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Energy Storage: When does the money overtake the hype?
Chris Hartshorn, Ph.D. VP – Research Lux Research, Inc.
Prepared for iNEMI Workshop20 October 2010
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Lux Research
We help clients capitalize on science‐driven innovation
We focus on emerging technologies in the chemicals and materials sector and the energy and environment sector
We have practices in Power and Energy Storage, Solar, Green Buildings, Nanomaterials, Water, Biosciences andTargeted Delivery
We have clients on five continents – blue‐chip corporations, govt agencies, universities, investors, and SMBs
We source our intelligence from direct interaction with key execs and experts at cutting‐edge technology firms in our sectors of focus
We draw on our network to:• Continuously monitor emerging technologies• Identify discontinuities in technology commercialization• Assist with company and technology evaluation
We have global reach, with 50+ employees in New York, Boston, San Francisco, Seoul, Amsterdam and an office in Singapore as of September 2010
Research team is 67% scientists, 33% business analysts
Testimony to U.S. Congress
Svalbard Global Seed Vault, Norway
Suntech Power factory, China
Qatar Science and Technology
Park
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Agenda
Grid scale energy storage: Looking for a catalyst
Electric vehicles: Match the market, not the hype
Implications: Massive growth, careful navigation
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Two main applications for grid‐scale storage: Power and Energy
First, an analogy for review:• Energy storage is to water capacity as…• Power delivery is to water flow
Comes down to short discharges (power function) or long discharges (energy‐type)• Some possibilities for overlap too
Flow Capability (Power)
Capacity Capability (Energy)$/kWh
$/kW
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Wide range of applications – winning technologies will address multiple
Minutes
Seconds
Days
Hours
10 kW 100 kW 1 MW 10 MW 100 MW
Spinning reserve ancillary service
Renewables firming
End‐user electric service reliability
Renewables shifting
Frequency regulation
ancillary service
Energy arbitrage/ commodity storage
End‐user rate reduction
T&D upgrade deferral
Discharge duration
System power
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The regulatory environment must be mapped on to incentives to derive a true deployment timeline
This is a possible method for determining “scenarios for integrated roll‐out;” this considers market models, smart grid components/modules, and geographies:
•China•Eastern EuropeMonopoly
•British Columbia•South AfricaSingle Buyer
•Texas, New York•Western EuropeOpen Access
•NE U.S., California•SingaporePower Pool
•U.K.•Eastern Australia
Fully Contestable
• Distributed• Centralized• Renewable • Fossil
• Distributed• Centralized• PHEV
• Improved T&D
• Appliances• Insulation
• TOU• Demand response
• Carbon trading
• CCS• Offsets
Generation Energy storage Efficiency Demand
Management Other
•Renewables standards•Energy demand growth rates•Geographic constraintsKe
y geograph
ies
(market models) x (smart grid modules) x (geographies)
= “Integrated energy roll-out scenarios”
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Available technologies span a range of capabilities
Electrochemical (batteries)• Molten salt• Lithium‐ion• Advanced lead‐acid• Flow batteries
Non‐electrochemical• Compressed air
energy storage• Thermal storage• High‐speed flywheels
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Efficacy of grid‐scale storage varies by region
RegionGeneration mix (major energy
source(s))Geography Regulation
Comparable regions
New YorkLimited renewables; (31% natural gas, 29% nuclear)
Long transmission lines, congestion in urban area
RestructuredEngland, Russia
CaliforniaHigh renewables and aggressive RPS; (55% natural gas)
Long transmission lines in protected land, congestion in urban areas
Partially restructured
Spain, Argentina
HawaiiHigh renewables and expensive fossil fuels; (83% oil)
Small island grids, no interconnections
Fully regulated, with some merchant power
Japan, Indonesia
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Power applications are only economical in very limited markets
Li‐ion is attractive in specific markets now, but needs improvements in cycle life to be truly competitive
Flywheels may be cost effective in high value frequency regulation markets with cost reduction
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Incremental solution: in CA/HI, it’s ice energy storage
Ice is very attractive due to long life and modest up‐front cost
Ice is a form of distributed storage and thus can be implemented incrementally
Li‐ion batteries are close to profitability today, and costs for other batteries will drop over time
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The outlook from two sides of the table:Technology developers
The majority of grid energy storage developers are targeting applications to address high renewables penetration – primarily wind, but also solar and tidal.• With the exception of CAES and pumped hydro, grid energy storage technologies
are clearly excluded from the wholesale energy markets for arbitrage applications.
Most of the storage technology developers do not have a sense of the true market for energy storage, and are unclear on the business models that will be successful.• Both power and energy applications lack the compensation framework and
storage‐specific regulations to build a complete business model.
Multiple functionality (e.g. wind ramping and wind shifting) is a must for initial grid energy storage installations for new technologies.• As there is little demand “pull” for specific applications, installations that can
serve multiple applications will see greater success by serving several concurrent needs.
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The outlook from two sides of the table:Utilities
Renewables penetration – particularly distributed generation – will drive the growth of grid energy storage.• Utilities and policy makers across the globe see renewables intermittency as a top
driver for grid energy storage, particularly in the distribution layer where renewable intermittency will impact the voltage regulation of the network.
It’s still a lot cheaper to build a new peaker plant than to invest in grid energy storage.• Efforts to evaluate the future value of storage are frustrated by the uncertainty in
pricing for some fuels – including carbon taxes and nuclear fuel taxes.
A driving economic case for electrochemical grid energy storage will take “a long time” to develop.• Without storage‐specific regulations and tariffs, electrochemical storage cannot
complete with conventional generation and grid regulation in the short‐term.
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When can penetration of renewable energy force adoption of energy storage?
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Renewable Generation Cost Determines Addressable Market
Decreased $/Wp = Increased
addressable market
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Challenges for Wide‐Spread Renewables Adoption
#1: Utility adoption
#2: Increasing natural gas availability
#3: Grid stability
#4: Low capacity factor
Today
10+ years
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Challenges for Wide‐Spread Renewables Adoption
#1: Utility adoption
#2: Increasing natural gas availability
#3: Grid stability
#4: Low capacity factor
Today
10+ years
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Challenge #3: Grid Stability
Challenge: Large amount of intermittent renewables (wind & solar) threatens grid stability
Czech Republic – stability issues realized at 3% renewables
Belgium – stability issues likely at 8% renewables
Germany – stability issues likely at 20% to 25% renewables
Continuous U.S. – stability issues likely at 20% to 25% renewables
Hawaii – stability issues possible at 30%
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Renewable Generation Cost Determines Addressable Market
~15% addressable
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Challenges for Wide‐Spread Renewables Adoption
#1: Utility adoption
#2: Increasing natural gas availability
#3: Grid stability
#4: Low capacity factor
Today
10+ years
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Challenge #4: Low Capacity Factor
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Supp
ly vs. Dem
and (GW)
Hour of the day
Demand (GW) Available Resources (GW)
Source: California ISO
Baseload
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Challenge #4: Low Capacity Factor
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Supp
ly vs. Dem
and (GW)
Hour of the day
Demand (GW) Available Resources (GW)
Source: California ISO
5 GWp of solar in CA
Baseload
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Challenge #4: Low Capacity Factor
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Supp
ly vs. Dem
and (GW)
Hour of the day
Demand (GW) Available Resources (GW)
Source: California ISO
Baseload
Energy Storage
10 GWp of solar in CA
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Challenge #4: Low Capacity Factor
0
5
10
15
20
25
30
35
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23
Supp
ly vs. Dem
and (GW)
Hour of the day
Demand (GW) Available Resources (GW)
Source: California ISO
Baseload
Energy Storage
10 GWp of solar in CA
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Solar as a Percentage of Generation in 2015
4.7%
0.25%1.6%
0.7%
0.3%
1.1%
0.7%
0.16%
5.7%
1.2%
5.6%
2.0%
0.9%
0.9% 1.5%
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Renewable Generation Cost Determines Addressable Market
With cheap energy storage, 100% of market is
addressable by renewables…
…but highly unlikely given long lifetime of existing capacity and
need for technology mix
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Agenda
Grid scale energy storage: Looking for a catalyst
Electric vehicles: Match the market, not the hype
Implications: Massive growth, careful navigation
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Types of electric vehicles
Vehicle type Subtypes Relevant battery chemistries
Typical fuel savings
Micro‐hybrid N/A Lead‐acid, advanced lead‐acid,supercapacitors
5% to 15%
Hybrid electric vehicle (HEV)
Mild NiMH 15% to 30%
Full NiMH, Li‐ion 40% to 50%
Plug‐in hybrid vehicle (PHEV)
Series/ parallel Li‐ion 55% to 85%
Series Li‐ion 55% to 85%
All‐electric vehicle (EV)
N/A Li‐ion 100%
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The fundamental question with electric vehicles: Will people buy these cars?
Toyota Prius Chevy Volt
HEV (NiMH battery)~$23,00051 mpg city/48 mpg highway
PHEV (Li-ion battery)~$40,000 ($32,500 after incentives)40 mile all-electric range
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EVs must overcome range anxiety
I'm only a few miles from home. Could I borrow a socket?
EV (Li-ion battery)~$32,800 ($25,300 after incentives)100 mile all-electric range
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Historical Li‐ion costs for consumer electronics and future costs for automotive
$500
$550
$600
$650
$700
$750
$800
$850
$900
$950
$1,000
2010 2011 2012 2013 2014 2015
Li‐ion cost (US$/kWh)
Cell cost Automotive pack cost
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Demand‐driven market model
Analysis accounts for: • Technology improvements (including ICE technologies)• Component cost reductions• Gas/electricity prices• Driving habits• Governmental subsidies
Model is based on relative payback periods of electric vehicles vs. ICE vehicles and has two phases:
• A “hippie phase” (logarithmic growth) • A “growth phase” (logistic growth)
Types of vehicles modeled:• HEV: contains a NiMH battery pack (like the Toyota Prius)• Light PHEV: a PHEV‐12 with a Li‐ion battery pack (like Toyota’s planned PHEV)• Heavy PHEV: a PHEV‐40 with a Li‐ion battery pack (like the Chevy Volt)• EV: contains a Li‐ion battery pack (like the Nissan Leaf)
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Global automotive sales by vehicle type: three scenarios
Source: Lux Research Source: Lux Research Source: Lux Research
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The U.S. market is primed for light PHEVs, if oil prices play along
Source: Lux Research Source: Lux Research Source: Lux Research
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No electric vehicle will threaten ICE vehicles by 2020
Source: Lux Research
Source: Lux Research
Source: Lux Research
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Micro‐hybrids dominate, accounting for 37% of vehicle sales in 2015
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Relatively small numbers of PHEV/EVs have large effects on global battery sales
Source: Lux Research Source: Lux Research
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The charging station value chain matures ahead of electric vehicle critical mass
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EV cost: Cost per vehicle remains exceedingly high based on payback calculations, and only incentives are driving adoption while this is the case.
Consumer behavior: EV owners will not want to wait more than eight hours to charge at home overnight, nor more than five minutes to charge at a station, and don’t want special charging hardware installed inn the home.
Standards: Given the relatively low number of vehicles on the road as infrastructure develops, EV charging stations must be interoperable to enable the charging any vehicle.
Grid stability: It will be some time before enough EV charging load is in place to cause significant impact on grid operations.
Aggregating a critical mass of EVs will require years of government support
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Agenda
Grid scale energy storage: Looking for a catalyst
Electric vehicles: Match the market, not the hype
Implications: Massive growth, careful navigation
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Global storage markets for transportation applications
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Global storage markets for grid applications –significantly smaller opportunity
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Large format Li‐ion batteries will grow, but disappoint the over‐stimulated value chain
11 GWh of sales compared to 18.2 GWh of capacity
Overcapacity of more than 65%
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Summary
Electric vehicles tend to be overhyped, but still represent a massive new market for large‐format Li‐ion batteries and electronics manufacturers alike, under most reasonable scenarios
Grid applications will slowly emerge in areas with aggregated renewables penetration, but need to be catalyzed by a high profile grid failure
There will be a glut of energy storage capacity by mid‐decade. Electronics manufacturers must scale to match the actual markets and focus on partnerships in the growth geographies.
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Lux Research Inc. 234 Congress St Boston, MA 02110 USA Phone: +1 617 502 5300 Fax: +1 617 502 5301 www.luxresearchinc.com
Thank youChris HartshornVice President – Research +1 617 502 5313+1 646 943 [email protected]