Decline in storage costs “staggering”

April 23rd, 2019, Published in Articles: Energize, Featured: Energize

If the most recent numbers are to be believed, gas-fired peakers will increasingly be challenged by battery storage devices. Although it should come as no surprise to anyone following developments in the solar and energy storage technologies, it does. 

The latest technology cost analysis released by Bloomberg New Energy Finance (BNEF) shows that battery storage costs have fallen by more than one third since the first half of 2018 while wind and solar – considered more or less mature technologies – have also fallen by another 10 and 18%, respectively, over the same period. Additionally, BNEF says offshore wind prices are down 24% over the last year and will continue to experience major price declines.

The most significant, however, has been the cost of lithium-ion battery storage, which BNEF says has fallen by 35% to $187/MWh (about R2,80/kWh). That means it is now effectively competing with, and in some cases, beating generation from peaking plants. This is becoming evident even in the US where abundant natural gas is cheaper than anywhere else. [In South Africa, Eskom’s diesel-powered peakers are said to cost at least R5,00/kWh – ed.].

Taken together, these findings make it even more plausible to incorporate distributed energy resources (DERs) into the network while changing the economics of how and from where we get the energy we use.

The bottom line, according to BENF is that the spectacular reduction in the costs of solar PV and battery storage technologies is ensuring that renewables are not only vastly cheaper than coal and gas power plants on generation costs, but also competitive with fossil fuel generation when it comes to dispatchable generation – the latter being still hard to fathom for many in the industry.

Fig. 1: Stunning cost declines (source: https://reneweconomy.com.au).

According to Tifenn Brandily, an analyst at BNEF, “Solar PV and onshore wind have won the race to be the cheapest sources of new ‘bulk generation’ in most countries,” adding, “But the encroachment of clean technologies is now going well beyond that, threatening the balancing role that gas-fired plant operators, in particular, have been hoping to play.”

BNEF describes the cost falls of wind, solar and storage – all regarded as immature and expensive technologies just a few years ago – as “staggering”, and attributes that largely to technology innovation, economies of scale, stiff price competition and manufacturing experience. According to Elena Giannakopoulou, head of energy economics at BNEF, “Our analysis shows that the levelised cost of electricity (LCOE) per MWh for onshore wind, solar PV and offshore wind has fallen by 49, 84 and 56%, respectively, since 2010.”

For lithium-ion battery storage, the costs have dropped by 76% since 2012, and this is early in terms of technological maturity or capacity scale.

Not surprisingly, BNEF expects the reduction in cost of batteries to offer new opportunities for them to balance a renewables-heavy generation mix as more or less a given in many parts of the world.

BNEF says that batteries, increasingly co-located and paired with solar or wind projects, are starting to compete, in many markets and without subsidy, with coal and gas-fired generation for the provision of ‘dispatchable power’ which can be delivered whenever the grid needs it. If or when such schemes are further developed and demonstrated, gas fired peakers may be challenged in one of the few lucrative niches they still maintain.

According to the BNEF report, “Electricity demand is subject to pronounced peaks and lows inter-day. Meeting the peaks has previously been the preserve of technologies such as open-cycle gas turbines and gas reciprocating engines, but these are now facing competition from batteries with anything from one to four hours of energy storage.”

Fig. 2: Off-shore wind turbines (source: https://i.pinimg.com).

BNEF expects a significant decline in the cost of offshore wind, which was long considered to be too expensive compared to the onshore variety or solar PVs. This picture, it says, is rapidly changing as developers move towards much larger turbines, resulting in sharp reductions in costs to below $100/MWh compared to more than $220 just five years ago.

Giannakopoulou said: “The low prices promised by offshore wind tenders throughout Europe are now materialising, with several high-profile projects reaching financial close in recent months,” adding, “Its cost decline in the last six months is the sharpest we have seen for any technology.”

Acknowledgement

This article was first published in the May 2019 edition of EEnergy Informer and is republished here with permission.

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