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Five things you need to know about stationary energy storage

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  • Stationary energy storage will play a crucial role in the transition from a system based on fossil fuels to a system primarily based on renewable energy. Without energy storage, there will be no energy transition.
  • Electricity will make up half of our final energy consumption by 2050. The electricity grid is made up of sub-segments that each require different stationary storage solutions in order to function properly.
  • With the exception of pumped hydro, Li-ion batteries are the only storage solution that is widely deployed currently, but they can only deliver energy up to several hours.
  • Other stationary energy storage technologies with longer discharge times, have not yet reached a mature stage.
  • As more countries embark on a path to net-zero, the necessity to integrate an increasing share of renewables into the energy system becomes crucial. This will create a boom in the global market for stationary energy storage in the coming years.

1. Stationary energy storage is a key enabler of the energy transition

It’s hard to underestimate the relevance of stationary energy storage for the energy transition. Without energy storage, there will be no energy transition. In the energy system of the future, electricity will play a far greater role than today. Electricity is expected to provide half of our energy consumption by 2050 compared to just approximately 20 percent on average in the world in 2018, according to the IEA, ‘Net Zero by 2050, A Roadmap for the Global Energy Sector’. Like cars, more machines will be electrified in order to reduce greenhouse gas emissions.

What many don’t realize is that the demand for electricity at any given moment must be matched with an exact equal supply of electricity at that same time. In other words, supply and demand must be balanced at all times in order to avoid interruptions and blackouts.

Flexibility in the current system mainly comes from fossil-fuelled power plants, in particular gas-fired power plants, or from curtailment of renewable energy sources. Curtailment is when we actively ‘turn off’ renewable energy sources in times of overproduction to keep the grid balanced. In a fossil-free energy system the first solution will no longer be an option and curtailment is a waste of precious renewable resources. The flexibility of tomorrow’s system will come from more intelligent demand-response in combination with much more storage of green electricity.

The key issue is that electrons cannot be stored. So, in order to store electricity, electrons need to be converted into molecules that can be stored in many different ways, ranging from batteries, to water, heat, compressed air, green hydrogen, etc.

In short, if green electrons can be converted into molecules, this stored green energy can be used to:

  • Support the integration of renewable energy sources (RES) in the electricity system
  • Optimise curtailment and make RES more economical through increasing the number of full load hours
  • Reduce extreme price volatility by reducing large, short-term fluctuations in the power load
  • Provide stability, ancillary and balancing services for the grid
  • Provide security of supply for the longer term (seasons and strategic reserves)
  • Reduce grid congestion in certain cases
  • Enable parties to better trade and hedge on the electricity markets

2. There is no single standard storage solution for the electricity system

In grid balancing, there is a flexibility balancing spectrum ranging from ultra-short term (seconds) to ultra-long term (seasons or strategic reserves). These are separate markets in terms of flexibility, and therefore response time and discharge time, and each of these sub-markets deals with different demand-supply balancing issues and goals.

For short-term balancing flexibility, a fast response time matters. This therefore requires a storage solution that can deliver electricity within seconds. Obviously, for the long duration flexibility markets, response time matters less. Here the key characteristics are energy capacity and long discharge times.

Figure 1 illustrates the different sub-markets with the associated flexibility needs, the timescales, the concern that needs to be dealt with and the type of service to solve the issue.

 

Figure 1: Different electricity sub-markets have their own characteristics and concerns
Figure 1: Different electricity sub-markets have their own characteristics and concernsSource: OECD & IEA, Status of the power system transformation 2018; ENTSO-E, RaboResearch

* FCR: Frequency Containment Reserves, aFRR: Automatic Frequency Restoration Reserve, mFRR: Manual Frequency Restoration Reserve, RR: Replacement Reserve. These are all part of the short-term controlled balancing markets, which are physical markets. In each country, the response times in the FCR, aFRR, mFRR and RR market may differ slightly.

As illustrated above, every flexibility market has its own specific characteristics which require a fitting storage solution. There is no single standard storage solution for the electricity system.

3. The most frequently mentioned stationary storage solutions

In theory, many solutions per sub-market are imaginable. However, to avoid overcomplicating things, we have opted for a selection of stationary storage solutions to give an orderly and quick overview, rather than a complete overview.

As can be seen in Figure 2, every storage type provides one or more solutions given its characteristics. Flywheels, for example, can only offer a solution for the very-short-term market due to its short discharge time. On the other end of the spectrum, we find pumped hydropower which offers a solution for all markets and is the most efficient and effective stationary storage solution. However, it is often left out of the equation when comparing stationary storage solutions because of its enormous footprint in terms of surface and site- specificness.

Batteries form a very good and economical solution for the short-duration range. But their current short discharge time of up to 4 hours makes them unsuitable as a solution for the medium- to long-term segment.

Compressed Air Energy Storage offers an economical solution for the mid-duration range and is economical. Clean hydrogen can also be deployed in the short and the mid- and the long-term markets, but the high costs make it uncompetitive.

Figure 2: Each storage type provides a solution given its characteristics
Figure 2: Each storage type provides a solution given its characteristics Source: Grantham Institute, World Energy Council 2020, RaboResearch

*CAES: Compressed Air Energy Storage. P2G: Power to Gas refers to converting renewable electricity into gas, for example through electrolysis.

It is beyond the scope of this article to discuss how the different technologies work and their advantages and disadvantages. However, Five steps to energy storage, by the World Energy Council 2020 gives a more extensive overview.

As Figure 2 shows, not every technology is currently ready to be deployed. The International Energy Agency (IEA) uses a Technology Readiness Level (TRL) scale of 1 (initial idea) to 11 (mature). Pumped hydropower is the only real mature technology in this overview with a TRL of 11 (proof of stability reached). A Lithium-ion battery is a mature technology that is widely deployed already in the electric vehicle (EV) sector. However, in the stationary storage sector, Lithium-ion batteries are less mature when it comes to utility-scale deployment and have a TRL of 10 (integration needed at scale). The other technologies have a TRL of 9 (commercial operation in relative environment) or TRL 8 (first of a kind commercial).

4. Batteries today, CAES tomorrow and green hydrogen will take at least a decade

If we exclude pumped hydro, the vast majority of the current stationary energy storage facilities (either commissioned, built or announced) are Lithium-ion batteries. From 2010 to 2020 the costs of Lithium-ion batteries fell by a massive 89 percent, according to BloombergNEF. And despite the current spike in prices due to rising prices of crucial inputs like cobalt and nickel, Lithium-ion batteries remain popular. However, the price spike has forced battery producers to look for other battery chemistry compositions like lithium iron phosphate (LFP). Given that footprint in size, weight and energy-density matter less for the stationary storage sector than for the EV sector, LFP could be an interesting alternative for Lithium-ion.

Looking down the duration spectrum in terms of discharge times, we see CAES developing in the coming years. Until now, only a handful of CAES projects have seen the light of day, most of them in North America and China. But we expect this to change in the near future as the technology matures.

The least commercially developed and most expensive storage technology at this moment is green hydrogen at the far end of the duration spectrum. Although grey hydrogen is widely available already, it causes GHG-emissions. Green hydrogen is produced with renewable electricity and water in a process called electrolysis.

Although many green hydrogen projects have been announced around the world, and although the technology of electrolysis is proven, the large-scale commercial production of green hydrogen and business cases are not. The high system capex makes the technology uncompetitive in the current regulatory framework. Nevertheless, we expect it to be only a matter of years before the first demonstration projects (50 MW) will be commissioned. But we expect it will take at least a decade before green hydrogen will be produced at sufficient scale.

5. The global stationary energy storage market will boom in the coming years

The relevance of electricity in the energy transition and the enabling role of stationary energy storage will lead to a boom in capacity around the world in the coming years. Storage capacity is usually measured in two ways: power capacity and energy capacity. Power capacity is the maximum amount of power the battery can discharge at a given moment and is measured in Watt. Energy capacity is the total amount of energy the battery system can store and is measured in Watthour. It is comparable to a river that fills a lake and the lake’s size.

BloombergNEF projects the total global cumulative stationary energy storage power capacity to reach 370 GW in 2030 which is more than 20 times the 17 GW capacity in 2020. In terms of global cumulative energy capacity, the expected growth is even more impressive with a more than 30fold expansion from 33 GWh in 2020 to 1,036 GWh by 2030.

Figure 3: The stationary storage market is expected to boom in the coming years
Figure 3: The stationary storage market is expected to boom in the coming yearsSource: BloombergNEF, RaboResearch

Figure 4: The stationary storage market is expected to boom in the coming years
Figure 4: The stationary storage market is expected to boom in the coming yearsSource: BloombergNEF, RaboResearch

Asia Pacific was the largest market in 2020 followed by EMEA and the Americas. This will change in 2030: Asia Pacific will still be the largest market, but the Americas will have surpassed EMEA as the second largest market, mainly attributable to growth in the US. Although stationary storage capacity will grow in EMEA, it will clearly lag the other two regions. Growth in Europe will be modest, for various reasons but primarily: the patchwork of regulation and policy of EU Member States, the reasonably good interconnectivity of national electricity grids (which reduces the need for stationary energy storage) and the challenging business cases for mid- to long-term stationary energy storage projects.

Conclusion

As noted, stationary energy storage will play a crucial role in a smooth transition from an electricity system based on fossil fuels to a system based on renewable energy. Without energy storage, there will be no energy transition. Currently, stationary energy storage is still at its infant stage. Many technologies still need to be scaled up and their costs significantly reduced before they can be deployed at large scale. Despite these challenges, the global market for stationary storage is expected to boom, as more countries embark on a path to net-zero and the necessity to integrate an increasing share of renewables into the energy system becomes crucial.

 

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Author(s)
Hyung-Ja de Zeeuw
RaboResearch Netherlands, Economics and Sustainability Rabobank KEO
+31 6 5131 6468

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