With just over 3 GW deployed worldwide, grid battery storage remains a small business today, but recent developments demonstrate that the sector is thriving. In the United States in 2018, more than 300-MW battery storage was deployed, led by California. Globally, network operators are testing projects in Italy, the United Kingdom, Spain, and other regions. In Australia, China, United Arab Emirates (UAE), and the United States, large energy storage projects are ready to deliver more than 100 MW of capacity for up to six hours.
While the benefits of deploying battery technologies for grid management are clear, there has been limited development of the global grid-battery market because of three main reasons:
- Costs
Costs of batteries are still too high for most grid applications to be viable, other than where local regulations incentivize deployment. However, cost of battery storage continues to drop year after year, largely because of battery manufacturing for electric vehicles (EVs). We expect the cost to fall within the US$100/kWh range by the mid-2020s. This cost decrease, combined with a stacking of revenue streams and battery applications, will lead to a significant proliferation of positive business cases.
- Regulations
In most regions, regulatory barriers prevent network operators from owning and operating battery storage, except in Italy, where the regulatory framework has been amended. System operators are therefore restrained from developing battery-storage solutions beyond pilot projects. It is imperative that clear regulatory frameworks and market mechanisms are established to allow the development of storage assets with clear targets for deployment. For example, the California Public Utilities Commission (CPUC) requires utilities to build energy-storage capacity and has clarified the market rules for battery aggregation. Following these moves, California’s largest utilities have procured or are seeking approval to procure almost 1500 MW, as of summer 2018.
There is also a strong argument for providing direct incentives for use of battery storage to catalyze development and lower costs which has worked in the renewables sector. Consider the contrast between Germany and Spain, two European countries with relatively high renewables penetrations. In Germany, where incentives are provided, the residential storage market is booming and reducing stress on the grid. In Spain, battery deployment remains very limited.
- Alternatives
Batteries are far from being the only option for balancing supply in a distributed energy grid with high renewable use. Other approaches include:
Good regional and international interconnectivity decreases the intermittency of renewables over large areas and allows for a greater mix of power sources to be used.
Fast-start and rapid ramp-up fossil-fuel plants have also played a key role in meeting peak power supply requirements and will remain important in the future.
Demand side response (DSR) has already been widely tested as a way to balance the grid by incentivizing end-consumers to reduce their consumption or switch to behind-the-meter generators in response to grid requirements.
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