Price Drops in Energy Storage Following Solar’s Path
June 29, 2016
There are several scenarios out there for a renewable future in which no significant grid storage is needed. These are important to keep in mind, and in part, they have been modeled with the idea that energy storage would remain too expensive in the medium term to keep up with the necessary expansion of wind and solar energy.
But, just as photovoltaic solar prices plunged in the past half decade, surprising just about everyone and changing the landscape, now it looks as though storage prices will be following a similar path, with, maybe, just as industry-shaking consequences.
Solar veterans will recall a time not so long ago when the industry’s biggest dream was a PV module with a cost of 99 cents per watt. Obviously, the solar industry has long left that figure in the dust — module costs of 40 cents per wattare a reality in today’s market.
In fact, the 99-cent figure was more a VC-funding, press-ready construct than a real economic calculation.
Which is reminiscent of the equally arbitrary $100 per kilowatt-hour battery cost goal now put forth by the battery industry and the press. (Although it does help to have a concrete target to aim for.)
Ben Kallo at equity analyst firm RW Baird believes that Tesla’s current battery costs are ~$150 to ~$200 per kilowatt-hour, well below the industry average pack costs of ~$350 per kilowatt-hour (as estimated by Bloomberg New Energy Finance). Kallo suggests that the Chevy Bolt’s battery costs “are significantly higher” than those of Tesla.
Kallo suggests that Tesla “could reach its <$100 per kilowatt-hour target in the intermediate term as Gigafactory production ramps.” He continued, “Additionally, we believe TSLA is ahead of expectations on reducing battery costs, and continues to have a significant lead on competing EVs.” (Kallo upped his Tesla stock target to $300 per share based on improved Model X production.)
Tesla’s battery factory gets a lot of attention. When completed, the so-called Gigafactory will manufacture more lithium-ion batteries each year than were produced globally in 2013.
That will help push prices further downward. But a few other large producers — LG Chem, Panasonic and Samsung — are already making batteries at unprecedented scale. There are numerous giga-scale factories producing cells and battery packs for electric cars and stationary applications throughout Asia. And the recent wave of capacity is already impacting pricing in a big way.
According to Larsh Johnson, the chief technology officer of Stem, the company is paying 70 percent less for lithium-ion batteries than it was 18 months ago.
“It’s happening. The capacity is out there,” said Johnson in an interview. “The momentum continues.”
Traditional demand management typically requires systems that discharge for 1 to 2 hours. Stem is now getting customer requests for systems that can provide 4 or more hours of storage to support grid management services, such as frequency regulation or load-shifting to support renewable energy integration. The company is also looking at a broader geographic range, which includes Texas, Germany and Ontario.
The energy density of lithium-ion batteries continues to improve as well, helping vendors improve performance without adding new costs. “Double-density batteries are important,” said Johnson.
Then there is this survey by Navigant Research, which has projected that by 2025, the overall size of installed energy storage systems (ESS) will reach 21.6 GW, from 1.1 GW this year. That’s a huge increase—driven mainly by the Asia-Pacific. Navigant Research explains that ESS and renewable energy adoption are reinforcing demand for one another: the more renewable energy is being produced, the greater the need for reliable ESS, and the more widely available these ESS, the greater the demand for renewable energy becomes.
Another study, from the MIT, has looked into the various types of ESSs and has found that regardless of type, they make for a good investment right now. Lead author Jessika Trancik notes that prices still have further to fall to boost ESS attractiveness, but they are already offering a reasonable level of profitability.
Finally, S&P has published a report recognizing the importance of energy storage systems for the future adoption of renewable energy across the world, in keeping with a target for an overall 45 percent share of renewables in the energy mix by 2030. The report notes that ESS capacity must reach 150 GW by that year if the adoption target is to be achieved.