pumped hydro at large scale, at a levelized cost of storage (LCOS) of $0.17/kW. In order to compete with lithium-ion for shorter durations, they will have to be compete with $0.35/kWh.

Thermal storage innovation

Thermal Energy Storage Systems (TES), which provides opportunities for Intraday, Interday and seasonal balancing, is currently a $4.35 billion market. Relative to lithium-ion batteries, TES can offer higher power capacity, high cycle life and better overall system reliability.

TES involves storing heat in a solid, liquid or gas medium. Relative to electrochemical solutions. TES using water and molten salt is commonplace today.  It is typically used in conjunction with concentrated solar plants for district heating and for gas boilers, but has limited operating temperature, high cost and auxiliary temperature requirements.

Kraftblock and Alumina Energy are two innovators commercializing solutions made using materials which can heat up to 1,650 degrees (molten salt has been unable to cater for temperatures above 585 degrees). The innovators are developing, packed-bed and granulate systems which can come from recycled materials (with max 1200 degrees limit) and containerized for scalability. Innovators 1414 Degrees and Azelio are developing technologies storing energy mainly during the phase change process in material (solid/liquid).

Aside for integrating variable renewables, a gap exists in the industrial heat market, according to Martin Schichtel, CEO at Kraftblock. Schichtel finds companies waste thousands of gigawatts of waste heat, as flare gas or exhaust gas per year. By capturing and recycling this heat, TES can decrease operating costs for industrial concerns, allowing for the generation of  electricity, preheat raw materials or supply alternative processes.

Innovators are at the validation stage with a few pilot projects on the ground. 1414 Degrees has put into operation a pilot TES system with a Wastewater Treatment Plant capturing biogas waste heat to produce electricity and heat on demand and Azelio are ensuring baseload energy for the industrial unit for renewable biofuel production. Corporate Siemens Gamesa has also put into operation a pilot heat storage facility storing 130 MWh energy in volcanic rock at 750°C for up to a week, with plans to use TES technology in the range of a several gigawatt hours project. Initial metrics for emerging TES are looking promising. Alumina Energy are currently operating at a LCOS of $0.05-$0.07/kWhe for retrofit use case,  converting an existing thermal generation plant to electric energy storage.

New markets for mechanical storage

To compete with pumped hydro, which accounts for 96% of the global energy storage market, mechanical storage innovators are containerizing solutions and working with corporates to standardize offerings which can work at large scale. Innovators with compression based, pressure-based or gravitational-based solutions are competing with pumped hydro’s $0.17/kWh market price.

Traditionally an inefficient solution, compressed air energy storage (CAES) innovators are deploying Adiabatic systems which store heat generated by compression for later use on discharge, thereby significantly increasing roundtrip efficiency and enabling an emission-free process. Hydrostor, backed by Meridiam, has commercialized its Advanced-CAES solution that can be flexibly sited where the grid needs it using either hard-rock or salt-based air storage caverns. The company recently launched its Goderich commercial reference facility, and raised an incremental $37 million to advance its 2GW project pipeline. Quidnet Energy a startup backed by Bill Gates-backed Breakthrough Energy Ventures, is also looking underground, developing a geomechanically pumped hydro system. CEO Joe Zhou explained that the company is working on a novel solution for 1-20MW module sizes.

One other innovator Highview Power is the first company to commercialize a compression system using cryogenic air. The company has recently announced commercial projects in the UK, Europe and the U.S. working with utilities such as National Grid to help integrate renewables and stabilize the electrical grid. Other key innovations focused on gravitational storage such as Energy Vault are gaining momentum with $110 million equity investment from Softbank. The company claims  their gravity storage units cost around $7M-$8M to build (compared to billion for other pumped storage) and can reach LCOS of $0.05/kWh.

Near-term market opportunities

The immediate needs of the grid is concentrated within the four hour limit, however markets with opportunity do exist today. Factors such as energy storage regulation, off-peak pricing, natural gas cost and policy dictate this value. California is a potential target market. With a renewable penetration of 34%, the state has surplus renewable electricity due, stringent energy storage procurement targets, a 100% zero-carbon energy mandate and heightened concerns over system resiliency due to the bankruptcy of the utility PG&E. Furthermore, during 2018, 1,279 MW of gas-fired capacity shut, SoCalEd shortlisted energy storage over gas projects for a capacity solicitation, and NRG Energy canceled plans to build a 262-MW gas plant. Other key spots include Hawaii, Australia and Germany.

Hurdles ahead

Integrating long duration storage requires high upfront investment and will have to be propped up by government lenders or private financers who are happy with risk. Many innovators at this stage have opted in for the development model, where much of the engineering and manufacturing is outsourced to channel partners who sometimes also serve as equity stakeholders.

Making a capital expenditure case for grid-scale renewable energy storage systems requires stacking of income from different revenue streams. Unlike distributed storage, utility-scale storage cannot receive behind-the-meter revenue, so it must rely on services supporting the grid, including voltage support, frequency regulation and spinning reserves. While this path is clearer for lithium-ion batteries today, it will be something to be worked out for the long duration market.

Close attention should also be given to green chemical-based storage solutions such as methanol, ammonia and hydrogen, which we have covered in detail in previous Insights.