Battery energy storage costs need to fall by as much as 99% to be competitive with other grid balancing technologies, according to UK transmission system operator National Grid.
In a report published on 10 July, Future Energy Scenarios 2014, National Grid explored the number of years taken to recover the cost of sodium sulphur and lithium-ion batteries through revenue from individual reserve services – Short Term Operating Reserve (STOR) and Fast Reserve – and the decrease in total plant costs that would be necessary in order to recover costs.
The analysis calculated the total plant costs (TPC) for 3MW STOR and 50MW fast reserve plus O&M costs, divided by annual revenue minus annual electricity cost at £36/MWh. National Grid assumed a 15% weighted cost of capital.
Both sodium sulphur and lithium-ion batteries were assumed to have a lifetime of 15 years; and neither battery technology recovered its costs within this period from providing either reserve service, according to the National Grid case study.
For sodium sulphur, National Grid calculated STOR costs outstrip revenue by a roughly 4:1 ratio; with nearly 2:1 for fast reserve. For lithium-ion, the cost-revenue ratio for both STOR and fast reserve is approximately 7:1.
National Grid’s analysis suggests sodium sulphur prices need to reduce by 80-85% for STOR and 52-58% for fast reserve. Lithium-ion costs needs to fall by greater than 99% for both services.
By comparison, the report found pumped hydro storage needed to fall 15-17% for STOR and 0-41% for fast reserve; while above-ground compressed air energy storage needs a 51-53% cost reduction for STOR, with no reduction required for fast reserve.
The report stated: “Although the battery devices were aggregated to meet the minimum capacities for STOR (3MW) and Fast Reserve (50MW), the asset sizes are still considerably smaller than those of CAES and PHES devices. Therefore, although TPC and O&M costs are generally lower for the battery technologies, availability and utilisation payments are also considerably smaller.”
National Grid noted anecdotal evidence suggests the cost of lithium-ion batteries is falling, and that Tesla anticipates the Gigafactory will drive down the per kWh cost of their battery packs by at least 30%.
The report also notes there is value in energy storage helping to improve transmission and distribution network capacities, potentially resulting in deferred or avoided investment, providing storage devices can offer a level of reliability that is similar to or better than that of traditional network assets.
“Stacking revenue streams, so storage owners can access multiple simultaneous revenue streams, can be complex,” said National Grid. “It is crucial to understand how the value of flexibility changes over time and what the market will be willing to pay to deliver it. Only once these questions are answered will it become clear if or when the market needs to start turning to storage.”