Battery
degradation refers to the loss of capacity of a battery energy storage system (BESS)
due to aging and use. This is also known as capacity loss or capacity fading. According
to a 2003 paper in Journal of Power Sources: capacity loss in lithium-ion
batteries after 500 charging and discharging cycles varied from 12.4% to 24.1%,
yielding an average capacity loss per cycle range of 0.025–0.048% per cycle.
The typical reasons for degradation/capacity loss are ambient temperature,
discharge C-rate, and state of charge. High battery temperatures accelerate
degradation. C-rate refers to charging and discharging rates. This is why
fast-charging leads to higher battery degradation rates, although this is
changing so that fast-charging is affecting degradation less and less. State of
charge (SOC), also expressed as depth of discharge (DOD) refers to how low the
battery level is when it is recharged. For many lithium batteries it is
recommended that to reach optimum battery life and minimum degradation that
batteries are recharged when the remaining charge is very low rather than
higher or totally discharged.
While the average
lifespan of a utility scale battery storage system is 25 years, the system can
degrade to 75-85% of original capacity in the first decade, assuming 1 hour of
storage and 1.5-2 cycles per day. Invinity Energy Systems reports: “The more
cycles that can be used during a 24 hour period, the greater the revenue
potential, but some common grid storage batteries lost 20% or even 40% of their
capacity during the first decade of service.”
Batteries are utilized in different ways. The EIA selects the following as the applications of battery systems on the U.S. power grid: frequency regulation, price arbitrage, ramping or spinning reserve, storing excess wind and solar generation, voltage or reactive power support, system peak shaving, and load management. Some of these applications are simultaneous. The graph below shows that through 2021, the highest percentage of installed battery capacity is used for frequency regulation at about 64%, followed closely by price arbitrage at 59%. The instant startup time for batteries makes them very good for frequency regulation. The dictionary definition of arbitrage is as follows: “the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.” Where applicable, electricity markets can offer arbitrage so that electricity can be sold to the grid at higher prices when in demand and bought at lower prices when supply is high. In 2019 arbitrage was only at 17%. That shows that arbitrage has taken off quickly and now is utilized by most grid-scale battery systems. Thus, any effects arbitrage has on battery degradation will now apply to most battery systems. Utility-scale battery storage capacity more than tripled in 2021 from 1.4GW to 4.6GW. 80% of battery capacity added in 2021 in California was used for price arbitrage. They also noted that more than 93% of the storage deployed in 2021 were paired with large-scale solar energy facilities to take advantage of the considerable federal tax credits such installations receive.
In California grid-scale batteries are required to have
four-hour duration and are used to smooth the evening solar duck curve in a daily
peak shaving events during hot days. That type of configuration degrades in
specific ways compared to ERCOT in Texas where grid batteries are used to
maintain reserve capacity. Those batteries spend more time fully charged
without use and collect capacity payments for their readiness. More time fully
charged without being used leads to more degradation of one type.
According to
Wood MacKenzie and DNV grid-scale and commercial/industrial battery deployments
have been expanding while residential deployments have remained steady. California
in particular, and other western states have dominated grid-scale deployments
and New York has been the leader in commercial/industrial deployments.
Source: Energy Information Administration
The average
grid-scale battery lifetime (presumably before increasing arbitrage use) is
basically equivalent to that of the lifetimes of natural gas turbines, natural
gas combined cycle plants, and wind and solar components. The utilization
rates, degradation rates, operation and maintenance costs, upfront costs, and
other parameters can vary. Upfront costs for battery systems, wind, and solar
are high compared to natural gas. Maintenance costs are higher for natural gas
than for wind and solar. As the table below shows, one of the biggest risks of
battery systems compared to thermal and renewable resources is quick battery
degradation.
Another way to
compare features like reliability is to compare the reliability of thermal
resources and inverter-based resources (IBRs) such as wind, solar, and battery
storage resources. The North American Electric Reliability Corp.’s recently reported
increasing occurrences of IBRs tripping offline or reducing output in response
to grid disturbances. The report concluded that BESSs “may have the same
systemic performance problems as solar photovoltaic resources.” A major BESS
resource tripped offline in 2022. The report referred to these occurrences as “systemic
reliability risks.” Planning, modeling, construction, and, in particular,
commissioning practices have been targeted as ways to improve IBR reliability.
Chemical Degradation vs. Mechanical Degradation:
Temperature is the Main Cause of Mechanical Degradation and Better Designed
Fit-for-Purpose Cooling Systems Can Help Mitigate It
At low C-rates,
or slower charging, the primary mechanism of battery degradation is normal chemical
degradation. At higher C-rates, or faster charging, the primary mechanism is
mechanical degradation. I believe this is due mainly to the higher temperatures
achieved by fast charging. A 2022 study published in the Journal of Energy
Storage of a German 7.2 MW/7.12MWh utility-scale battery system used
primarily for frequency regulation, concluded that battery pack position in the
vertical stack affected temperatures with higher temperatures occurring higher
up in the pack. The authors concluded that the lifespan of the BESS could
potentially be extended by 11 years mainly with proper fit-for-purpose cooling
system design: “Based on a detailed analysis of the BESS, we conclude that
spatial temperature gradients within the battery containers are larger than
expected and have a profound effect on lithium-ion battery ageing on system
level. We extend this degradation model to study the technical potential of
batteries in different energy market applications such as the day-ahead market
with long periods of high charge and discharge rates (up to 1 h with a power to
capacity ratio of 1 C) and the intraday market with volatile price spreads and
therefore frequent and short periods (of up to 0.25 h) of high charge rates of
up to 1 C. Our results suggest that the cooling system of energy storage
systems needs to be carefully designed according to the intended application in
order to control the temperature of the individual battery packs effectively.
Slowing down ageing will be also beneficial for reusing 2nd life batteries
stemming from a prior automotive application to extend the overall lifetime of
such batteries.” They also noted that most battery degradation studies are
based on modelling rather than real-world operational data and therefore there
should be more studies based on that real data. This example shows that mechanical
battery degradation can be better mitigated in the future with better cooling
system designing.
An April 2023
study in Applied Energy came to a similar conclusion regarding thermal
management systems of utility scale Li-ion BESSs. This was a long-term study based
on a digital twin model that collected data for a 1MW BESS with 18,900
individual cells cycled for 10 years. They likewise concluded that cooling
system design or thermal management was key to mitigating battery degradation:
“Simulations of the impact of cell-to-cell variability, thermal effects, and
degradation effects were run for up to 10,000 cycles and 10 years. It is shown
that electrical contact resistances and cell-to-cell variations in initial
capacity and resistance have a smaller effect on performance than previously
thought. Instead, the variation in degradation rate of individual cells
dominates the system behaviour over the lifetime. The importance of careful
thermal management system control is demonstrated, with proportional control
improving overall efficiency by 5%-pts over on–off methods, also increasing the
total usable energy of the battery by 5%-pts after 10 years.”
A 2020 study in
the Institute of Electrical and Electronic Engineers Access Journal acknowledged
the lowered lifespans of BESSs utilized for arbitrage as well as dissipation
losses of both the battery and electronic components. They presented “a
novel three-dimensional mixed-integer program formulation allowing to model
power, state of charge (SOC), and temperature dependence of battery dynamics
simultaneously in a three dimensional space leveraging binary counting and
union-jack triangulation. The inclusion of a state-of-the-art electro-thermal
degradation model with its dependence on most influential physical parameters
to the arbitrage revenue optimization allows to extend the battery lifetime by
2.2 years (or 40%) over a base scenario.” They note that their optimization
routines including state-of charge awareness and introduced thermal sensitivity
management could each result in about 12% increased profitability for a total
of about 23% increased profitability.
Effects of Price Arbitrage on Battery Degradation
Price
arbitrage by storage providers improves the economics of energy storage in two
ways: 1) by allowing the storage operators to sell high and buy low and 2) by allowing
them to reap a tax credit by pairing their BESSs with a solar facility, or in
far fewer cases with a wind facility. Fitch Ratings recently reported that
BESSs could be prone to faster asset degradation and higher capex volatility
than renewables and thermal peaking plants, especially if they use arbitrage
strategies. However, it is also true that BESSs have lower operational risks
than thermal resources. Fitch explains the BESS degradation issues as follows: “Batteries
are subject to fast degradation with the useful life of utility-scale
lithium-ion versions far below the estimate for solar panels. Degradation rates
and life expectancy of battery storage mainly depend on use (frequency, depth
of discharge and the style of operation), as well as battery chemistries and
external conditions, such as temperature. Moreover, they require more frequent
replacement than the main equipment in other energy technologies in order to
mitigate potential underperformance. Operators could add extra capacity when
systems are new, or replace units later. A high proportion of arbitrage in
revenue could spur degradation, reducing the visibility over the pace at which
an asset loses capacity.”
More Arbitrage is Likely in the Future
Arbitrage has long been touted as a
desirable feature of battery resources resources even as there are significant downsides
and challenges. These challenges are one reason strategies like vehicle-to-grid
(V2G) tech has not lived up to the hype. I would argue that it would be risky
for EV owners to sign up for V2G programs. While they may make some money from
arbitrage, they would likely be sacrificing battery lifespan and subjecting their
EVs to battery degradation. V2G programs work better for vehicle fleets that
are only in operation at certain time periods, but I would still be worried
about battery degradation.
A new pilot
program in Texas is allowing Tesla Powerwall owners to sell stored energy back
to the grid. This is apparently intended to contribute to peak demand energy
needs and help Texas prevent blackouts as has happened is California during peak
demand emergencies. Clean Technica called it a win-win for Texas but there was
no mention of battery degradation being an issue. BESSs charge and discharge very
slowly which will not stress a local power grid but they can certainly stress
the battery in a long-term sense.
Using BESSs for
arbitrage can potentially reduce the required redundancy size needed for a grid
so that new plant construction can be avoided, as long as the variable and
intermittent resources charging the BESS are adequate to charge it. While avoided
resources and profits through arbitrage are commonly heard selling points,
battery degradation is rarely mentioned. For the BESS owner it is certainly an
important consideration. Below is a model diagram of a typical BESS plus solar
peak shaving event.
Wood MacKenzie and DNV recently presented a very
informative webinar - Discussing the BESS operational techno-economic
evaluation cycle – which went into some detail about battery degradation. The
graphics below are from the webinar. They analyzed the cycle from by use case,
discussed revenue streams, degradation issues for each use case, and costs.
Degradation is affected by design/sizing, cycling/resting conditions, and
throughput. Costs are associated with augmentation, auxiliary loads, and
operation and maintenance. Powering temperature management is the main use of
auxiliary loads. BESS augmentation is the process of adding battery capacity as
the system ages. The timing of augmentation can be affected by the amount of
system capacity overbuilt on the front end of a project. Thus, augmentation
needs to be planned according to use case and what is known about that use pattern
on degradation.
Arbitrage is a
factor in both California (CAISO) and Texas (ERCOT) use cases. Use case
determines the revenue streams and also determines the key factors that cause enhanced
degradation. The first graph below is a CAISO use case. The ones that follow
describe degradation and what drives it.
The following
graphs show how certain use cases affect degradation and how compounded degradation
is determined. The first graph below shows the cycling and resting characteristics
of a use case.
As mentioned regarding
the ERCOT system, maintaining 100% SOC for long periods for capacity reserve results
in enhanced degradation as the graph below shows.
The graph
below shows the significant enhanced degradation due to inadequate thermal management
and thus the importance of adequate thermal management in optimizing battery
life.
The graph
below compares four different use case SOC profiles with subsequent degradation.
It also shows that maintaining SOC above zero reduces degradation as well as
limiting idling at 100% SOC reduce degradation.
The final
three graphs below show the need for augmentation, including initial overbuild
and future repowering, and the need for comprehensive augmentation planning as
batteries age. Considerations include reserving space, forecasting future costs,
and revenue impacts of capacity maintenance.
References:
Battery
storage systems could face rapid asset degradation, especially with arbitrage:
Fitch. Kavya Balaraman. Utility Dive. July 18, 2023. Battery storage systems could face
rapid asset degradation, especially with arbitrage: Fitch | Utility Dive
Capacity
loss. Wikipedia. Capacity loss - Wikipedia
What
drives capacity degradation in utility-scale battery energy storage systems?
The impact of operating strategy and temperature in different grid applications.
David Gräf, Julian Marschewski, Lukas Ibing, David Huckebrink, Marc Fiebrandt,
Götz Hanau, and Valentin Bertsch. Journal of Energy Storage. Volume 47, March
2022, 103533. What drives capacity degradation in
utility-scale battery energy storage systems? The impact of operating strategy
and temperature in different grid applications - ScienceDirect
Digital
twin of a MWh-scale grid battery system for efficiency and degradation analysis.
Jorn M. Reniers, David A. Howey. Applied Energy. Volume 336, 15 April 2023,
120774. Digital twin of a MWh-scale grid
battery system for efficiency and degradation analysis - ScienceDirect
Utility
Scale Battery Storage On The Grid. Invinity Energy Systems. January, 2022
(update January 4, 2023). Utility Scale Battery Storage /
Invinity Energy Systems
Discussing
the BESS operational techno-economic cycle. Webinar. Wood MacKenzie/DNV.
October 24, 2023,
Tesla’s
Latest Project Will Allow Homeowners to Sell Excess Energy Back to the Grid for
Major Profits: It’s a Win-Win. Jeremiah Budin. The Cool Down. October 7, 2023. Tesla's latest project will allow
homeowners to sell excess energy back to the grid for major profits: 'It's a
win-win' (thecooldown.com)
US
storage providers increasingly use price arbitrage strategies to maximize
income: EIA. Elizabeth McCarthy. Utility Dive. August 3, 2022. US storage providers increasingly use
price arbitrage strategies to maximize income: EIA | Utility Dive
Battery
Storage Using Arbitrage May Face Rapid Asset Degradation. Fitch Ratings. July
13, 2023. Battery Storage Using Arbitrage May
Face Rapid Asset Degradation (fitchratings.com)
Battery
systems on the U.S. power grid are increasingly used to respond to price.
Energy Information Administration. Today In Energy. July 27, 2022. U.S. Energy Information
Administration - EIA - Independent Statistics and Analysis
Simulation
of capacity fade in lithium-ion batteries. R. Spotnit. Journal of Power Sources.
Volume 113, Issue 1, 1 January 2003, Pages 72-80. Simulation of capacity fade in
lithium-ion batteries - ScienceDirect
Battery
storage failures highlight reliability challenges of inverter-based resources:
report. Robert Walton. Utility Dive. October 4, 2023. Battery storage failures highlight
reliability challenges of inverter-based resources: report | Utility Dive
Energy
Arbitrage Optimization With Battery Storage: 3D-MILP for Electro-Thermal
Performance and Semi-Empirical Aging Models. Volkan Kumtepeli, Holger Hesse, Michael
Schimpe, and Anshuman Tripathi. January 2020IEEE Access 8:204325-204341. (PDF)
Energy Arbitrage Optimization With Battery Storage: 3D-MILP for Electro-Thermal
Performance and Semi-Empirical Aging Models (researchgate.net)
Battery Energy Storage Systems – Power Arbitrage. Aurora Consulting. May 23. 2021. Battery Energy Storage Systems - Power Arbitrage - Aurora Power Consulting (aurora-power.co.uk)
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