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Road to COP29: Our insights
The 28th Conference of the Parties on Climate Change (COP28) took place on November 30 - December 12 in Dubai.
Energy Storage Updater: February 2021
Global | Publication | februari 2021
Content
Energy storage and the EU Green Deal
In the run-up to COP26 in Glasgow, momentum is strengthening to accelerate the decarbonisation of the global economy, and in particular its energy and transport systems. Energy storage and batteries will be important in this transition.
From an energy systems perspective, in the EU unfavourable conditions or barriers for the development and financing of energy storage projects often still prevail. Reform is underway however. As part of the EU Green Deal, the European Commission has begun a comprehensive review of relevant EU legislation to determine to what extent amendment or additional legislation is necessary to make the EU carbon neutral by 2050. These changes are expected to create a true level playing field for storage technologies.
To support the EU Green Deal objectives, the EU has adopted a €1.8 trillion package of funding options. Depending on factors including maturity of the storage technology and the specific system services it can provide, storage may be eligible for funding, strengthening the business case for its deployment in the EU.
In our experience, funding models for energy storage in the EU are diverse, depending not only on technology and risk appetite, but also on local electricity market structures. Whilst project finance is still relatively rare in Europe, colleagues in the US have recently assisted in the financial close of a portfolio of six storage projects (further information available here).
In relation to the decarbonisation of transport systems, battery electric vehicles will play a strategic role. In Europe, there is support for increased European battery manufacturing capacity, with the European Investment Bank increasing its financing for the sector in 2020 to €1bn. However, the European Commission has made clear that this expansion is not to be undertaken at any cost. As a result of the battery sector’s strategic importance, EU policy is now focused on creating a harmonised framework covering the entire battery life-cycle. In its proposal for a Regulation on batteries and waste batteries, the European Commission proposes to strengthen the sustainability of supply chains and improve the recycling of industrial, automotive, electric vehicle and portable batteries placed on the market in the EU.
Read the full article here.
Technology and corporate news
Global
Corporate funding in battery storage in 2020 was up by 136 percent compared to 2019, Mercom says
Mercom found that while corporate funding rose significantly with US$6.6bn raised across 54 deals in 2020 compared with US$2.8bn in 42 deals in 2019, venture capital funding into battery storage dropped slightly, totaling US$1.5bn in 32 deals last year, compared to US$1.7bn from the same number of deals in 2019. The report names Swedish lithium-ion battery design and manufacturing startup Northvolt as the top recipient of venture capital funding globally. US company Quantum Scape and UK energy storage developer and system integrator Zenobe Energy also feature in the top five funding recipients. Debt and public market financing for battery storage companies was reported to have risen significantly from US$1.1bn across ten deals in 2019 to US$5 bn in 22 deals in 2020. The full Mercom report is available here.
Battery pack prices reported below US$100/kWh for first time
According to research by BloombergNEF, the cost of lithium-ion battery packs has fallen close to 90 percent and average prices are forecast to be close to US$100/kWh by 2023. The fall is attributed to rising order sizes and battery electric vehicle sales growth, leading to economies of scale for battery manufacturers, and to the falling cost of cathode materials since 2018, improving profit margins for developers. BloombergNEF believes that even a rebound in the cost of raw materials would only delay the decline of pack prices given the industry’s increasing resilience to cost fluctuations, due to consolidation up the value chain.
‘Growth, competition and consolidation’: Energy storage system integrators face fast-changing market
According to IHS Markit, system integrators (companies that create large-scale and commercial and industrial battery energy storage system solutions to order) have driven the energy storage market’s rapid growth so far, but face a diversifying landscape. Competition is being increased by an influx of new market entrants, which may include battery or inverter manufacturers as well as project developers and independent power producers.
Wind power giant Vestas launches venture capital fund
Vestas, a leading global wind turbine manufacturer, has announced plans to provide seed capital for early-stage startups focusing on four areas: long-duration storage and other grid flexibility technology; "power-to-X" technologies to use renewable electricity to produce carbon-neutral fuels; wind energy technologies; and sustainability and advanced materials. Vestas’ substantial testing and development facilities will be offered to startups, where they can experiment with, optimize and ultimately mature their technologies. With investments ranging from approximately €1m to €6m, Vestas is already considering several potential targets.
Why Fluence, the AES-Siemens joint venture, just raised US$125m from Qatar
Fluence secured a US$125m private placement from sovereign wealth fund, the Qatar Investment Authority in late 2020 in exchange for a 12 percent stake. This appears to be the single largest corporate investment in a pure-play grid storage company to date, possibly signaling a higher volume of investment in grid storage companies to come this year.
Zinc-ion batteries: 'Up to 50 percent cheaper than lithium-ion, with no raw-materials concerns'
Zinc-ion batteries, patented by Salient Energy, use zinc and manganese which are far less scarce and cheaper than lithium, cobalt and nickel, which are all needed for standard lithium-ion batteries. The energy-storage technology is forecast to be 30-50 percent less expensive, safer and longer lasting, than standard lithium batteries.
Africa and the Middle East
Azelio and Jet Energy in MoU to develop storage projects with solar PV in Francophone Africa
Azelio AB has signed a memorandum of understanding with Morocco based solar engineering, procurement and construction (EPC) contractor Jet Energy to explore approximately 45 MW of storage projects in Francophone Africa in 2021 to 2025. The projects would see Jet Energy acting as project developer and Azelio providing its Thermal Energy Storage. Power on Demand (TES.POD) technology, with new and existing solar photovoltaic (PV) installations.
Eos Energy Storage expands battery deployments in Nigeria
Eos Energy Storage LLC, a manufacturer of safe, low-cost and long-duration zinc battery storage systems, is partnering with Nayo Tropical Technology Ltd. a West African mini-grid EPC company. Eos will deploy additional units of its signature Aurora EnergyBlock systems, rated at 125 kW / 500 kWh, to four rural micro grid projects in Nigeria in the first quarter of 2021. A benefit of the EnergyBlock systems is reported to be that they can operate without heating, ventilation and air conditioning systems, allowing the system to operate in hot climates.
Energy Resources Senegal, an energy developer, majority owned by Senegal’s state owned-utility, and Climate Fund Managers, an investment group in renewable energy and sanitation, have entered into an agreement to jointly build the first solar-plus-storage plant in Niakhar, a town located near Dakar. The large-scale energy project will integrate 30 MW of PV with 15 MW / 45 MWh of battery storage.
Syrah picks solar-plus-storage option for mining operation in Mozambique
The Australian mineral company, Syrah Resources Ltd., and Solarcentury have entered into a memorandum of understanding for the design, funding, construction and operation of a solar-plus-storage project at the Balama graphite operation in Mozambique. The scheme, subject to final approval, will be an 11.2 MW solar park with an 8.5 MW battery energy storage component, that will work in conjunction with an existing 15 MW diesel generation power plant.
Bushveld Minerals showcases vanadium redox flow battery storage in South Africa
Bushveld Minerals is developing a hybrid mini-grid project installation at the Vametco vanadium mine in South Africa comprising 3.5 MW of solar PV generation and 4 MWh of vanadium redox flow battery (VRFB) energy storage. This is part of Bushveld’s strategy to demonstrate the technical merits of long duration VRFB when paired with renewable energy. The hybrid mini-grid project will supply just under 10 percent of Vametco’s electrical energy consumption as well as contributing to a reduction in the carbon footprint of Bushveld’s mining and processing operations.
Sterling & Wilson to build a solar plus storage hybrid power plant in Niger
Sterling and Wilson PvT, India-based infrastructure EPC services company, in partnership with the French EPC Company Vergnet and SNS Niger, signed an EPC contract to build a solar-diesel-storage power plant in Agadez, Niger. The project consists of 18.9 MWp solar and 6.54 MVA diesel generator capacity. The storage component will be an 11.55 MWh / 3.0 MVA battery energy storage system. This project will be Niger’s first ground-mounted solar-diesel-battery storage based power plant.
The Red Sea Development Company (TRSDC) will develop a resort complex in Saudi Arabia powered by wind and solar energy, and using a 1,000 MWh battery storage facility. A contract for utilities infrastructure was awarded to a consortium led by ACWA Power. The consortium is a public-private partnership that includes financing from Saudi and international banks. The site is expected to have an initial demand of 210 MW and the consortium was awarded a 25-year contract. The battery storage system will support energy resilience across the 28,000 km2 site, including powering facilities at night-time and ensuring power if outages occur across its networks.
Asia Pacific
First transactions made using Renewable Energy Hub’s ‘Virtual Storage’ contract in Australia
Renewable Energy Hub recently announced its “Virtual Storage” electricity swap contract. The agreement allows participants to buy and sell stored energy. Suppliers like Tasmanian Hydro have already used the platform to sell power to Macquarie Group and ERM Power. Financial instruments like the Virtual Storage contract are touted as important mechanisms that will benefit energy suppliers, storage operators, and power merchants to trade stored energy more effectively and ultimately support Australia’s transition towards renewable energy.
World’s biggest battery storage project announced by Australian renewables fund
CEP Energy has announced plans to build a 1,200 MW battery in NSW’s Hunter Valley, an energy-producing region presently reliant on fossil fuels. In conjunction with its plans to roll out various solar projects in the region, CEP anticipates that the new facility will replace lost capacity as coal and gas-fired generators are gradually retired. The A$2.4bn (US$1.85bn) project will eclipse California’s Moss Landing Energy Storage Facility to become the world’s largest battery energy storage system. CEP has plans to network the battery with other facilities to supply 2,000 MW of capacity.
Singapore’s first floating energy storage system
Keppel Offshore & Marine and the Singapore Energy Market Authority have awarded a research grant to develop a floating 7.5 MWh energy storage system. The grant is part of a push to develop innovative energy solutions for the marine sector. The system features a battery-stacking feature with the potential to increase the efficiency of the system’s deployment. The floating system will be Singapore’s largest energy storage system to date.
Hybrid solar microgrid for Cambodian holiday island to reduce local dependence on diesel
A state-of-the-art hybrid microgrid is set to replace a suite of diesel generators currently powering Koh Rong Sanloem, a remote resort island in Cambodia. Singapore-based microgrid specialist Canopy Power, has partnered with financier Total Solar Distributed Generation to build a microgrid consisting of 1.25 MWp of photovoltaics, 2 MWh of battery storage, and an auxiliary diesel component. It is hoped the project will provide stability to the grid, reduce pollution and cost, and serve as a model to be reproduced in similar remote environments.
Saft opens 480 MWh energy storage system factory in China
Energy storage and microgrid technology solutions company, Saft, has opened a new factory in Zuhai, China, dedicated to the production of energy storage systems. The factory is reportedly capable of producing 200 containerized energy storage systems each year, equating to an annual production of 480 MWh of storage potential. Saft hopes the new factory will enhance its ability to participate in the shift towards renewable energy in the region.
Europe
Siemens signs technology deal with Britishvolt to create ‘most efficient’ UK battery gigafactory
Siemens is partnering with Britishvolt on the UK’s first lithium-ion battery gigafactory in Northumberland, England. Britishvolt will have access to Siemens’ electrification solutions, automation and Digital Twin manufacturing execution technology, a simulation development tool. It is hoped this will accelerate the time required for battery cells to go from laboratory to production at scale. The gigafactory, with a production capacity of 35 GWh, is expected to start delivery of the first batteries at the end of 2023.
Engie, Neoen building subsidy-free 1 GW solar project with storage, electrolyzer in France
Engie and Neoen are investing €1.2bn in the Horizeo project in Saucats, Nouvelle-Aquitaine. The project will include a 1 GW capacity solar farm, 40 MW energy storage, and 10 MW electrolyzer for green hydrogen generation, as well as a data center. Revenue is reported to be from over-the-counter contracts with businesses, as opposed to sourcing income through calls for tenders from the Energy Regulatory Commission (CRE). Separately, Engie and Total have signed an agreement to develop and operate a 40 MW electrolyzer facility, powered by more than 100 MW of solar projects, with the capacity to produce up to 15 metric tons of green hydrogen per day.
Giga-Norway: Panasonic, Equinor check out green battery business potential in northern Scandinavia
Panasonic, Equinor and Hydro have signed a memorandum of understanding to assess the European market for lithium-ion batteries, as well as a business case for locating in Norway. This comes after FREYR secured $14m in financing for the construction of a 2 GWh manufacturing facility in Norway in 2021, with plans to build a further 34 GWh of production. FREYR has also signed a framework agreement with 24M as its battery cells technology partner. 24M’s technology uses thicker semisolid electrodes that the company believes will reduce manufacturing costs by as much as 50 percent.
Work starts to build world's first commercial liquid-air energy storage plant
Highview Power and Carlton Power have launched a joint venture to build and operate the world’s first commercial liquid-air energy storage facility in Carrington, England. The 50 MW / 250 MWh project received a £10m grant from the UK government and is expected to enter into operation in 2023, the first commercial project emerging from the upcoming range of “build-anywhere long-duration intermittent-energy storage” (Baldies) technology. The underlying “CRYObattery” technology uses frozen liquid air as storage, ensuring similar benefits to pumped hydro power whilst not being restricted by location.
InterGen approval for 320 MW / 640 MWh battery in England
InterGen has secured planning approval to install a battery storage system with a capacity of at least 320 MW / 640 MWh in Essex, England. The project will require £200m of investment and is reported to have the capacity to expand to 1.3 GWh. Construction is set to begin in 2022 for operation in 2024. It will be used to stabilize existing power supply in the grid.
Terna has awarded 250 MW in the Fast Reserve pilot project auction to 17 operators across 23 storage projects. Demonstrating significant industry interest, operators bid 1,327 MW, six times more than the required 230 MW, at a third of the auction base price. The pilot project will see batteries provide to and stabilize the grid with ultra-rapid frequency reserve for the first time, offsetting the reduction in traditional generation and anticipating significant expansion in intermittent renewable sources of electricity.
The stretch of river holding Spain’s pumped hydro future
The Mont-Negre (3.3 GW) and Gironés & Raïmats (3.1 GW) projects are reported to be competing to build and operate pumped hydro plants on the Riba-roja reservoir in Spain, but commentators suggest only one project may proceed. ENTSO-E data released in a quarterly report on electricity markets issued by the European Commission in 2020 is reported to have shown that Spain ranks only behind Italy, Germany and Austria in terms of operational, planned and announced pumped hydro capacity Europe.
Google to test data center battery backup that also serves the grid
As part of its aim to meet round-the-clock electricity demand with carbon-free sources by 2030, Google has announced that it will install a 3 MW, 2-hour-duration backup battery at its data center in Belgium. Google’s batteries would provide frequency regulation to the grid. Models estimate data centers account for approximately 1 percent of global electricity use and are currently supplied by 20 GW of diesel generation. If demand were to grow for cleaner backup generation for data centers, this could accelerate the uptake of storage by providing an additional revenue steam.
North America
Behind-the-meter battery pioneer Stem to take SPAC route to public markets
Stem, Inc. is planning to go public via a special purpose acquisition corporation (SPAC) reverse merger with Star Peak Energy Transition Corp. US$608m in gross proceeds is anticipated as a result of the SPAC, including Star Peak’s US$383m in cash and US$225m in a private investment public equity commitment, which counts major players such as BlackRock, Adage Capital Management, L.P., Electron Capital Partners and Van Eck Associates Corporation among its contributors. Stem hopes that with the SPAC it will be better positioned to fund its US$2.7bn portfolio of projects and to go after larger projects. New funding also opens the door to tech acquisitions, which have become increasingly important in the ever evolving and increasingly complex energy storage market.
In rare battery startup move to public markets, Eos raises millions from listing on Nasdaq
Zinc battery startup Eos Energy Storage is on track to net approximately US$130m from its recent public listing. Eos went public via a SPAC reverse merger, with B. Riley Principal Merger II Corp. Eos plans to use the majority of its new capital to increase its manufacturing capacity and build out its commercial team. With the market for energy storage accelerating and the capital now in place to realize its potential, Eos is one step closer to sealing its spot as a leader in aqueous zinc batteries.
Macquarie’s Green Investment Group to take stake in utility-scale energy storage developer esVolta
Macquarie’s Green Investment Group (GIG) is investing an unspecified sum into US energy storage developer esVolta. esVolta has had a successful past few years, with a number of major energy storage projects in California and the closing of a US$140m senior secured credit facility in the first quarter of 2020. GIG’s interest in esVolta was predicated on its “significant growth potential across new markets” and GIG hopes to be able to harness esVolta’s presence in the energy storage industry in order to accelerate and support the increased deployment of renewable energies across the market.
Hawaii’s Kaua’i Island will get beyond 80 percent renewables thanks to solar-plus-pumped hydro plant
Kaua’i island’s total share of renewables in its energy mix could reach 80 percent due to a proposed 35 MW solar PV system paired with 240 MWh of pumped hydro energy storage. A power purchase agreement for the project was recently executed between local utility Kaua’i Island Utility Cooperative and The AES Corporation. Output from the facility will better enable the local utility to meet evening peak demand once solar production starts diminishing. The project will also take Hawaii one step closer to its goal of 100 percent renewable energy by 2045.
The Canada Infrastructure Bank (CIB) signed a memorandum of understanding (MOU) with Oneida Energy Storage LP for the construction of a battery storage project in Ontario. Oneida Energy Storage LP is a joint venture between NRStor and Six Nations Grand River Development Corporation. It plans to deliver the Oneida Energy Storage Project, a 250 MW / 1000 MWh energy storage facility in Southwestern Ontario, which would be the largest project of its kind in Canada. CIB’s CAN$10bn growth plan emphasizes the delivery of new clean power infrastructure, and the project would also benefit from CIB’s innovative financial modelling, project structuring and procurement options.
Vistra proposes California battery project twice the size of ‘world’s largest’ facility to date
Vistra Energy is proposing a new 600 MW / 2,400 MW energy storage facility at Morro Bay in California. This follows the inauguration of the 300 MW / 1,200 MWh Moss Landing Energy Storage Facility in the State at the end of 2020.
NREL outlines four-phase framework for energy storage development
Researchers at the National Renewable Energy Laboratory have published a report commissioned by the US Department of Energy considering the evolution of energy storage in the US power system. The Four phases of storage deployment: a framework for the expanding role of storage in the US power system anticipates the evolution of the market from short duration storage to storage with durations lasting days or months using liquid and gas fuels that can be stored in underground formations for a long time with very low loss rates.
Latin America and the Caribbean
AES begins work on 560 MWh ‘largest battery system in Latin America’ for solar and wind in Chile
The AES Corporation has begun constructing a 112 MW / 560 MWh battery energy storage system project in Chile. This project will be the largest battery storage system in Latin America to date and Chile’s first solar plus storage project. The batteries will be paired with 253 MW of solar energy generation. The battery systems will be supplied by Fluence, an energy storage technology provider co-owned by the AES Corporation and engineering solutions company Siemens.
Highview Power in Chile, Latin America JV for ‘giga-scale’ liquid air energy storage projects
Highview Power, a provider and integrator of zero emissions liquid air energy storage systems suitable for large-scale and long duration applications, announced a joint venture with Energia-Latina S.A. Enlasa, an energy generation company headquartered in Chile. The joint venture will co-develop “giga-scale cryogenic energy storage projects” in Chile and other parts of Latin America. The companies plan to work together to harness the growing deployment of renewables in Chile and in Latin America as a whole.
Leclanché begins construction of ‘visionary’ solar-plus-storage project in Caribbean
Leclanché, a Swiss energy storage company, has broken ground on a US$70m solar and storage microgrid project in St. Kitts and Nevis. Upon completion, the 35.7 MW solar farm and 14.8 MW lithium-ion battery energy storage system (BESS) will be the Caribbean’s largest solar-plus storage project. The BESS has a capacity of 45.5 MW and as a whole, the system will provide approximately a third of the island’s energy supply.
Policy and regulatory news
Global
McKinsey: Continuous fall in battery prices is enabling the rapid rise of renewable energy
With many of the world’s leaders putting policies in place to support decarbonization and technology costs falling, McKinsey’s Global Energy Perspective 2021 has predicted that renewable energy will make up around 55 percent of global power generation by 2035, enabled by a continuous fall in battery prices. Renewable energy combined with battery storage is becoming increasingly cost-competitive with fossil fuels. The report indicates that there will still be a role for some fossil fuel assets, such as gas peaker plants in the sector, and other technologies, notably hydrogen, will have important roles to play. The report also noted a role for hydrogen that could be used to decarbonize hard-to-abate sectors such as industrial processing and double up as a long-duration storage solution in the power sector. The full McKinsey report is available here.
Pumped hydro moves to retain storage market leadership
The International Hydropower Association and the U.S. Department of Energy announced an alliance of 11 national governments and more than 60 organizations to speed up the development and deployment of pumped hydro projects globally. New pumped hydro projects typically involve significant expenditure over a number of years and a lack of suitable locations has made new projects challenging. The increase in cheaper renewable power has also impacted the economics of pumped hydro, which relies on price arbitrage. Total project costs range between US$106 and US$200/kWh, compared to between US$393 and US$581 for lithium-ion batteries, World Bank figures show. However, despite this price advantage, pumped hydro projects are not progressing. The International Forum on Pumped Storage Hydropower will focus on developing policy and market frameworks, maintaining environmental sustainability standards, and demonstrating and improving the value of projects. A first step has been the development of a pumped storage valuation guidebook that helps developers, owners and operators assess the value of hydropower projects.
LevelTen Energy launches PPA-style contract for energy storage projects
Renewable Energy procurement advisor, LevelTen Energy, is reported to have developed a RE-Store Energy Agreement, designed for utility-scale storage projects. The contract means that buyers are paid the difference between highest and lowest hourly energy prices each day in the wholesale market, while the storage owner receives a fixed revenue stream. The buyers do not take on the operational risk that is associated with other utility-scale storage projects, and the storage owner does not need to sit alongside an energy generation system and can use stable revenues to raise debt finance. Further details available here.
Africa and the Middle East
South Africa’s 2 GW Risk Mitigation tender and what it means for energy storage, renewables and gas
South Africa’s Ministry of Mineral Resources and Energy launched a risk mitigation procurement program for 2 GW of energy capacity. Independent power producers were invited to prepare bids for renewable energy projects paired with energy storage or natural gas projects with an installed capacity of between 50 MW and 450 MW for 20-year power purchase agreements. Winning projects will need to be dispatchable under terms defined by the tender: the main requirement being that they can dispatch power to the grid as needed between the hours of 05:00 and 21:30. The tender was closed off to coal and diesel plants. Given the technical criteria, it is expected that storage will play a role. The deadline for bid submissions has passed. A list of bidders is available here.
Asia Pacific
The Asia-Pacific region will continue to be the world’s leading center of lithium-ion cell manufacturing for the next decade according to new analysis by research firm Wood Mackenzie. Battery price reductions, the biggest factor in system costs savings in 2020, together with a growing focus on hardware components that make up large-scale energy storage systems, will drive a 30 percent drop in front-of-meter battery storage in key markets China, Australia and South Korea.
China’s energy storage deployments for first nine months of 2020 up 157 percent year-on-year
China deployed 533.3 MW of new electrochemical energy storage projects in the first three quarters of 2020, an increase of 157 percent on the same period in 2019 according to work conducted by in-house research group China Energy Storage Alliance. This brings the total installed energy storage capacity to 33.1 GWh, a significant portion of the global total of 186.1 GWh. These figures include all forms of energy storage including pumped hydro, which still accounts for more than 90 percent of installed capacity.
NSW’s ‘urgent’ electricity infrastructure bill includes 2 GW of long-duration energy storage
Policymakers for New South Wales in Australia have been debating a bill to co-ordinate investment in the state’s electricity infrastructure that includes 2 GW of long-duration energy storage and A$50m (US$36.71m) support for green hydrogen over ten years. The recently assented Electricity Infrastructure Investment Act 2020 seeks to co-ordinate investment in new generation, storage and network infrastructure in NSW.
‘Extraordinary move’: India’s government investing billions in battery, manufacturing
India’s government has agreed on a financing package that includes INR181bn (US$2.42bn) over the next five years to support the manufacture of advance chemistry cell (ACC) batteries and help both domestic and international players set up operations in India. The government said that ACC battery manufacturing represents “one of the largest economic opportunities of the 21st century” for sectors such as renewable energy, electric vehicles and consumer electronics.
Europe
2020: A key year for the future of energy storage in Europe
The Energy System Integration Strategy, the Hydrogen Strategy and the Renovation Wave were released in 2020, supporting the growth of energy storage, including power-to-x, thermal storage and residential storage solutions. Together with this strategic framework, a number of financial and fiscal initiatives have been introduced to address the barriers faced by energy storage stakeholders. Notably the Just Transition Fund, which aims to help mobilize €150bn between 2021 and 2027, was expanded to support energy storage technologies.
EU seeks competitive edge from green batteries
The EU is introducing new regulations that will create a sustainable battery market by forcing manufacturers to use recycled materials and to reduce emissions. From 2024, electric car and industrial battery manufacturers will have to declare the battery’s carbon footprint and, from 2027, comply with an emissions limit. From 2027, there will also be an obligation to disclose the content of recycled raw materials, followed by requirements to use a minimum share of recycled cobalt, lithium, nickel and lead from 2030. It is hoped that the regulatory framework will give the EU’s battery production a competitive edge in its ‘green’ manufacturing. There are concerns however that the proposals will add complexity and lead to over-regulation.
Germany: Growth in home and industrial sectors but large-scale battery storage slowed down in 2019
Research by academics at RWTH Aachen University found that in 2019, Germany saw a slowdown in the large-scale battery storage sector with nine projects coming online, compared with 22 in the previous year. Revenues from frequency containment reserve (FCR) have been falling as battery storage in Germany has increased and FCR auctions have become more competitive. More positively, the German network regulator Bundesnetzagentur approved proposals by grid companies to create so-called ‘virtual transmission lines,’ in an undertaking called GridBooster. This should include two projects of 100 MW / 100 MWh each and another of 250 MW / 250 MWh providing redundancy and spare capacity to large transmission lines. There has also been continued growth of residential battery storage, with 250 MW / 490 MWh added during 2019.
Classifying storage as generation in Great Britain must be a stopgap
Ofgem (Great Britain’s energy regulator) has pushed ahead with classifying battery storage as a subset of generation, to the disappointment of some in the sector. The change was in part motivated by the double charging of storage which, without formal definition, was treated as both demand and generation. The Renewable Energy Association has called for this definition to be a preliminary measure, until further parliamentary time can be dedicated to defining how battery storage fits into the legislative framework.
As part of the continued development of Dynamic Containment in Great Britain, National Grid ESO is to allow participants to stack their revenue streams, with batteries able to tender for bids in both the BM and Dynamic Containment during the same periods. Dynamic Containment was widely welcomed in 2020, as not only a significant tool for National Grid ESO but also for providing a strong return for participants, offering two to three times the price of other frequency response services. Guidance from NGESO can be found here.
Lithuania plans to invest €100m to install four 50 MW batteries with at least 200 MWh of storage capacity. As well as providing backup to the grid (currently interconnected with Russia), the batteries will support the planned expansion of renewable power generation, which is projected to reach 4 GW in 2030 in Lithuania.
Royal decree confirmed that storage will be integrated in the next Spanish renewable auctions
Spain is reported to be looking to install 60 GW of renewables by 2030. A royal decree has been approved by the country’s Council of Ministers for the pay-as-bid auctions that will allow hybridization between technologies and be compatible with energy storage. Alongside this framework, the Council of Ministers have also approved a decarbonization strategy whereby the country will reduce 90 percent of greenhouse gas emissions by 2050, and create carbon sinks through reforestation to absorb the remaining 10 percent.
North America
Energy storage hits record level in third quarter
A record 476 MW of storage was deployed in the third quarter of 2020. This marked a 240 percent increase over the previous high. Although the increases were across the board, the biggest rise was attributed to front-of-the-meter (FTM) storage procurements. Massive systems deployed in California drove the record growth. Despite the economic downturn and COVID-19 related effects, the US Energy Storage Association believes that energy storage is poised to continue this trajectory with unprecedented increases in the coming months.
US Department of Energy publishes its ‘first comprehensive energy storage strategy’
The US Department of Energy (DOE) has published the Energy Storage Grand Challenge Roadmap, its first comprehensive strategy on energy storage. The strategy includes cost and performance targets to be met with a goal to establish the US as a leader in energy storage. The DOE will establish five “tracks” to implement its strategy: a Technology Development Track, a Manufacturing and Supply Chain Track, a Technology Transition Track, a Policy and Valuation Track and a Workforce Development Track.
The final report from the California Public Utilities Commission (CPUC), the California Energy Commission and state grid operator CAISO about California’s rolling blackouts in August revealed that the heat waves caused a supply-demand imbalance. This imbalance was not corrected due to problems with California’s resource adequacy program and market practices for ensuring adequate grid capacity. In order to mitigate these issues in the future, CPUC has ordered utilities to speed up their build-out of energy storage and solar-battery capacity.
Alberta’s fast frequency response pilot is ‘a step in right direction’, Energy Storage Canada says
Alberta Electric System Operator (AESO) is expected to implement a fast frequency response (FFR) pilot in late 2021 for 12 to 18 months. FFR will require providers to respond within 0.2 seconds when the grid system’s frequency hits 59.5 Hz to bring it back up to 60 Hz and AESO is targeting any new technology that can meet these requirements. Energy Storage Canada, a trade association, believes this pilot is an opportunity for energy storage resources in the province; however, the tariff treatment of energy storage resources is still a hurdle.
As battery storage developers look for contracted revenue streams and for ways to manage commercial risks associated with their projects, commodity hedges and related derivatives provide unique opportunities to accomplish their goals. Energy storage hedges may become more common as capital costs for battery storage assets decrease, especially if the US Congress enacts a tax credit for standalone energy storage. Repurposing a revenue put or a heat rate call option, which are historically used for merchant gas plants, are two structures to consider.
Latin America and the Caribbean
Puerto Rico Electric Power Authority (PREPA) will issue six solar and storage procurements, totaling 3.75 GW of solar and 1.5 GW of four-hour storage, within the next 30 months. The regulator has set a target to release the first procurement as early as possible this year to secure 1,000 MW of solar and 500 MW of storage. A study by PREPA concludes that Puerto Rico’s grid can handle only 650 MW utility-scale renewable generation, including existing renewables. That value could increase as a result of system upgrades and energy storage systems expected to be incorporated in the near future.
The Chilean National Energy Commission (CNE) has issued definitive terms to conduct an auction for 2,310 GWh of renewable energy capacity and energy storage in May 2021. Power generators will need to start supplying energy and capacity in 2026 under 15-year power purchase agreements. The bidding terms aim to reduce market risks, encourage energy suppliers' participation, achieve competitive prices that benefit regulated customers and provide more access to different types of energy projects, including storage. English language press coverage is available here.
Industry events
Energy Storage Summit – 23 – 24 February 2021 and 2 – 3 March 2021
Energy Storage Association conference – 21-22 April 2021 (virtual)
Solar and Storage Finance Asia - 6-7 July 2021
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