The rapid growth of wind and solar power comes with a well-known problem: They don’t work all the time. Energy storage is a solution investors should watch in 2021, even if it doesn’t yet lend itself to stock picking.

Governments around the world greatly raised their decarbonization ambitions this year. There is great uncertainty about how their promises will be delivered, but almost all scenarios involve massive building of solar and wind farms. As their share of power production grows, it will become crucial to bridge the times when the wind doesn’t blow and the sun doesn’t shine.

Building wind and solar together can reduce the gaps, while gas-fueled power plants can provide a nonrenewable backup. Also helpful are demand-side response agreements—when big power consumers promise to cut their usage during pinch points in exchange for lower prices.

Even with all these methods, though, it will be necessary to store excess electricity for use in lean times.

Lithium-ion batteries similar to those that power an electric vehicle are expected to provide most of the new storage capacity. Residential batteries can store power from rooftop solar panels, but it is so-called utility-scale stationary solutions for wind and solar farms that are really needed. They are often customized turnkey installations that provide between one to four hours of backup power. Battery packs cost nearly 90% less than in 2010 and will continue to get cheaper, according to researchers at BloombergNEF.

The coronavirus pandemic brought the broader economy to a halt, but the energy storage industry didn’t get the memo.

Instead, developers made this year the biggest ever for battery installations in the U.S. More capacity is going into homes than ever before, helping families make better use of rooftop solar investments and keeping the lights on during outages. Large-scale projects reached new heights, including LS Power’s completion of the largest battery in the world, just in time to help California grapple with its summer power shortage.

Just a few years ago, energy storage was a niche item, something people built in the very few locations where a higher force compelled it. Now, utilities across the country are using batteries to solve numerous grid problems, and planning far more for the near future. And the most boisterous of power markets, Texas, has finally broken open for storage developers, with major projects already underway.

Here is an attempt at condensing all of these upheavals and breakthroughs into a list of the crucial energy storage storylines from the year. Think of it as a cheat-sheet for all things energy storage in 2020.

Deployment like never before

2020 will certainly go down as the biggest ever for the U.S. grid storage industry. The annual market for grid batteries passed the $1 billion mark and the 1 gigawatt threshold for the first time ever, per the latest Energy Storage Monitor report. Overall capacity installations doubled compared to 2019, a growth rate that you won’t see in any other kind of energy infrastructure right now.

With increased use of rechargeable batteries to power modern technology, particularly electric vehicles, researchers have been looking for alternative materials for lithium-ion in rechargeable batteries. Modern batteries use lithium and cobalt, but these have a very limited supply.

Interestingly, the fluoride ion is the mirror opposite of the lithium ion, having the strongest attraction for electrons, which allows it to easily carry out electrochemical reactions.

Researchers in Japan are also testing fluoride-ion batteries as possible replacements for lithium-ion batteries in vehicles. They say these batteries could allow electric vehicles to run 1,000 kilometers (621 miles) on a single charge. However, current fluoride-ion batteries have poor cyclability, which means they tend to degrade rapidly with charge-discharge cycles.

In their new work, the researchers adopted a different approach to fluoride-ion battery design, identifying two materials that easily gain or lose fluoride ions while undergoing small structural changes to enable good cyclability.

The new battery materials are both layered electrides, says Rohan Mishra, assistant professor of mechanical engineering and materials science at Washington University in St. Louis.

Electrides are a relatively new class of materials that researchers have known about in principle for about 50 years, but it wasn’t until the past 10 to 15 years that their properties were better understood, Mishra says.

While these materials conduct electrons like ordinary metals, unlike the “sea of electrons” in metals where the electrons are delocalized throughout the crystal, in electrides, the electrons reside at specific interstitial sites within the crystal structure, similar to an ion.

“We predict that these interstitial electrons can be easily replaced with fluoride ions without significant deformations to the crystal structure, thus enabling cyclability,” Mishra says. “The fluoride ions can also move or diffuse fairly easily due to the relatively open structure of the layered electrides.”

Although provisions in the $900 billion stimulus package agreed to by Congress on Dec. 21 that will extend the solar investment tax credit (ITC) and the wind production tax credit (PTC) received the greatest publicity, lawmakers also authorized about $35 billion for clean energy research and development (R&D) programs focused on solar technology, advanced nuclear technology, geothermal, wind, energy storage, grid modernization, and carbon capture technology, including a large-scale carbon sequestration demonstration program. However, a key provision sought by the National Rural Electric Cooperative Association (NRECA) was not included in the package.

Support for Nuclear Power Initiatives

The bill specifically allots $1.5 billion for nuclear energy programs. Maria Korsnick, president and CEO of the Nuclear Energy Institute, said the funding shows the strong bipartisan support nuclear power has in the U.S. “This legislation demonstrates growing confidence in our nation’s largest source of carbon-free energy, while building on efforts to ensure nuclear energy is properly valued alongside wind and solar in the United States’ carbon-free energy future,” she said.

“By including key elements of the Nuclear Energy Leadership Act in this legislation, Congress has signaled its commitment to accelerating the deployment of next-generation nuclear reactor technologies. Funding for advanced reactor demonstrations, including small modular reactors and microreactors, will keep America competitive in this strategic sector,” Korsnick added.

Carbon Capture a Priority

The omnibus spending bill also includes a two-year extension of the 45Q tax credit. Section 45Q provides a tax credit on a per-ton basis for CO₂ that is sequestered. From 2008 to 2018, an incentive of $20 per metric ton for CO₂ geologic storage and $10 per metric ton for CO₂ used for enhanced oil recovery (EOR) or enhanced natural gas recovery was available.

In February 2018, with the passage of the Bipartisan Budget Act of 2018, the tax credit was updated, increasing it to $35 per metric ton for EOR and $50 per metric ton for geologic storage by 2026. The $35 tax credit is also available for non-EOR CO₂ utilization and direct air capture projects.

Pacific Gas & Electric is asking state regulators to approve another massive round of energy storage procurements, including its first large-scale contract for behind-the-meter batteries to serve grid needs.

The six projects announced Wednesday add up to 387 megawatts and 1,548 megawatt-hours of energy storage, including two utility-scale solar-storage systems in Southern California and three standalone battery installations across the state. 

But the 27-megawatt/108-megawatt-hour behind-the-meter battery project represents a departure from PG&E’s current roster of utility-scale storage contracts. The 15-year agreement calls for Nexus Renewables Inc., a portfolio company of Ontario, Canada-based Nexus Energy, to deploy a fleet of batteries at multiple sites in PG&E service territory and provide them for grid services starting in August 2022. 

UPDATE: Nexus sources its energy storage equipment through Fluence, a prominent energy storage systems integrator, and operates its systems through its energy trading and dispatching desk, PG&E spokesman Paul Doherty said in a Wednesday email. 

Amcor, an Australian-based packaging materials manufacturer with several facilities in Northern California, will host the batteries a common industrial zone in PG&E’s service area, Doherty said. That will allow the batteries to provide backup and resiliency features for the host sites, as well as providing PG&E with resource adequacy value to bolster grid reliability. 

This foray into behind-the-meter battery aggregation comes as part of PG&E’s efforts to meet the California Public Utilities Commission’s call for energy storage and other resources to help balance the state’s increasingly solar power-influenced grid. 

The U.S. Department of Energy (DoE) has released a new energy storage strategy that aims to accelerate the transition of technologies from the lab to the marketplace. Its “Energy Storage Grand Challenge” plan focuses on ways to manufacture technologies at scale in the United States, while ensuring the security of supply chains to enable domestic manufacturing.

The government also hopes to develop and domestically manufacture energy storage technologies that can meet all U.S. market demands by 2030. In addition, the DoE has released two companion storage-related reports: the “2020 Grid Energy Storage Technology Cost and Performance Assessment,” and the “Energy Storage Market Report 2020.”

By offering six use cases that identify energy storage applications, benefits and functional requirements for 2030 and beyond, the storage strategy identifies cost and performance targets. These include:

• A $0.05/kWh levelized cost of storage for long-duration stationary applications, and a 90% reduction from 2020 baseline costs by 2030. The DoE said that achieving this levelized cost target would ease commercial viability for storage across a range of uses, including meeting load during periods of peak demand, grid preparation for fast charging of electric vehicles, and applications to ensure reliability of critical services.
• A $80/kWh manufactured cost for a battery pack by 2030 for a 300-mile range electric vehicle – a 44% reduction from the current cost of $143 per rated kWh. Achieving this target would lead to cost-competitive electric vehicles and could benefit the production, performance and safety of batteries for stationary applications, the DoE said.

Cost and performance

The 117-page technology cost and performance assessment found that the dominant grid storage technology, pumped storage hydro, has a projected cost estimate of $262/kWh for a 100 MW, 10-hour installed system. The report said the most significant cost elements are the reservoir ($76/kWh) and powerhouse ($742/kW).

Clean energy industry groups are cheering the last-minute inclusion of key tax incentive extensions and billions of dollars in research and development funds that found their way into the $2.4 trillion spending package and coronavirus relief bill passed by Congress on Monday night. (Whether the bill would be vetoed by President Donald Trump remained an open question as of Wednesday morning.) 

But solar and wind power groups and energy storage advocates didn’t get all they’ve been asking for from Congress in the bill — and they’re seeking support for those additional policies from the incoming Biden-Harris administration and lawmakers from both parties. 

What’s in the bill: Tax credits, renewables on public lands 

There’s no doubt that solar and wind power will benefit from the Investment Tax Credit extensions included in the bill. For solar, that includes a two-year extension of the ITC at its current 26 percent through 2022 and at 22 percent through 2023, as well as an extended Jan. 1, 2026 deadline for completing projects that have claimed the credit based on when they started construction under “safe-harbor” provisions. 

“That’s a pretty significant change,” Abigail Ross Hopper, CEO of the Solar Energy Industries Association, said in a Tuesday webinar. “As we think about this solar decade, this gets us a lot of the way there.” 

Offshore wind also gained full 30 percent ITC credits for projects started by the end of 2025. That will bolster a nascent industry that’s seen delays in federal permitting that could have threatened the build-out of a massive new clean energy resource in the coming decade, according to Dan Shreve, Wood Mackenzie’s head of global wind research. 

These “commonsense emergency relief measures” represent “a bipartisan vote of support for the renewable industry and the hundreds of thousands of Americans building our clean energy future,” Gregory Wetstone, CEO of the American Council on Renewable Energy, said in a statement.