Energy storage

Tracking the technologies that will transform the power sector

The world’s population is expected to grow by two billion people by 2050 and global energy demand is expected to roughly double during the same period. Concurrently, the power sector is on the brink of a major transformation as more stakeholders look into the possibility of moving away from traditional fossil-energy-based centralized power systems towards the potential of renewable-energy-based distributed generation. However, the penetration of renewable technologies has been hampered by their costs - which are improving - and their intermittency and variability, which reduces availability and induces grid instability. Therefore, the utility industry should consider overcoming these challenges if renewables are to account for more than just a negligible portion of the global energy portfolio.

At present, the emerging consensus is that energy storage is the pivotal technology that will reshape the energy sector by enabling widespread adoption and grid-integration of solar and wind renewables. In the same way that transmission lines affect where electricity is consumed, energy storage influences when it is consumed. Thus, commercial and residential consumers are provided the flexibility to become power generators and to select the price point at which they will consume electricity, and utilities and the grid gain the agility to accommodate producers and consumers with disparate temporal behaviors. Regulators are beginning to recognize the value of storage and are creating policies that further improve the business case for adoption.

Recent advancements in materials and manufacturing have improved the economics of storage. Traditional storage technologies such as pumped hydro and compressed air have limited applicability and are losing market share to emerging battery technologies, many of which are leveraging experience in the transportation and consumer electronics sectors to compete in the power sector. In addition to the various technologies that are gaining commercial traction, there are numerous disruptive technologies under development that offer the potential of step-change improvements in performance or cost. The multitude of current and emerging storage options can make it difficult to decide which technology to adopt and when. To assist decision makers, this paper offers a preliminary feasibility assessment that evaluates the business case and benefit/cost ratio of storage technologies within certain customer classes.

The impact of energy storage is far-reaching, as not only does it address the issues that have limited renewable energy’s penetration, it fundamentally alters the longstanding relationship between utilities and their customers. The disruptive potential of storage is unlike other energy technologies in that it pervasively extends across the value chain in a way that stakeholders will impact and be impacted by its adoption. To remain a casual observer is to risk disruption, as even non-power companies (e.g., Tesla, Daimler) are entering the market. If the decision is to adopt, there is a need to translate the technical parameters of storage into financial implications to understand the bottom-line impact. If the decision is to not adopt, there is still a need to respect the interdependencies of the ecosystem and evaluate potential impacts to the business and operating model. Either way, the potential of storage requires that stakeholders develop robust strategies that decrease the risk and increase the opportunity.

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