Energy storage developers have been saying for a decade that the industry is on the verge of a big breakthrough that will finally turn the battery into a major player in the power market.
At least this time around, they’ve got customers backing them up.
Utilities Southern California Edison and San Diego Gas & Electric said at a recent energy storage conference that supply from batteries now competes against natural gas-fired plants that start up when demand peaks. Storage developers are inking deals with big corporations, including InterContinental Hotels Group Plc and Whole Foods Markets Inc., which want to install storage units to save on power bills.
Batteries account for a tiny fraction of global power resources. The technology has been prohibitively expensive and, until recently, relatively unproven. The U.S. government’s Argonne National Laboratory, the same one that built the first nuclear reactor to generate power, just offered its help to companies developing storage. The Energy Department has said the technology is key to adding more of the intermittent solar and wind power that President Obama has called for in his Clean Power Plan.
“For the past century it has been cheaper to schedule coal, gas and hydroelectric generators than to store energy in batteries,” Hugh Bromley, an analyst for Bloomberg New Energy Finance, said. “That is starting to change as technology costs are pushed down the learning curve, largely due to the experience and scale nurtured in the consumer electronics and electric vehicle industries.”
Last year, Southern California Edison signed contracts for 264 MW of storage, more than five times the amount required by the state as part of its plan to replace a shuttered nuclear power plant, Stuart Hemphill, a senior vice president for the utility, said. The company didn’t plan to ink deals for batteries beyond the requirement, but the offers were more "competitive" with other resources than it thought they would be, he said.
California’s regulators have asked the state’s three biggest utilities to add 1.3 GW of energy-storage capacity by 2020. A gigawatt is enough to power about 800,000 households.
“This is no longer a science experiment,” Stem Inc. Chief Executive Officer John Carrington said. The developer has sold battery systems to companies, including InterContinental Hotels and Whole Foods, that allow them to store grid power when it’s cheap and then tap into it when it’s expensive, he said.
Still, there remains a tangle of regulations and rules that need to be straightened out to allow for battery users to take advantage of the resource, said Jon Wellinghoff, a former chairman of the Federal Energy Regulatory Commission. "The rules of the market have not yet caught up with the technology," Wellinghoff said. He is now a partner in San Francisco with the law firm Stoel Rives LLP.
In 2015, about 2 GW of energy storage is forecast to be installed globally in countries including the U.S., Germany, Japan and South Korea, according to Bloomberg New Energy Finance. By 2020, that number is projected to grow to 11.3 GW.
General Electric Co. sees battery costs falling 50 percent over the next five years, a decline that may mimic or even surpass the recent drop in costs for solar and wind power, Pratima Rangarajan, general manager for energy storage at GE, told hundreds of attendees at the Energy Storage North America conference in San Diego. GE has 40 MWh of operating energy storage systems running and plans to install another 65 MWh next year, she said.
"We are ready to go to the next stage,” Rangarajan said, “which is the scaling stage.”
©2015 Bloomberg News
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