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Net-zero power blocked by lack of energy storage pricing: report

16 December 2021 Cristina Brooks

Countries must overcome multiple challenges to install more energy storage if they want to reach net-zero, a report found.

The newly-formed Long Duration Energy Storage (LDES) Council presented the report in a webinar 13 December.

Speaking on a panel during the webinar, Rembrandt Niessen, chief operating officer at long-duration CO2 battery provider Energy Dome, told participants: "We see the large utilities [with wind and solar] coming to us wanting to know more about the technology, wanting to know more about the value proposition."

While consumers pay for renewable energy through bills, the carbon emissions prevented by energy storage are not tracked and priced. "Integrated utilities with future transmission bottlenecks benefit from LDES but face uncertainty on monetization," found the report.

Globally, renewable power usually relies on natural gas-fired power as a backstop, but gas-fired power will need to be replaced with energy storage to allow the electricity sector to eliminate fossil fuel-related emissions per Paris Agreement targets. "To avoid catastrophic climate change, we need to rapidly build a net-zero power sector predominantly powered by renewable energy," it said.

LDES could store 10% of all power generation, make up 60% of all new flexibility capacity, and eliminate around 10% to 15% of today's power sector CO2 emissions.

When renewable penetration reaches 50% over the next 15 to 20 years, and then later reaches 60-70%, more energy storage will be needed. The duration of LDES could average 50 to 130 hours by 2040, compared with two to four hours currently.

By 2040, global LDES capacity will need to have scaled up to 400 times the present-day levels to 1.5-2.5 TW (85-140 TWh), the report found.

Growth in the energy storage sector has accelerated this year. IHS Markit analysts project that energy storage capacity grew at twice the rate of the prior year (to 10 GW) in 2021, and expect China will account for 44% of annual installations by 2030.

Renewable energy targets

Not only utilities, but also the EU and countries in Europe plan to use renewable power to reach net-zero targets.

Already, the EU's executive wants to raise its renewable energy targets to 40% in the Renewable Energy Directive, as part of proposals that would see renewables across the bloc exceed 80% of all power generation by 2050.

To meet these targets, states and utilities must act "imminently" to meet an expected $1.3 trillion to $3 trillion-worth of demand for LDES globally before 2040, according to the report. However, this is much smaller than the amount invested regularly in transmission and distribution networks.

Most LDES will be used for shifting loads in large energy systems, but it could also be used, for example, for firming corporate power purchase agreements (PPAs) and for companies disconnected from grids, for which it would offer a lower cost solution than gas turbines.

Regulators will also need longer-duration storage to run public services during climate-change-linked disasters, Alexander Schönfeldt, CEO at council member company and flow battery supplier Enerox/CellCube, said during the webinar.

Technology in early stage of development

LDES is defined as any technology that can cheaply store energy for multiple hours, days, or weeks, but at present typically is available for eight or more hours. The most widespread LDES technology is Pumped Storage Hydropower (PSH), a form of mechanical storage that accounts for 95% of global energy storage capacity.

Mature LDES technologies exist, but they have issues: lithium-ion (Li-ion) batteries would be uncompetitive to operate over a long duration, hydrogen faces cost barriers, and PSH is dependent on natural geography.

The report homed in on the opportunities offered by LDES technologies still at an early stage of development, like electrochemical flow batteries, liquid air energy storage (LAES), and compressed air energy storage (CAES), as well as underground PSH that isn't geographically dependent.

Standing in the way of LDES' development and use are barriers in the form of a lack of policy and a weak business case, the panelists said. "There's … a huge need for new technologies that can actually meet these requirements for not only technical feasibility, but also commercial viability," said Alan Greenshields, EMEA director at US-based battery company ESS.

Lack of viable contracts

Speakers on the panel blamed a failure to advance on LDES projects on an absence of models for storage contracts, confusion around what battery services should cost, as well as the lack of a common language around storage services. "There are only three things that matter: costs, costs, and costs, and so for these systems to actually be commercially viable as well as technically viable, you have to have a new technological approach to get to cost points which can compete with natural gas," Greenshields said.

LDES is only viable today in community microgrids that are separate from urban grids, for example, in developing countries, said Greenshields.

Microgrids are also used by industrial users. "There is significant potential for industrial customers, in particular off-grid mines or other facilities that rely on expensive diesel generators for primary power," said McKinsey & Company consultant Yves Gulda, adding there was potential to use green-hydrogen-powered generation as LDES in the steel sector.

But finding users to pay for storage's operating costs in urban markets is a challenge. This is because electricity is highly commoditized and cheap, while pollution by grid operators and grid users is not adequately priced, he said.

"In the services we're used to, you basically crank up a gas turbine to provide as much energy as the grid needs to serve the corresponding under-liability service to the user. At the moment [this] appears to cost nothing. There's a big issue to bridge the gap between the political goal and the realities of how grids work, where you have to ask people now to pay for things they've never paid for in the past, but if you don't pay for them, the only way to do it is to carry on burning fossil fuels," added Greenshields.

The LDES Council's report said that to make the LDES assets economically viable, owners would rely on policy mechanisms such as a carbon price, the carbon price would need to rise over time, subsidies or otherwise must reduce the capital cost, and certificates of origin for electricity must help to ensure LDES is used.

Not only utilities, but oil majors with renewable assets are backing these policies. The launch of the LDES Council at the start of last month's COP26 climate summit included paying members BP and Breakthrough Energy Ventures, which is Bill Gates' venture capital fund. Its lobby effort is backed by EASE, an energy storage industry association the EU created in 2011 to represent the emerging sector.

The LDES Council is also aiming to collaborate with bodies like the International Energy Agency and European networks association ENTSO-E/G.

Posted 16 December 2021 by Cristina Brooks, Senior Journalist, Climate and Sustainability

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