One of the benefits of being the Executive Director of NAATBatt is that it gives me frequent opportunity to speak and correspond with some of the brightest minds in the advanced battery industry and in advanced electrochemical energy storage technology. Those conversations are rarely of earth-shaking importance. But on more than rare occasion they reveal to me certain insights about our industry that make it a little easier to understand and clarify the path forward.
I had one of those insightful strings of correspondence earlier this week with Bill Bushong, Director of Contract Research at Spectrum Brands, Inc. Spectrum Brands owns Rayovac and recently joined NAATBatt as a member. Bill sent me a link to an announcement by GE Global Research about a new energy storage system that GE is hoping to develop. The new system, based on supercritical carbon dioxide, is said to be 50 percent efficient at turning heat into electricity. Heat generated by solar energy, nuclear power, or combustion could first be stored as molten salt and the heat later used to drive the process. Bill asked me what I thought the implications of the GE system were for stationary battery energy storage.
I replied that energy storage is as much about the why’s and the where’s, as it is about the what’s. The new GE technology sounds like a very impressive what. Using storage as a virtual power plant to replace gas peakers is a use case that many are pursuing and the GE technology might prove well suited to that function. But many of the most valuable use cases of storage—the why’s of storage–do not involve storing and releasing large amounts of energy at centralized locations. Those use cases involve storing small amounts of storage in commercial, industrial and residential settings and on distribution systems. That local storage can be used to manage the flow of electricity for a variety of possible purposes. The ability to store relatively small amounts of energy in small places is something that batteries do very well. It is hard for me to imagine that the GE technology, which relies on high temperature molten salt, is going to be suitable for many of those local storage use cases.
Bill concurred with my observation but said that it gave him concern. What I was describing, he noted, was a series of small, separate markets for storage, each potentially using different storage technology. The struggle for rechargeable batteries, Bill said, is the volume/cost equation for battery manufacturing and sales. A fragmented market, and by implication the numerous low-volume markets that fragmentation creates, might make it difficult for any battery technology to achieve the cost reductions necessary to capture market share.
Bill said that there are two fundamental ways to drive cost: design (chemistry/packaging) and volume (labor/materials). It matters what the total battery sales volume is. The more non-battery applications that are used for energy storage, the greater the market that these alternatives occupy, the more expensive batteries will be.
Bill said that, as a general rule of thumb, the cost of a new technology starts at about 80/20 (labor/materials) and matures to 20/80 (labor/materials). This suggests that more than 75% of cost reduction potential lies in the ability to squeeze out labor costs, usually through automation. The high capital costs of investing in automation can only be supported by high volume markets.
Bill’s point, I believe, is a good one. If cost reductions are necessary to create a market for storage (and most believe that they are), the greatest potential by far for reducing the cost of storage lies in finding a way to manufacture batteries in high volume. This is not an original idea. I have heard it expressed before. But Bill’s comments reminded me about it in a very pointed way.
And perhaps in a timely way: NAATBatt just proposed comments to an of energy storage bill that proposes tax credits for storage on a “technology neutral” basis (i.e., hydro storage and CAES would get the same credits as batteries). NAATBatt did not object to the technology neutral feature of the bill. On its face, that seems fair. But perhaps we, as an industry, need to rethink our position? If Bill is right, that batteries will not achieve a price point necessary to support their success in energy storage unless they are produced in great volume, NAATBatt and other advocates for advanced battery technology need to rethink their government relation strategy. We need, perhaps, to focus on promoting advanced battery technology itself, rather than energy storage more generally.