Podcast script:
The world is witnessing a growing demand for electricity. This has fueled a move toward renewable and cleaner energy sources, as many experts anticipate that over 70% of the needed global system capacity will come from solar and wind energy by 2050. The rapid growth of renewables is driven by the increasing numbers of micro-grids, continued renewable energy penetration in the global power sector, and progress in electromobility.
However, renewable energy projects are confronted with a very significant obstacle that hinders their large-scale deployment. By their innate characteristics, wind and solar power are intermittent. Solar generation operations cease at night, and wind turbines stop rotating when air currents are not strong enough to generate momentum. This cyclical trait conflicts with the electrical grid operators’ duty of maintaining a continuous balance between supplied electricity and its demand. If that fine balance is disturbed, the grid will collapse causing power outages and blackouts. One of the possible solutions to overcome this issue is to utilize large-scale energy storage technologies.
The current technological advancements and downward cost trajectories of the energy storage sector could help to mitigate large fluctuations in grid supply. However, several technological and regulatory challenges facing energy storage remain, making this issue relevant for a number of key energy stakeholders, including the market’s participants, regulators, and consumers.
In their workshop brief, titled: “Utility-Scale Storage: Sleeping Giant or Mirage?” KAPSARC’s researchers discussed key opportunities and challenges related to energy storage technologies’ deployment, and sought to formulate a better understanding of how energy storage might evolve. The researchers noted that energy storage technologies are an enabler of increased integration of renewable generation in the power sector, as they can be deployed at the generation, transmission, and distribution segments of the energy supply chain, making storage technologies especially attractive for vertically integrated utilities. They can also compete in energy, capacity, and ancillary markets. In short, storage can act both as an energy provider and as a load.
From a technological standpoint, there are four types of energy storage technologies that are available in the market at this moment, which are electrochemical, electrical storage, mechanical storage, and thermal. Out of these four types, electrochemical storage is expected to become the most prevalent, with a market cap that is expected to reach $4 billion by 2025. The cost of battery technology is expected to decrease substantially due to increased efficiency gains within the battery supply chain and upscaling of manufacturing.
At the same time, the multiple functions of energy storage make it difficult to regulate, and stand in the way of wider and speedier storage deployment. Currently, there is no market sophisticated enough to accommodate storage technologies and all of their capabilities, which is mainly due to the insufficient clarity on long-term revenues that would result from deploying energy storage. Moreover, there are currently no markets for possible offered services, like avoiding thermal generation starts, increasing system efficiency, ramping/following, and black starts.
In terms of finance, most storage projects have been financed through equity and government grants; however, they have inherited regulations that don’t cover all of the services they offer as mentioned earlier, which limits their revenue streams that reward performance. Hence, investors are very reluctant to enter this nascent field. Yet, several countries and utilities have taken progressive steps to enable further energy storage deployments, such as is the case in the United States, Australia, Germany, and Italy.
Among the steps that these countries took are allowing energy storage to compete in all markets, revising interconnection processes to include storage, encouraging hybridization, setting procurement targets for renewable and storage projects, offering subsidies and rebates through green energy financing programs, and rewarding performance (such as faster response times and ramping). If correctly employed, there is reasonable evidence to be optimistic that energy storage will deliver on its potential and be an important part of the future of global energy.
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