Intersolar North America, including ees™, its new dedicated program on energy storage, concluded this week at Moscone Center West in San Francisco. NAATBatt, as part of its growing partnership with the Intersolar family of international renewable energy conferences, participated heavily in the ees program and produced two workshops, one on storage safety, one on solar-storage policy, as part of the larger Intersolar program.
Before relating my takeaways from the program overall, I would first like to thank all the NAATBatt members, who participated in the ees program, the NAATBatt workshops, and the NAATBatt exhibit booth. My sense is that the members who participated found the program to be productive and well worth the time and money invested in attending.
I would also like to thank a number of the organizations who helped NAATBatt produce the workshop on solar-storage policy. Matt Roberts of the Energy Storage Association, Alex Morris of the California Energy Storage Alliance and Todd Olinsky-Paul of the Clean Energy States Alliance were extraordinarily helpful in organizing the workshop. Their individual and collective expertise in policy issues concerning storage made as a profound and humbling an impression on me as it did on everyone who attended.
Overall the ees™ program was interesting on a number of levels. It is clear that the subject of storage has arrived in the consciousness of the solar industry. The ees sessions were packed with solar developers and integrators wanting to learn more about storage technology. The NAATBatt booth on the trade show floor, as well as the booths of the other NAATBatt members I spoke with, enjoyed foot traffic beyond expectation. The keynote speech by JB Straubel of Tesla Motors and several of the ees™ program sessions were standing room only.
Still, I was a bit concerned by the number of projections about the storage market that included hockey sticks. The storage market is still small, with less than 0.1% of solar PV projects including a storage component today (according to GTM Research). Yet the projects of almost every prognosticator at the conference showed expected market growth for storage and solar-storage of exponential dimension over the next few decades.
I do not necessarily disagree with hockey stick projections about the storage market. But it would be helpful and ultimately make the industry more credible if the assumptions that underlie those optimistic projections were stated more explicitly.
Energy storage is a technology that can perform a remarkable number of important functions on the grid. But almost without exception, storage’s ability to perform those functions is not unique. A number of other technologies and practices can provide back-up power, load shifting, frequency regulation, ramp support and the like to the same extent, more or less, as can storage. Storage is in competition with each of those other technologies in the electricity marketplace. For storage to achieve the hockey stick projections touted by some, it must win that competition.
Two fundamental factors determine the competitiveness of storage. The first is the cost of storage technology itself. The good news is that the cost of storage is falling, in some cases rapidly. JB Straubel put it well during his keynote address when he noted that recent declines in the performance of lithium-ion battery cells were the result, not of great breakthroughs, but of hundreds of small, individual improvements in the structure, chemistry and manufacturing of cells. Those improvements are likely to continue. But the falling price of storage, without more, is unlikely to stimulate the explosive market growth predicted at ees™. That kind of growth requires assistance from a second factor.
The second factor that determines the competitiveness of storage is the cost of electricity itself. Storage benefits from high electricity prices. High electricity prices magnify the cost savings that can be achieved by the kind of efficiency, load shifting and smoothing that storage provides. It is no coincidence that the domestic U.S. markets seeing the largest deployments of storage projects are those that have some of the highest electricity prices.
A general rise in the cost of electricity is an unstated assumption in many of the more aggressive projections of the storage market presented at ees™. But rising electricity prices are not a certainty. As Brian Warshay of Bloomberg New Energy Finance noted in the opening session of the ees™ program, electricity prices have remained more or less stable over the last four decades.
But the case that we are at an inflection point in electricity prices in the United States is a strong one. Over the next few years it is estimated that up to 59 GW of generation capacity provided by coal fired power plants will need to come off line. The aging fleet of nuclear power plants is also facing growing retirement pressure. This retiring generation capacity must be replaced, and will be replaced, by renewables in part. But in much larger part it will be replaced by currently low cost natural gas power plants. And in this growing reliance on currently low cost natural gas power plants lies the real case for the energy storage hockey stick.
There is no shortage of estimates about what the price of natural gas will do over the next few decades. Many of those estimates differ wildly. But a strong case can be made that, over a two or three decade period, a substantial rise in natural gas prices is likely, very possibly including sudden and dramatic price spikes. As the U.S. electricity grid moves to unprecedented reliance on natural gas as a source of electricity generation, a rise in natural gas prices will have a profound effect on the cost of electricity.
So the case for storage is really a case against a long term stable price for natural gas. Hockey stick projections for the storage market fundamentally depend on the assumption that gas prices will rise and/or that grid operators will hedge against that possibility. That is a pretty good bet to make. We should not be shy as an industry about stating that assumption more explicitly.