The operator of South Australia’s vast network says it has no concern about the growing penetration of renewable energy on its grid, and is in fact encouraging remote towns to look at high penetration renewable micro-grids to reduce costs.
South Australia is likely to source more than 50 per cent of its electricity needs from fluctuating, but highly predictable, wind and solar power this year, and the penetration will continue to grow.
Last week the Australian Energy Market Operator issued a report on the growing penetration of renewables, and the imminent departure of the last coal generator, but found no threat to energy security.
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SA Power Networks chief executive Ron Stobbe told analysts: ”We don’t see any major implications at all for our networks. We can manage generation from any source.”
Indeed, SAPN is looking to rapidly increase the share of renewable energy in parts of its grid, to increase reliability and reduce costs – both for itself and its consumers.
It says it is talking with a number of remote towns on the feasibility of high penetration renewable energy micro-grids, that might focus on wind and /or solar power, plus diesel back-up or battery storage.
SAPN says this will be a cheaper option for the network than upgrading its extended grid, and also in making repairs to lines damaged by storms and fires. And it will increase safety.
Networks in Western Australia and Queensland are also looking at high renewable penetration micro-grids for the same reasons. A recent analysis suggested using solar and storage could cost just one-tenth of the price of other proposed methods to protect against fire risk.
SAPN is also looking to trial “mid-scale” network storage to improve reliability, allow for higher renewables penetration and defer network upgrades. Ergon in Queensland says a similar strategy is cutting network costs by one third.
SAPN says it is also conducting residential battery storage trials with multiple vendors, to ascertain the value to consumers and to networks by deferring upgrades, and is creating an innovation centre to look at such technologies.
Energy storage is often hailed as a game changer for renewable energy reliability. But what will it take to ensure that storage is an economic solution?
In November, financial advisory firm Lazard released its inaugural Levelized Cost of Storage Analysis (LCOS). Well known for its Levelized Cost of Energy Analysis (LCOE) analysis — now out in version 9.0 — Lazard’s publishing an analysis of storage is a major sign that it considers battery energy storage a critical technology that’s here to stay.
But a closer look at Lazard’s LCOS shows something RMI’s October Economics of Battery Energy Storage report noted: battery economics are usually evaluated on the basis of single-use cases; stacking multiple uses greatly can enhance battery economics; and evaluating those economics gets difficult quickly.
The use cases and stacked value streams — in addition to per-kWh cell cost declines — offer tremendous opportunity.
RMI’s report primarily looked at the value, not cost, of a basket of multiple, stacked uses for customer-sited storage systems. Lazard focused on the costs of several physical storage technologies (including the lithium-ion studied in RMI’s report) and not “alternative” storage options such as building-as-storage, water heater-based storage and other demand flexibility options.
It evaluated those storage technologies on the basis of a variety of single-use cases such as frequency regulation and peak shaving/demand charge reduction. Lazard compared those costs to conventional, fossil-fuel alternatives.
Jesse Morris, a manager at RMI and co-author of RMI’s battery report, said, “We did not make this comparison in our Economics of Battery Storage report for a number of reasons, but Lazard’s analysis is a great first step. It adds to a strong foundation from which the industry can better understand multiple-use cases.
“In the end, this is the comparison that we need to be able to make if we’re going to convince regulators that a distributed energy resource-focused future is a lower-cost alternative.”
Batteries are tricky to evaluate in part because they aren’t strictly a demand- or supply-side solution. They’re an arbiter of supply and demand, serving as either generation or load depending on whether they’re discharging or charging. So the favorable finances of storage can use all the clarity and all the study they can get.
Shifting from single- to multi-use cases
The LCOS examined single-use cases, which is how most batteries are deployed today. But single uses are not how RMI proposes (or how Lazard expects) they be deployed in the future. Batteries today are used for a minority of their useful lifetimes.
They can do much more than sit idle most of the time, and increasing their use rate greatly can enhance the value they provide to customers and the grid.
“In point of fact, it will be possible to use batteries for more than one thing, which means their value is higher than is being captured in our study,” said Jonathan Mir, managing director and head of North American Power and Utilities at Lazard. “I think we’re going to have to do the same thing around the stacked use cases.”
Storage costs are dropping
Both reports find that the age of the battery is here, largely because costs have dropped so far, so fast. Mir said, “This reminds us very much of where utility-scale renewables were seven or eight years ago,” when Lazard began covering renewable costs in its LCOE series.
“To us, this seems like an inflection point where you can see external factors causing demand to really take off and then you wind up with price declines as manufacturing scales up,” he said.
Lazard’s analysis also predicted significant cost declines over the next five years, based on a survey of industry experts. For example, the median expected five-year price decline for lithium-ion storage is 47 percent below today’s costs.
“A distributed energy resource-focused future is a lower-cost alternative.”
The LCOS calculated the costs of eight energy storage technologies for 10 single-use cases, half behind the meter (including augmenting residential solar PV) and half in front (including transmission-upgrade deferral). It compared these to the costs of conventional alternatives such as natural-gas peaker plants or diesel generators.
The study found that the costs of storage are within “striking distance” of conventional alternatives for many single-use cases, including lithium-ion batteries used for frequency regulation and flow batteries used to defer adding a new peaker plant.
The challenge of multi-use accounting
What the LCOS analysis didn’t do is estimate the cost of energy storage when it is used for multiple, stacked services, a key to realizing the value of storage to customers and the grid.
Most of storage’s costs are fixed, capital costs. But variable costs — as well as battery lifetime, potentially capacity loss over time and ultimately replacement — depend on the use or uses to which a battery is put over its lifetime, especially how often it is charged and discharged. This makes it difficult to state the cost of a given storage technology for a variety of multiple, stacked services.
“That is our ambition,” said Lazard’s Mir. “It’s important to capture, because we think our study is likely underestimating the value and potential of storage because storage would be used in more sophisticated ways than are being illustrated, but the quantitative analysis and framework to illustrate that is still being developed. It is another indicium of how immature the industry is.”
Evaluating battery energy storage economics is hard, and RMI sees opportunities to build on Lazard’s commendable start. The basic problem is finding a levelized cost that can be added in as services are stacked in different combinations.
Garrett Fitzgerald, a senior associate at RMI and co-author of the Economics of Battery Energy Storage report, explained, “By combining fixed costs and variable costs that are determined by what services and how often they are being provided, you end up with a total lifetime cost of providing just a single service. It is not possible to then determine the incremental cost of stacking other services on.”
For example: “It would be incorrect to simply add the LCOS of frequency regulation and the LCOS of peaker replacement as an estimate of the LCOS of a system providing both,” said Fitzgerald.
The importance of value stacking
Establishing a framework to measure the value (and cost) of stacked use cases for storage should be possible. Mir said, “To us, that is a natural evolution of the study.”
But, he noted, “We have not seen a good solution in the public domain for how to demonstrate this idea, so we will come up with a framework. We understood it as a very important qualification to the work we were doing, which is why we tried to be so clear about it.”
Indeed, the third page of the LCOS is devoted to explaining exactly how the energy storage value proposition depends on the stacking of multiple uses and adding together the value streams they create. RMI’s Morris said, “Their description is very clear and an excellent way to think about the comparison between stacking values and comparing different stacks of value to a given cost.”
The current state of play
Lazard considered only unsubsidized costs and disregarded the additional value created by such things as avoiding the toxic or climate-changing emissions of conventional fossil-fueled technologies. Nor does Lazard take into account state incentives, such as California’s SGIP and mandatory battery storage legislation.
“Their comparison of all chemistries performing all use cases against a gas peaker plant or a reciprocating diesel engine (depending on the application) is extremely helpful,” said Morris. Should subsidies for storage be introduced at the national level, Lazard will factor them in the same way it does for LCOE.
So what did Lazard find? Of all the permutations analyzed, only one — lithium-ion batteries providing frequency regulation to the grid — was cost effective when performing a single, unstacked service today. The study also predicts that seven combinations (all with batteries) will be cost effective within five years.
These include two use cases — peaker replacement and industrial peak shaving/demand charge avoidance — for which multiple battery chemistries will be cost-competitive with their diesel and natural-gas alternatives.
The LCOS does contain this encouraging caveat, however: “A number of [technology and use case] combinations are within ‘striking distance’ and, when paired with certain streams of value, may currently be economic for certain system owners in some scenarios.”
These combined value streams that come with stacked uses need to be accurately and easily accounted for.
The road ahead
“Costs will come down naturally with scale; they always do,” said RMI’s Fitzgerald, but he cautioned, “Storage won’t be mainstream until there are more channels for developers or storage owners to find revenue.” As examples of the new channels being opened up for storage, he cited “things like aggregated wholesale market participation in California or distributed system platform providers as described in New York’s REV proceeding.”
Fitzgerald said, “Storage can do a lot for the grid, and it can do most when behind-the-meter. Regulation is changing that will allow distributed storage to collect revenue for these services.”
In consequence, he said, “most of the industry is focused on opening up new revenue streams and moving toward customer-sited and customer-focused services, such as demand charge management or solar-plus-storage solutions.” Lazard’s Mir added, “We see that demand increasing pretty rapidly.”
Home storage unit is perfect for continent rich in solar and wind resources but short of reliable power sources, says Christine Mungai
Batteries that can store renewable energy for longer and at half the current cost have been hailed as an energy revolution that could transform Africa’s power supply.
Tesla boss Elon Musk said the company had Africa in mind when it developed the wall-mounted energy source. Just like the mobile phone allowed the continent to surge ahead in internet connectivity, so a battery pack that can power a home or business could allow Africans to leapfrog the limits of the grid.
The company has promised to release the technology into the public domain, encouraging others to develop their own models using the open source data.
At $3,500 (£2,267) for the 10 kilowatt hours version or $3,000 for a 7KWh version it’s still relatively expensive, but within a few years the price is expected to dropas others develop their own models.
Africa is the world’s most energy-scarce continent. Sub-Saharan Africa has an installed capacity equivalent to that of Spain, and half of it is in South Africa alone.
But perhaps more importantly, Africa could become the global centre for green energy. Thanks to the expansive Sahara desert, strong winds along its coasts and its flat, arid interior, and geothermal reserves all along the Rift Valley, the continent has the world’s highest reserves of renewable energy resources.
Here are three ways the new battery could make an impact:
Lighting and power
The battery could allow millions to leapfrog from no electricity at all straight to renewables.
Sub-Saharan Africa has more people living without access to electricity than any other region – more than 600 million people – nearly half of the global total. Although
the continent is home to 13% of the world’s population, it accounts for only 4% of global energy demand.
Worse still, the electricity available is erratic. Nigeria’s power is notoriously unreliable, but Ghana and South Africa have also been recently plunged into blackouts, mainly because of a lack of investment in the electricity grid.
With the Powerwall currently able to supply five hours of power, an enterprising African engineer could hook up several together, scaling up the battery’s capacity to provide continuous power to homes or commercial centres.
The battery could also finally break Africa’s dependance on fuel guzzling generators. In 2012, the cost of fuel for backup generators used by businesses and households is estimated to have been at least $5bn.
Nigeria is said to have the biggest concentration of generators per square kilometre in the world; the country accounts for almost three-quarters of electricity supply provided by back-up generators in Africa.
Mobile tech hubs
Today, technology hubs are springing up all over Africa’s cities. There are currently at least 90 tech hubs across the continent.
Kenya is planning to build a tech city – its “silicon savannah” – costing $14.5bn from scratch at Konza, 60km away from the capital in Nairobi. Ghana plans to build Hope City, a $10bn high-tech hub outside Accra, aiming to turn Ghana into a major tech player too.
Meanwhile, companies like Facebook and Google have ambitious plans to deploy wireless internet across the globe using drones or hot-air balloons to carry the signal.
But the combination of a solar panel battery and drone/balloon internet, it might only be a matter of time before the idea of a physical tech city itself becomes obsolete.
Using the new batteries, a tech hub – and workplaces in general – could become more mobile, springing up guerrilla-style anywhere in urban or rural Africa, like a flash mob for geeks.
Disengaging from government
With the possibility of being entirely off-grid, the home battery could finalise the disconnection of African everyday life from the happenings in the political sphere.
Traditionally, the relationship between a government and its people is one of bartering political support for the provision of services, such as roads, schools, electricity, water and security.
But increasingly, African life today is characterised by an extensive retreat of the state from these functions.
In Kenya, for example, the number of private primary schools rose nearly 1,000%in a decade, while the number of government primary schools grew just 40%.
In Uganda, the percentage of university students attending private institutions jumped from 9% in 1999 to 74% in 2011. In South Africa, there are more private security guards than police and army combined.
Nairobi city senator Mike Sonko even recently launched a personally funded fleetof ambulances, tow trucks, garbage collectors, water bowsers and fire brigades to respond to citizen emergencies.
Already, studies show that the African middle class deliberately disengages from politics as a form of protest, particularly if the government is authoritarian or a quasi-democracy.
The result – if the Tesla batteries take off, and Africa goes off-grid – could be less pressure on states to provide infrastructure and services to its people, widening the gap between governments and voters.
Source: The Guardian
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