Market opportunity and
step change in growth for
utility scale battery energy
storage
David Cunningham
08 June 2016
What we do
SgurrEnergy personnel hold unparalleled renewable energy
infrastructure knowledge across the full project lifecycle.
About SgurrEnergy
We provide expert advice for a diverse range of stakeholders including
utilities, developers and investors on multiple generating technologies.
Onshore wind
Wave and tidal
Offshore wind
Bioenergy
Solar
Hydro
Energy Storage
Our network of local offices
Global track record
We have consulted on over 160GW of renewable energy generation in over 90
countries covering both project development and due diligence
Europe
• Belgium
• Bulgaria
• Estonia
• Finland
• France
• Germany
• Greece
• Ireland
• Italy
• Latvia
• Lithuania
• Malta
• Netherlands
• Norway
• Poland
• Portugal
• Russia
• Romania
• Slovakia
• Spain
• Sweden
• UK
• Ukraine
Asia
Africa
Oceania
• China
• Angola
• Ethiopia
• Kenya
• Malawi
• South Africa
• Australia
• New Zealand
• India
• Israel
• Korea
• Mongolia
• Pakistan
• Philippines
• Sri Lanka
• Turkey
• United Arab Emirates
• Vietnam
Project
Client
MWh
Year
Technical and commercial feasibility
UK Government
1.5MW
2016
study to displace diesel power with
agency
Confidential
1MW
2016
Confidential
Multi-
2016
additional solar with incumbent wind.
Technical and commercial feasibility
study for battery energy storage in a
renewable hybrid system. Displacing
North America
• Canada
• Mexico
• USA
diesel power.
Technical and commercial feasibility
study into the use of battery energy
storage to enhance the commercial
value of UK operational wind farms
Technical and commercial feasibility
South America
• Brazil
• Chile
• Galapagos Islands
(Ecuador)
MW
(Major UK utility)
Confidential
study in battery energy storage, colocated with solar parks
MultiMW
UK multi-site
solar PV
developer/owner
2016
The Duck of Death…?
MWh
Net load
13,000 MW of
ramp needed for a
period of three
hours.
Source: California Independent System Operator (CAISO),
Time
There are many storage technologies
1. Pumped hydro energy storage
2. Lithium-ion batteries
3. Advanced lead-acid batteries
4. Sodium-sulphur batteries
5. Sodium-nickel chloride batteries
6. Flywheels
7. PEM fuel cells and electrolysers (hydrogen)
8. Redox flow batteries
9. Compressed air energy storage
10. Superconducting magnetic energy storage
11. Electrolytic double layer capacitors
12. Cryogenic energy storage.
Current global storage capacity
Technology type
Projects
Rated power (MW)
Electro-chemical
918
2,729
Pumped hydro storage
350
179,427
Thermal storage
203
3,615
Electro-mechanical
69
2,611
Hydrogen storage
9
6
How will this develop?
More pumped storage?
Gas fire peaking plant and reserve capacity?
Source: US DOE 2016
LCoE incumbent ES vs BES
Pump spreads €/MWh
Clean spark spread peak €/MWh
60
35
50
50
46
39
40
41
41
40
46
45
44
43
42
47
46
25
32
22
20
27
24
19
21
21
21
22
27
27
24
24
20
28
30
30
25
28
27
26
29
20
16
15
9
10
10
5
0
32
31
30
30
29
1
2
3
5
0
2007
2008
2009
2010
Pumpsreads
2011
2012
2013
2014
2015 2016E 2017E
2007
Fixed & capital costs for a 400MW storage plant
Source: EEX Pricing, SgurrEnergy analysis
2008
2009
2010
Clean spark spreads
2011
BES capex $'000/MWh
1500
1000
500
0
2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2025E
Battery cost
Source: Unicorm/Tesla/ BYD/LG/ SgurrEnergy analysis
BoP cost
2013
2014
2015 2016E 2017E
Fixed costs for a 800MW CCGT power plant
Source: EEX Pricing. SgurrEnergy analysis
2000
2012
LCoE incumbent ES
Pump spreads €/MWh
60
50
50
46
41
41
40
39
42
46
45
44
43
46
47
40
32
28
30
24
22
19
20
21
21
21
22
2014
2015
2016E
2017E
10
0
2007
2008
2009
2010
Pumpsreads
2011
2012
2013
Fixed & capital costs for a 400MW storage plant
• Wholesale electricity pricing driven down by low marginal cost
renewables
• Reduced utilisation rates
• High upfront costs and expensive development process
• Investors reluctant to take merchant risk
LCoE incumbent ES
Clean spark spread peak €/MWh
35
30
25
27
27
24
32
31
27
29
28
27
30
30
29
26
24
25
20
20
16
15
9
10
5
5
1
2
3
0
2007
2008
2009
2010
2011
Clean spark spreads
2012
2013
2014
2015
2016E
Fixed costs for a 800MW CCGT power plant
• Wholesale electricity pricing driven down by low marginal cost
renewables
• Reduced utilisation rates
• Investors reluctant to take merchant risk
2017E
BES Innovation & Cost Reduction
BES capex $'000/MWh
1800
43% cost reduction since 2010. Supply chain investment
in expected to lead to another 50% by 2018/19
1600
1400
1200
1000
800
600
400
200
0
2010
2011
2012
2013
2014
2015
Battery cost
Source: Unicorm/Tesla/ BYD/LG/ SgurrEnergy analysis
2016E
BoP cost
2017E
2018E
2019E
2020E
2025E
LCoE of Lithium-ion based BES
2000
1800
1600
1400
$800k/MWh
LCoE USD/MWh
1200
•
•
•
•
$600k/MWh
1000
$400k/MWh
800
Model assumes 5,000 cycle service life
Daily use
No degradation
92% efficiency
$250k/MWh
600
400
200
0
10
20
30
40
50
60
70
80
90
100
Depth of Discharge (%)
• Warranties are highly conservative – 2,500 cycles fully discharged
versus 5,000 expected at 80% ‘end of life’ capacity
• $800/MWh representative of current pricing in the market
• $400/MWh seen as the ‘time shift’ and baseload renewables.
Summary benefits of BES
BES can provide 13 services
to 3 potential stakeholders
Source: Rocky Mountain Institute
UK Policy Incentives
SERVICE CHARACTERISTICS
Scheme/instrument
Notification period
Service delivery period
Enhanced frequency
response
<1 second
Focus on 1-30 seconds but value considered up to 30 mins
Firm frequency response
<10 seconds
Focus on 10-30 seconds but up to 30 mins for secondary response
Fast reserve
<2 minutes
Typically 2-5 mins but must be capable of 15 mins sustained
output
<4hrs – focus on
<20mins
Contracted MW must be deliverable for no less than 2 hours
>4hrs
Expect periods of required output will be 2-4 hours but could be
much longer
Day ahead – gate close
Typically would expect to be outputting during peak periods ~4
hours
STOR (short term operating
reserve)
Capacity market
Wholesale market
operation / Triads
Source: SgurrEnergy
Commercial model 1 – Generation
Commercial benefits
Turnkey EPC
Provider/Systems
Integrator
Co-located to RE plant
•
•
•
•
Developer
IPP
Utility
TSO/DNO
Sale of firmer power/Third party
aggregator
Network
Energy user
Energy price arbitrage
Additional capacity
Emissions reductions
Embedded benefits
• Reduced UoS costs
• Mitigate curtailment
• TRIAD participation
Ideal markets
•
•
•
•
Supply deficit
Import overreliance
High renewables penetration
Negative pricing
Source: SgurrEnergy
Commercial model 2 – Grid support
Commercial benefits
•
Turnkey EPC Provider/Systems
Integrator
Grid support at – substation or nodal point
Developer
IPP
Utility
TSO/DNO
Smart supply management/Third party
aggregator
Network
Energy user
•
•
•
•
•
•
Power reliability
• Voltage support
• Spinning reserve
• Frequency regulation
• Black start
Energy price arbitrage
Emissions reductions
T&D cost deferral
Reduced line losses
Transmission congestion relief
Ancillary services
Ideal markets
•
•
•
•
•
Transmission constraints
High renewables penetration
High peak and trough net load
Need for fast-responding
ancillary services
Expensive thermal peaking
capacity
Source: SgurrEnergy
Commercial Model 3 – Consumer
Commercial benefits
Turnkey EPC Provider
•
Consumer support e.g, distributed solar
•
•
•
Sale or ESCO model
Storage system only or
Storage & generation (e.g, rooftop solar plus battery)
•
•
•
•
Developer/Property owner
IPP
Utility
ESCO provider
Residential
energy user
Energy balancing/selfsufficiency
Peak shaving
Time-of-use optimisation
Demand charge management
Ideal markets
Commercial
energy user
•
•
•
Unpredictable energy supply
High electricity prices
High solar irradiation
Self consumption
Export power
Source: SgurrEnergy
Storage regulatory and legal issues
•
•
•
•
•
Generally electricity generation and supply markets are not designed for the
inclusion of modular energy storage technologies
In many countries (e.g. UK and EU member states) the classification of storage is not
currently defined in its own asset class
Should it be generation or supply?
Does it require its own category/licensable activity?
Is storage in conflict with the grid?
Other regulatory/compliance risks:
• Co-location with renewable generation
• Treatment under other industry charges
• Funding renewable incentives (“double counting”)
• Accessing the multitude of income streams – Risk of overly simplistic revenue
stacking.
•
Greater regulatory clarity could improve the environment for storage
•
Detailed techno-financial simulation modelling is a pre-requisite.
Summary
• Increased storage is essential to accommodate renewables
• However, marginal value of storage diminishes the more BES
deployed
• Innovation is very strong in this sector – CE market now BES
• EV market will have a powerful influence
• Winners starting to appear - Li-ion
• Both developing and high penetration markets are suitable for BES
• BES is currently suitable for ancillary services and some embedded
benefits
• Revenue stacking interface risk - delivery of multiple services
• Regulatory and policy change is needed, all sectors:
₋ Networks, generation, customers
₋ Based upon supply chain investment BES can credibly achieve cost
reduction of 50% in the next 3 years to increase market penetration
enabling ‘time shift’ and base load renewables.
Thank you for listening
For more information, contact [email protected]