Grid-Scale Battery Storage: Cost Issues and Deployment Projections

 

     The DOE’s Berkeley Labs reported in a study of the grid interconnection queue for 2021 that 98% of U.S. energy storage projects in the queue are battery storage projects. Grid-scale battery storage typically provides short-duration storage of 4-6 hours for renewables resources. Those batteries are charged when renewables generation is high and discharged to the grid when renewables generation is low to help balance the grid.

     Globally, China followed closely by South Korea, are leading the charge for grid-scale battery storage. In 2023 China is expected to install about 27% (9.8GW) of global grid-scale battery storage while South Korea will install about 18.5% (6.8GW). Those two countries together make up over 45% of grid-scale battery storage. The U.S. will be third at 14.4% (5.3GW), followed closely by Germany at 13% (4.8GW). Total global grid-scale battery deployment in 2023 is expected to be 36.7GW.

     In the U.S. pumped storage hydroelectric makes up 90% of energy storage. Some of those facilities have been in operation for decades, although they typically have low utilization factors which erodes their economic competitiveness. On a cost per kW basis pumped storage is cheaper than batteries but less flexible in operation and location. Permitting and construction of a pumped storage facility can take 3-5 years each and face opposition. They can also provide much longer-term storage from 10 hours or longer. These are very large construction projects that can have significant environmental impact. Financers face risks. Batteries can be deployed much faster and in smaller projects and in the places where they are needed. A good question is whether battery storage will provide adequate and cost-effective solutions to backing up and integrating wind and solar generation.

     According to Bloomberg New Energy Finance the price of battery storage has dropped significantly, from $1,200 per kilowatt-hour (kWh) of lithium-ion battery storage in 2010 to $151/kWh in 2022. The IEA’s net zero by 2050 pathway has global capacity growing from 18GW in 2020 to 610GW in 2030 and to 3,100GW in 2050. If that is to happen that global capacity must grow by a whopping 16.6 times from 2023-2030, a mere 7 years. That would be a major increase in its growth rate by a factor of about 4. With high metals and lithium prices and supply chain issues, that is a major longshot and again shows the aspirational nature of groups like the IEA and net-zero by 2050 advocates. The price of lithium remains 5 times what it was in 2020 and higher raw materials prices have caused cost/kWh to rise 7% in 2022 for lithium batteries. It was the first time that lithium batteries prices rose after a continuous drop in prices over the years. The following graph shows how far off two more sober projections are from the IEA net-zero pathway:

     The GlobalData forecast seems the most likely to me by far, especially with the cost and supply chain challenges. An industry already experiencing such constraints will no doubt experience them more if the growth rate quadruples in less than seven years. If the GlobalData forecast comes to pass, then deployments will have to grow by 10 times over 20 years from 2030 to 2050 to meet the IEA’s net-zero goal. Once again, we see that the IEA’s decarbonization pathway projections are heavily front-end loaded so as not be reasonable in the near-term. Even the GlobalData forecast shows a quite large growth rate from 2028-2030 that may be difficult to meet so the reality could be lower than that. At current growth rates the amount of deployed global grid-scale battery storage by 2030 would be at about 275GW rather than GlobalData’s estimate of 354GW or Bloomberg NEF’s estimate of 411 GW.

 

Cumulative Global Grid-Scale Battery Storage Beginning in 2017 with Forecast Through 2023 (GW). Dat Source: GlobalData.

References:

Weekly data: Booming battery pipeline heralds era of renewables-dominated grids. Nick Ferris. Energy Monitor. February 27, 2023. Booming battery storage pipeline heralds renewables era (energymonitor.ai)

Queued Up: Characteristics of Power Plants Seeking Transmission Interconnection as of the End of 2021. DOE. Office of Energy Efficiency & Renewable Energy. PowerPoint Presentation (lbl.gov)

Pumped Storage Hydropower Capabilities and Costs. Pumped Storage Hydropower Intyernational Forum. September 2021. 61432796645661f940f277a8_IFPSH - PSH Capabilities and Costs_15 Sept.pdf (website-files.com)