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The US Department of Energy Loan Program Office (LPO) wants more
energy storage industry entrepreneurs and developers to knock on
its door seeking money, its top official told executives, even
while the sector already has the deepest pool of applicants seeking
its support.
Speaking at the American Clean Power Association (ACP) Energy
Storage Policy Forum 22 June, LPO Director Jigar Shah said: "We
have money! You guys should ask for it!"
"We're taking a lot of risks. We're open to any business
models," said Shah. The LPO, an agency of the US government, closed its first loan guarantee
to a clean energy project since 2014 earlier in June with $504.4
million in backing for a hydrogen storage project in Utah.
Energy storage construction reached record levels in the first
quarter of 2022, the latest data show. To accommodate the ongoing
US intermittent renewable capacity buildout (See Net-Zero
Business Daily stories here and here), yet more storage
solutions will be needed.
Long duration energy storage, including hydrogen, will play a
critical role in meeting President Joe Biden's goals to achieve a
clean grid by 2035 and reach net-zero emissions economy wide by
2050, DOE said when announcing the guarantee on 9 June.
The guarantee went to the Advanced Clean Energy Storage (ACES)
facility in Delta, Utah, which will combine 220 MW of alkaline
electrolysis with two 4.5-million barrel salt caverns to store
green hydrogen. The hydrogen will then be deployed as fuel for
Intermountain Power Agency's (IPA) IPP Renewed Project.
IPA's Intermountain Power Project (the IPP being renewed) is a
coal-fired power plant its owners—23 municipalities in
Utah—are initially turning into a natural gas and
hydrogen-fired facility, with the ultimate aim of using just
hydrogen for fuel by 2045 or earlier.
At the 22 June event, Shah compared the Utah hydrogen project to
pumped storage hydro, also a sector with growth
opportunities in the US. Considering how desperate the Western
US is for storage capacity, he said, then the ACES project and
similar facilities were "super valuable" to Utah and its neighbors,
especially California. Such hydrogen projects are not dissimilar to
the storage caverns for gas that currently powers and heats much of
America in the winter, he added.
In addition, massive amounts of wind and solar capacity won't
get built without the offtaker being onsite green hydrogen, Shah,
the former head of solar company SunEdison said.
Loan applicants
With the ACES guarantee on the books, the LPO had 76 other
active applications (see breakdown by technology sector below in
graphic) at the end of May asking for combined loans in excess of
$78 billion, the agency's latest monthly update shows.
Source: LPO
The LPO has $17.7 billion in direct loan authority to support US
manufacturing of fuel-efficient, advanced technology vehicles and
qualifying components and $10.9 billion in loan guarantee authority
for nuclear projects.
LPO also has $8.5 billion in loan guarantee authority for
"innovative clean energy: fossil projects," otherwise known as
projects that utilize innovative technology to reduce, avoid, or
sequester GHG emissions or air pollutants.
After the loan to ACES, it has $2.5 billion in loan guarantee
authority for innovative renewable energy and efficient energy
projects, as well as up to $2 billion in partial loan guarantee
authority for tribal energy development projects.
However, the fossil and nuclear funds can also find their way to
"energy storage technologies for residential, industrial,
transportation, and power generation applications," the LPO noted
in an April blog.
No matter how energy storage capacity is built though, the US is
going have trouble getting to 90% clean energy, Shah said, warning
that advocates and planners must be realistic. "I don't know the
answer" on how to fix that conundrum, he said.
Collaboration
Shah said he did know, however, that collaboration was required
and no answers should be vilified. That includes accepting that oil
and natural gas cannot just be erased from the energy picture.
Much as there is a need for greater interconnection, reaching
the Biden administration's climate targets isn't just a matter of
fixing the transmission grid, he said.
"Its about [the clean energy sector] growing up and taking
responsibility for [its] actions," said Shah, and doing so by
figuring out the big picture, connecting the dots, and accepting
that nothing is off the table. The renewables sector can't just see
itself as an upstart disruptor and avoid working within the
existing system, and dealing with the consequences of its actions
and rise, he said. Honest conversations must be held, he said.
Shah said it was obvious communities with coal plants don't want
storage and solar, they want a nuclear plant more, or some form of
facility that offers more full-time jobs and taxes for the local
authorities. The diverse cast of actors in the wider energy
industry need to work together to figure out how to bring all
Americans along for the energy transition ride, he said.
And all that comes against a backdrop of commodities markets
betting against clean energy, he said, adding that if traders
thought renewable energy developers would succeed then prices would
reflect that. But, he said, commodity traders don't understand what
their investment banking colleagues know—that the energy
transition will succeed.
Setting records
Even as that planning gets underway and the LPO receives more
applications, the US energy storage market set a new record in Q1,
with grid-scale installations totaling 2,399 megawatt hours (MWh),
the highest capacity for Q1 on record, and four times that of a
year earlier, ACP data show.
But driven by that need to balance intermittent renewable
energy, US energy storage installations will grow by more than
eight times their level at the end of 2020, a National Renewable Energy Laboratory (NREL)
report concluded.
NREL's reference forecast is that more than 200 GW of storage
will be installed in the US by 2050. In terms of gigawatt hours
(GWh), total US capacity in 2020 was about 300 GWh and will be
about 1,200 GWh in 2050, said NREL, or even greater if the cost
curve improves more rapidly than expected.
Costs for lithium-ion batteries have been falling sharply for a
decade, helping to boost interest in the technology, said NREL.
Lithium-ion battery pack prices dropped by 80% from 2010 through
2020, and NREL has modeled them falling 18% per year through 2030.
This would move the price from $132/kWh in late 2021 to about
$50/kWh by the end of the decade.
S&P Global Commodity Insights said in a February report that
prices for lithium-ion batteries globally were about $110/kWh in the second half of
2021. Reflecting this trend, S&P Global found that in 2021, 57%
of new battery installations were co-located with solar, compared
with 8% in 2020. It forecasts that over 50% of new US battery
systems will be paired with solar through 2025, given current
incentives in the federal investment tax credit.
Since the end of 2021 though, battery storage costs have risen
and are expected to continue to do so, according to an April
S&P Global report. Battery costs are set to increase globally
by 22% in 2022 compared with January expectations and 31% in 2023.
Battery manufacturers are passing on raw material price volatility,
which disproportionally burdens the stationary storage market, the
S&P Global analysts said.
