June 16th, 2013 was a big day for renewable energy in Europe. On this sunny, windy Sunday afternoon in the summer, solar photovoltaics (PV) and wind peaked at over 60% of Germany’s electricity demand between 2 and 3 PM. The same afternoon, Italy’s hydroelectric, PV, biomass, geothermal and wind plants met the nation’s entire electricity demand for two hours.
These events marked major progress for the continent’s Energy Transition (Energiewende), and happened sooner than many had anticipated. They also portend a sea change for the Energy Transition. At the point reached on June 16th, not only did other forms of generation temporarily lose all value on Italy’s energy exchange, but the nation was forced to export excess electricity production.
Of course, this was only for two hours. But as more and more variable renewable energy – wind and solar PV and CSP – is added to the grid, compounded by the less dramatic variability of existing hydroelectric generation, this will become more and more of an issue.
Germany is not far behind. Solar and wind are already forcing other forms of generation to ramp down at moments of high production in Germany, and prices on the electricity exchange are at times forced into the negative.
- Germany currently exports substantial amounts of electricity at times of high solar and wind production. Image courtesy: Bruno Berger, Fraunhofer ISE using EEX data
In short, Europe is at a point where the need for storage to accompany renewable energy generation is no longer a distant future concern.
This need is farther off in the United States, Japan and other locations with lower penetrations of PV and wind. But it is coming, and both utilities, policymakers and the industry are preparing. In California, regulators recently approved a plan to require private utilities to source 1.325 GW of energy storage by 2020, which is expected to dramatically increase the global market.
This report by Solar Server, with support from Greentech Media Research, will look at the rise of energy storage to accompany PV and other renewable energy generation in Germany, Italy, Japan, the United States and globally, as the second phase of the Energy Transition.
Germany: Self-consumption and distributed storage
In the past eight years, Germany has been the leader in raw adoption of PV, with over 35 GW added as of October 2013. It is also emerging as a leader in the promotion of energy storage. The nation’s approach to energy storage is similar to its approach to PV, in that it has created policies to primarily support the growth of small-scale distributed solutions.
On May 1st, 2013 the German government introduced long-awaited subsidies for small-scale energy storage to accompany PV, which will provide up to EUR 660 (USD 870) per kW of the PV system, capped at 30 kW.
This adds to the other economic benefits of adding energy storage, which may not be obvious. While it is often described as a subsidy, Germany’s feed-in tariff has for some time paid producers well below the cost of retail electricity, and this has grown to a substantial difference over the last few years.
Currently feed-in tariff levels for PV systems smaller than 10 kW are set at EUR 0.14-0.15 (USD 0.19-0.21) per kWh, whereas retail electricity is around EUR 0.27 (USD 0.37) per kWh. This means that it is much more cost-effective for many PV system owners to consume the electricity they produce themselves than to sell it back to the grid.
These economics can be improved by storage. According to BSW-Solar, German residential PV system owners who integrate storage can up to double the portion of electricity from their PV systems that they use. While the point at which this happens depends upon a number of factors including the size of the system and the customer’s electricity use, it is possible for such storage systems to pay for themselves by saving consumers on electricity.
In addition to these decentralized solutions, Germany’s high level of variable renewable energy production is also leading to large-scale solutions. Operators of the nation’s pumped-hydroelectric storage plants have begun running two cycles per day, in response to the low daytime prices, and the European Commission is considering support for additional pumped hydro in Germany and expansion of pumped hydro in Austria.
Italy: Large-scale storage
Italy has similar conditions of high penetrations of PV and high retail electricity rates. And while the economics of small-scale storage are good in the nation, Italy is additionally pursuing large-scale storage projects. In July 2013, Italian grid operator Terna announced that it would launch a project to install 130 MW of batteries in four regions in Southern Italy, including the island of Sicily, at a cost of “several hundred million Euro”.
This is will follow two other, smaller scale storage projects that Terna has launched. The first, introduced in 2011, involved a total of 35 MW of projects to recover excess production by wind plants. The second project, introduced in 2012, involves 40 MW of what Terna describes as “power intensive” storage systems which are being installed in Sardinia and Sicily.
These first two projects involve a variety of battery technologies, and include comparative evaluation of technologies. For the 130 MW project, Terna has stated that it is in talks with an un-named Japanese company, and these battery systems are expected to be online within three years.
Terna CEO Flavio Cattaneo has also estimated that the nation could build up to 5 GW of hydroelectric plants with pumped hydro storage.
The United States: Preparing for the future
The United States is in a much different position than either Italy or Germany. Only a few states in the nation are producing large amounts of variable renewable energy. As such the U.S. market for energy storage has so far been focused on frequency regulation, in other words storage to balance out rapid, short-term fluctuations in power output.
However, in some regions high penetrations of renewable energy are beginning to portend additional needs for longer-term energy storage, and both state and federal regulators are responding. California has seen utility-scale renewable energy generation peak at as high as 23% of demand in late September 2013, and the state is already taking steps to prepare for higher levels when its renewable portfolio standard goal of 33% of overall generation is reached in 2020.
California’s AB 2514 is likely the strongest policy move on energy storage to accompany renewables outside of Europe. The law required California regulators to evaluate and mandate targets for energy storage, and in October 2013 the California Public Utilities Commission ruled that the state’s three large investor-owned utilities must procure 1.325 GW of energy storage by 2020.
Greentech media estimates that this will effectively double the global market for energy storage excluding pumped-hydro and underground compressed air storage, and quotes and un-named industry executive in stating that this will require USD 1-3 billion in investment.
Federal regulators have also made rule changes requiring utilities to change the way that they pay for storage, which so far has benefited the frequency regulation market.
Additionally, Texas is looking at energy storage to manage its wind generation, which is the largest by raw capacity in the United States. The state has the additional challenge of a relatively isolated grid.
Texas regulators have passed a number of measures to support energy storage, which are change the way that storage is financially supported, similar to federal regulations. The state currently has two large energy storage projects underway, including North America’s largest battery system at 36 MW and the first compressed-air storage system to be approved in decades.
Penetrations of wind and solar are also high in Hawaii, which unlike Texas has grids that are isolated by geography, not political decisions. Hawaii has served as a test site for a number of energy storage projects.
Japan: Rapid changes
While Japan has a moderately large PV capacity built in previous years, the nation has dramatically increased solar capacities with its feed-in tariff, implemented in July 2012. Additionally, Japan has the world’s largest capacity of pumped hydro storage at 25.5 GW, which can store the electricity from solar production during the day for evening use
Given the nation’s very rapid rate of solar adoption – estimated to be 7 GW this year – Japanese authorities are also looking at other solutions. In August 2013, the nation’s Ministry of Economy, Trade and Industry (METI) announced that it had chosen three companies to install two massive battery systems in different regions, in part to develop the technical abilities to better utilize batteries on the grid in the future.
Additionally, Japan’s METI is subsidizing research and development at sodium-sulfur battery maker NGK Industries, through an initiative whose goal is to lower the cost of battery storage to that of pumped hydro.
Energy storage technologies
The rapidly changing field of energy storage covers a wide range of technologies, each with specific technical characteristics. While Solar Server covered energy storage technologies extensively in our July 2010 report, and will only supply an overview of new developments here, it is important to note some of the technical details.
First, different energy storage technologies cannot be treated as commodities, since the technical features of energy storage systems determine the functions that they can supply on the grid. Ultracapacitors and flywheels offer very rapid power transfer, which can smooth out power fluctuations which last less than one second. For longer-term storage on the order of minutes, hours or days, a variety of battery types can be used. Finally, compressed air, pumped hydro, and methane and hydrogen systems are useful for long-term storage.
- Different energy storage technologies are suitable for different applications. Image: Fraunhofer ISE
Of all the technologies being explored for energy storage to accompany renewable energy, lithium-ion batteries have attracted the most attention in recent years. However, lead-acid batteries remain less expensive and are widely used in small off-grid systems, while sodium-sulfur systems make up the majority of grid-tied battery capacity. Finally, pumped hydro remains the cheapest and most widely deployed means of long-term energy storage.
One of the key advantages of lithium-ion technology are higher cycle lives. Solarpraxis AG estimates that lithium ion batteries can reach a lifespan of 20 years or 7,000 charge cycles if charged and discharged daily, much more than the 2,000 maximum cycles available with lead-acid gel batteries. The two can also be combined, and Fraunhofer ISE (Freiburg, Germany) reports that a hybrid approach of using a larger lead-acid battery with a smaller lithium-ion battery subsystem can create a battery system with a longer lifespan.
Fraunhofer ISE also finds that while lithium-ion batteries are more expensive initially, that over their lifetimes they are nearly as cheap as lead-acid batteries at smaller scales.
Exponential market growth
When we talk about deployment of energy storage, we are talking about multiple different markets at different scales. At the residential and commercial behind-the meter scale, PV systems with energy storage system represent a very small portion of overall PV system sales.
However, this market is growing rapidly, in large part due to German subsidies. At the beginning of September 2013, IHS reported that 1,000 German PV system owners had qualified for subsidies to support 30 MW of storage, with another 4,800 applications being considered. IHS states that the subsidy is causing the PV energy storage market to boom in the same way that feed-in tariffs caused the PV market to boom in previous years.
Battery companies have been preparing for this moment for some time, and in the last two years a number of companies began producing lithium-ion batteries to accompany residential and small commercial PV systems, including Panasonic, Conergy and Saft. Many of these and other systems have been rolled out in the German market.
At the larger scale it is difficult to put a number on the size of the current market, as deployment is uneven from year to year. However, with the large number of projects that have been announced, it is clear that this market is also growing.
IHS and other market analysts have made predictions about the future size of the global energy storage market, with IHS anticipating particularly sharp growth among energy storage systems to accompany PV systems for businesses. And while all predict exponential growth, the size of the market anticipated in any given year varies widely.
Like the PV industry, greater market adoption of energy storage will depend upon a number of factors, including regulatory support and subsidies, with prices falling as economies of scale are built and the industry matures.
It should be noted that the recent regulations in California allow energy storage at multiple scales, including behind-the-meter systems, to meet the 1.325 GW target. The main limitation is that pumped hydro systems larger than 50 MW do not apply. As such, while this will be a massive boost to the market, it is currently unclear what impacts this will have on various segments of the storage market.
This is not only true of California. We simply do not know what the future global energy storage market will look like, including what technologies will dominate. But what we do know is that as more and more renewable energy is added to the grid globally, energy storage will inevitably be a major component of our energy systems. The future is here.