TUESDAY 17 NOVEMBER 2015
F T.COM
Batteries start to compete for
power grid
The cost of batteries is falling to the point that they are becoming an increasingly
viable option for uses such as supporting the stability of power grids, according to
Lazard, the investment bank.
ED CROOKS – NEW YORK
E
lectricity storage has until
recently been prohibitively
expensive,
but
its
emergence
at
an
economically viable cost
will enable increased use of wind and
solar power, which are not always
available.
The cost of renewable energy has
fallen sharply over the past decade
as
market
growth,
usually
encouraged by subsidies, has
enabled manufacturers of wind
turbines and solar panels to benefit
from economies of scale.
Similar trends are now at work in
electricity storage with investments
such as Tesla’s battery “gigafactory”,
now under construction in Nevada,
greatly increasing manufacturing
capacity.
Within five years, Lazard believes,
the price of batteries is likely to have
fallen to the point that they will be
competitive against back-up fossil
fuel power generation for a wide
range of uses.
“Storage is looking far more
optimistic in terms of innovation and
material impact now,” said George
Bilicic, global leader of Lazard’s
power, energy and infrastructure
practice.
“Power grid applications were
grade school science projects a few
years ago. They are much more real
now.”
The need for electricity storage has
grown along with the use of
© THE FINANCIAL TIMES LIMITED 2015
renewable energy. Onshore wind and
solar power in sunny areas are now
competitive with conventional coal
and gas-fired electricity generation
even without subsidies, according to
Lazard.
However, because their output is
not consistent through the day, and
cannot be called on whenever
needed, they have to be supported
by other power sources. These are
typically gas-fired “peaker” plants,
which cost more to run than the
most efficient generation and are
used only when demand is highest.
Batteries are still typically more
expensive than peaker plants for
uses such as supporting the grid at
times of strain or backing up
renewable energy, but Lazard
expects that in five years’ time they
will be generally competitive options
even without any subsidies or tax
breaks.
New electricity storage installed on
to the grid to support wind and solar
power is likely to grow more than
60-fold from 196 megawatts of
capacity this year to 12,700MW in
2025, according to Navigant, a
research firm.
Jim Robo, the chief executive of
NextEra Energy, told a conference in
September he expected that after
2020, “there may never be another
peaker built in the United States”,
because electricity storage would be
used instead.
NextEra, which owns Florida
Power & Light, a utility, is one of
many US and international
companies investing in storage. AES,
the Virginia-based power company,
is for example providing 100MW of
battery storage capacity for Southern
California Edison, another utility.
The PJM electricity grid, which
stretches from Tennessee to New
Jersey, has become a centre for
investment in storage because its
market design rewards sources that
can be brought on quickly to support
the infrastructure.
Widespread use of energy storage
was not essential for increased
reliance on renewables, said Mr
Bilicic. A “blended” mix of solar,
wind and gas-fired power, with
improved energy efficiency, could be
competitive with conventional coal
plants, he added.
One option to back up variable
renewable energy is flexible
combined-cycle gas turbine plants.
General Electric and Siemens have
brought on to the market new
turbines that can ramp output up
and down faster and with higher
efficiency than previous models.
However, electricity storage will
make it easier to increase the
contribution made by renewables,
Lazard believes, and can generally be
deployed faster than new gas-fired
power plants.