A new poll has identified energy storage as the most promising technology for institutional investors keen on renewable assets, amid plans by many to ramp up allocations.

Nearly two-thirds of all asset owners and managers quizzed by the firm chose batteries and other energy storage technologies as the renewables subsector with the greatest potential.

The appeal of storage rests on the “growing role” it will play in the European energy mix as renewables become more prominent, Aquila said as it released the findings. “Cost reductions, technology development and improving regulations will continue to strengthen the investment case for storage moving forward,” the firm added.

The respondents – a 103-strong base featuring pension funds – dedicated on average 3.6% of their portfolio in 2018 to renewable infrastructure, a rise from the 2% recorded in 2016. For 12% of these investors, the exposure last year reached into the 10-15% region.

According to the survey, the institutional appetite for renewables looks set to build all the way to 2021, with 49% poised to ramp up exposure by that year. Despite their optimism around storage, the polled financiers planned their largest allocation increases in offshore wind, solar thermal and onshore wind.

Regardless of their investment target of choice, institutional players were drawn to renewables as a whole by long-term cash flows (the top reason for 55% of respondents). Geographic diversification, low correlation to other asset classes, inflation hedging and ethical considerations were, in descending order, the other key drivers.

Energy storage aside, electricity transmission was seen as the second most promising investment area, with interconnector projects close behind. Allocations in these two areas could be key for a solar industry faced with grid challenges in certain markets and question marks over interconnection projects, with the UK particularly exposed if no-deal Brexit comes to pass.

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In the last few years, India has been making huge strides in transitioning to renewable energy, and is today, one of the top 10 countries in the world utilising solar power. However, there is still potential that remains untapped, and to make renewable energy a successful source to answer all power needs, it is important to have a means to store the surplus power generated.
This is because non-conventional energy sources, like Solar, Wind, and Hydro, among others, do not have a constant production. For instance, while it might not be possible to harness the power of the sun at night, with energy storage solutions, one can use the stored energy, based on the requirement, irrespective of whether the power is being generated at the time or not. In fact, energy storage is today the only way to reduce our carbon footprint, and become a country reliant on clean energy!

Currently, there is a severe lack of utility scale energy storage solutions across the sector. While developments are in place, the implementation needs to be quick and efficient. It was only recently that renewable energy achieved certain economies of scale, leading to them becoming comparatively affordable and accessible. This has made it possible to consider renewable energy as a viable option, and has led to the development of a wide range of supporting infrastructure, including investments in robust energy storage solutions. It has also been possible, in large part, due to the innovative technology now available to companies in the
storage space, and the development of cutting edge solutions and batteries.

With the Government aiming for 100% electrification of households under SAUBHAGYA (Pradhan Mantri Sahaj Bijli Har Ghar Yojana), coupled with the growing demand for non-conventional sources to power energy needs, the need is urgent. However, as we, as a nation, take an expedited growth path towards the elimination of power deficiency and transition to renewable energy, not having a system to store the energy generated on the grid presents a huge barrier.

In addition to that, most grids in the country are thermal-fed. The hesitation to transition is based on the fluctuations that are seen in the output, making direct grid connectivity an area of concern. While during the day, there is a balance, the usage witnesses a peak during evening. Energy storage solutions or batteries provide the option for the requisite linear output that can address many of these challenges.

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According to the Wood Mackenzie U.S. Energy Storage Monitor’s Q4 report, the expected utility procurements, regulatory changes and grid-related developments will result in annual market deployment of 3,900 MW of storage capacity by 2023 and the market value of this development will be US$4.5 billion. This prediction represents very healthy growth since the latest actual annual deployment was 215 MW in 2017 and the preliminary number for 2018 is about double the 2017 figure. Does the growth we are seeing and this forecast indicate that battery storage has become the silver bullet for the electric sector as many claim?

It depends on who one speaks to. The U.S. Energy Storage Monitor (ESM) report found that nearly 60% of the installed capacity growth in the market during Q3 2018 was behind-the-meter (BTM). The authors attributed this growth to ongoing solar-plus-storage demand by customers seeking greater resiliency and those responding to changes in net metering and utility tariffs. Some analysts viewing the cup as half empty suggest the reason for reduced growth in the front-of-the-meter (FTM) segment relates to restrictions in the wholesale markets that prevent capture of the full value of energy storage. However, in longer term, the ESM authors believe that the FTM sector will overcome these hurdles and be the major driver for the energy storage growth anticipated during the next few years. State-driven regulatory programs, large utility procurements and grid service opportunities are expected to contribute to this growth. Implementation of rules in organized ISO markets as per FERC Order 841 will further assist energy storage development in wholesale markets.

Much of the energy storage growth to date has been driven by programs and projects in a limited number of states with California, Hawaii and New York leading the list for the last several years. That said, an increasing number of states are requiring utilities to incorporate battery storage into their planning and such demand pressure facilitates price reductions. GTM Research estimates lithium-ion battery storage prices were in the area of US$207/kWh in 2018 and that the price will decline about 8 percent per year over the next four to five years. Part of the rationale for the price decline is greater production with the expected startup of a number of major battery manufacturing facilities. Targray, a multinational specialty materials company, has identified 10 giga-factories, i.e. battery plants with a capacity of at least 1 GW, that are expected to come on line within the next several years. Targray also projects that utilities will be increasingly motivated to partner with or acquire solar-based energy storage system (ESS) companies. Among the drivers that are making ESS companies and their projects look attractive to utilities are the declining battery storage costs, more proven technology with LI-solar packages, and more creditworthy project opportunities with lower merchant risk and more secure revenue generation.

So is our opening question answered? Recent results from utility competitive procurement proceedings involving solar and LI battery ESS would make it appear so. Prices in Hawaiihave been in the range of US$0.08 to US$0.12/kWh for long-term solar plus storage contracts. Agreements in the western U.S. have reached levels below US$0.04/kWh for LI-solar ESS power purchase contracts. However, this is a bit misleading because kWh provided by LI storage alone would be about 10 times more expensive than a system with solar and battery backup. 

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The Arizona power grid has a unique set of challenges, which it turns out solar and energy storage are particularly well suited to address.

Arizona Public Service, the state’s largest investor-owned utility, announced Thursday morning that it will add 850 megawatts of battery storage and at least 100 megawatts of solar generation by 2025. That amounts to nearly 1 gigawatt of new clean energy technology, to be obtained through a combination of newly completed and upcoming procurements.

The plan includes outfitting existing utility-owned solar projects with 200 megawatts of batteries, deploying 500 megawatts of new battery resources, and contracting for 150 megawatts of third-party-owned storage — the last of which beat out new-build natural gas peakers in an request for proposals that just concluded.

This work builds on the dispatchable solar project APS is building with First Solar, which is scheduled for completion in 2021. Factoring in the 50-megawatt battery and 65-megawatt solar power plant included in that system, that brings APS’ recently announced contracts for new clean energy resources to more than 1 gigawatt.

“We were really excited last year when we were able to do a peaking solar plant with First Solar,” said Brad Albert, vice president of resource management for APS, in an interview. “So we were hopeful and had our fingers crossed that the pricing would continue to decline and the performance would improve — and that’s bearing out.”

“We feel very strongly that coupling up solar and battery storage technology, especially as it continues to decline in price and become more attractive as a resource for our customers, is a very powerful combination,” he said. “It helps to meet our critical customer needs with clean energy resources. That’s why we feel so good about being able to forge a path in this direction today.”

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Due to their decreasing costs, lithium-ion batteries now dominate a range of applications including electric vehicles, computers and consumer electronics.

You might only think about energy storage when your laptop or cellphone are running out of juice, but utilities can plug bigger versions into the electric grid. And thanks to rapidly declining lithium-ion battery prices, using energy storage to stretch electricity generation capacity.

Based on our research on energy storage costs and performance in North Carolina, and our analysis of the potential role energy storage could play within the coming years, we believe that utilities should prepare for the advent of cheap grid-scale batteries and develop flexible, long-term plans that will save consumers money.

Peak demand is pricey
The amount of electricity consumers use varies according to the time of day and between weekdays and weekends, as well as seasonally and annually as everyone goes about their business.

Those variations can be huge.

For example, the times when consumers use the most electricity in many regions is nearly double the average amount of power they typically consume. Utilities often meet peak demand by building power plants that run on natural gas, due to their lower construction costs and ability to operate when they are needed.

However, it’s expensive and inefficient to build these power plants just to meet demand in those peak hours. It’s like purchasing a large van that you will only use for the three days a year when your brother and his three kids visit.

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Globally, there is a rise in the uptake of electric vehicles (EVs) and battery storage systems, especially in regions where there is a lack of constant, reliable energy supply or more economically feasible solutions, Electric Vehicle Industry Association representative Carel Snyman said during a panel discussion on the second day of the Africa Energy Indaba, on Wednesday.

Spurred by the adoption of cleaner, but intermittent energy sources, declining prices and regulatory subsidies, battery energy storage systems are being increasingly used across the electric system.

The recent growth of the battery storage industry globally has prompted considerable investment, particularly in lithium-ion batteries, used in EVs, as well as in countries’ electricity grids.

The rapid development of the global EV market has seen a simultaneous rise in battery manufacturing capacity to support demand.

Sub-Saharan Africa, however, needs to revamp and modernise its transport systems to support a growing population, said Snyman.

Sector development agency GreenCape sustainable transport analyst Khanyiselo Kumalo pointed out that EV sales now contributed to about 5% of overall global vehicle sales, compared with 1% ten years ago.

While global uptake is happening at an exponential rate, the update of EVs in Africa is lagging behind, she added.

She said the biggest opportunity for South Africa, while policymakers catch up to incentivising EVs, is manufacturing in the value chain of EVs, such as batteries and charging infrastructure.

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In the depths of the deep freeze late last month, nearly every power plant in the Eastern and Central U.S. that could run was running.

Energy analysts saw a useful experiment in that week of extreme cold: What would have happened, they asked, if the power grid had relied exclusively on renewable energy—just how much battery power would have been required to keep the lights on?

Using energy production and power demand data, they showed how a 100 percent renewable energy grid, powered half by wind and half by solar, would have had significant stretches without enough wind or sun to fully power the system, meaning a large volume of energy storage would have been necessary to meet the high demand.

“You would need a lot more batteries in a lot more places,” said Wade Schauer, a research director for Wood Mackenzie Power & Renewables, who co-wrote the report.

How much is “a lot”?

Schauer’s analysis shows storage would need to go from about 11 gigawatts today to 277.9 gigawatts in the grid regions that include New England, New York, the Mid-Atlantic, the Midwest and parts of the South. That’s roughly double Wood Mackenzie’s current forecast for energy storage nationwide in 2040.

Energy storage is a key piece of the power puzzle as cities, states and supporters of the Green New Deal talk about a transition to 100 percent carbon-free energy sources within a few decades. The country would need to transform its grid in a way that could meet demand on the hottest and coldest days, a task that would involve a huge build-out of wind, solar and energy storage, plus interstate power lines.

The actual evolution of the electricity system is expected to happen in fits and starts, with fossil fuels gradually being retired and the pace of wind, solar and storage development tied to changing economic and technological factors. The Wood Mackenzie co-authors view their findings, part of a larger analysis of utility performance during the polar vortex event, as a way to show, in broad strokes, the ramifications of different options.

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Thanks to continuously declining costs, a hybrid renewable electricity generation system that combines wind, solar, and storage could become competitive with the cheapest fossil fuel electricity in the United States—combined-cycle natural gas generation, an MIT professor suggests.

John Deutch, an Institute Professor at MIT, has recently presented a study, ‘Demonstrating Near Carbon Free Electricity Generation from Renewables and Storage’, at an energy seminar at Stanford University.

According to Deutch, the best way to see if the hybrid electric systems (HES) of wind, solar, and storage could compete in costs with natural gas-fired electricity generation is to organize a large-scale demonstration to show if those HES could meet electricity demand of a relatively large service area “rather than rely on government sponsored large scale demonstration projects or regulatory mandates compelling deployment of storage.”

“Uncharacteristically I have been an optimist—I am an optimist—about this, and I believe we are very close to having an economically competitive triad—wind, solar and storage—to produce electricity at a cost as low as the cheapest fossil alternative, which is natural gas combined cycle,” Deutch said during his presentation. “We are close to having this be a commercial operation.”

The large-scale demonstration would show the private sector if those hybrid systems could be competitive, he said, noting that the base analysis was made for the ERCOT service area in Texas, and additional studies were made for Iowa and Massachusetts.

According to Deutch, Puerto Rico and Hawaii could be suitable places for energy developers to show HES viability. The MIT scientist proposes developers to bid for 20-year contracts with a utility and all the government has to do is to ensure a ‘regulatory wrap’ to allow the project.

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A new poll has identified energy storage as the most promising technology for institutional investors keen on renewable assets, amid plans by many to ramp up allocations.

Nearly two-thirds of all asset owners and managers quizzed by the firm chose batteries and other energy storage technologies as the renewables subsector with the greatest potential.

The appeal of storage rests on the “growing role” it will play in the European energy mix as renewables become more prominent, Aquila said as it released the findings. “Cost reductions, technology development and improving regulations will continue to strengthen the investment case for storage moving forward,” the firm added.

The respondents – a 103-strong base featuring pension funds – dedicated on average 3.6% of their portfolio in 2018 to renewable infrastructure, a rise from the 2% recorded in 2016. For 12% of these investors, the exposure last year reached into the 10-15% region.

According to the survey, the institutional appetite for renewables looks set to build all the way to 2021, with 49% poised to ramp up exposure by that year. Despite their optimism around storage, the polled financiers planned their largest allocation increases in offshore wind, solar thermal and onshore wind.

Regardless of their investment target of choice, institutional players were drawn to renewables as a whole by long-term cash flows (the top reason for 55% of respondents). Geographic diversification, low correlation to other asset classes, inflation hedging and ethical considerations were, in descending order, the other key drivers.

Energy storage aside, electricity transmission was seen as the second most promising investment area, with interconnector projects close behind. Allocations in these two areas could be key for a solar industry faced with grid challenges in certain markets and question marks over interconnection projects, with the UK particularly exposed if no-deal Brexit comes to pass.

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Energy markets across the world are changing rapidly with the increase of renewables and the change to a more distributed energy network. Energy storage is key. The capabilities of large-scale batteries have expanded, allowing users to capture more value and create a powerful tool to manage energy needs. At the same time, the price of energy storage dropped more than 50% from 2012 to 2017. And that trend is likely to continue. Energy storage systems are also being incentivized by many government programs to encourage utilization, further decreasing the cost of energy storage.

For manufacturers, energy storage systems can provide two major benefits: cost effective support to critical equipment onsite and mitigating utility risk.

Most advanced manufacturing facilities have equipment that is at risk of shutdown or damage due to poor quality incoming power or rapid voltage fluctuations. Other businesses have inventory at risk in the event of loss of climate control. Adverse impacts to businesses come in many forms: equipment repair or replacement cost, lost revenue, lost inventory and loss of customer confidence. Business interruption insurance coverage is often not effective in mitigating losses caused by external power supply issues.

By installing an energy storage system, manufacturers can ensure the best power, provide backup and monitor systems, potentially replacing various software or equipment on site. New battery systems can now replace a UPS (uninterruptible power supply) while also providing other services simultaneously. Control systems can ensure higher power quality and clean the electricity coming in from the grid, ensuring that sensitive equipment do not see voltage fluctuations. The storage system in the event of a grid outage also provides power for a safe shutdown procedure or power until backup gensets can be spun up. Storage systems can support and provide VAR (volt-ampere reactive) support for inductive or high demand loads, matching the needs of the business to ensure the business is run for optimal output instead of electricity costs. Previously, high-performance energy storage systems were cost prohibitive, but they are now cost effective.

Energy is one of the most significant costs in any manufacturing facility; energy storage solutions can help plan for and manage current and upcoming risk of electricity cost increases. In many places, the level of utility service has been decreasing due to aging infrastructure while the cost of electricity has been increasing rapidly.

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