Energy Storage, Commercially Viable?

For decades, energy storage has been viewed as one of the major solutions for meeting growing global power consumption and subsequent security concerns. However, despite many years of investment, its potential has not yet been fully realised. Although the technology has evolved rapidly and the benefits of energy storage are widely accepted, up until recently its deployment has been limited. Here, Ian Thomas, director of Turquoise International, a merchant bank specialising in energy and the environment, examines the challenges facing energy storage and potential investment opportunities. 

In recent years, investment in energy storage and associated technologies has exploded. Driven by the rapid development of renewable energy sources and the need to meet energy consumption while reducing our reliance on fossil fuels, there have been a significant number of noteworthy advancements.

Every week there is a new story in the media, with recent highlights including South Korean scientists proposing waste cigarette butts as energy storage devices, alongside continuing investigation into biowaste storage, banana peel batteries and hemp fibre as a replacement for graphene in some supercapacitors.

In the UK, the SUPERGEN energy storage hub has also been awarded £3.9m to improve the performance of greener electrochemical, mechanical and thermal storage devices, and to develop new sustainable materials.

Ian Thomas

Historically, investment into storage technologies has been focussed on utilising surplus energy produced by intermittent technologies, such as solar and wind, at times of oversupply. Increasingly, this emphasis is being shifted to focus on decarbonisation and the ability to increase resource efficiency. This is done by maximising the renewable energy supply resource and easing the need for constraint payments to be made to solar power plant and wind farm operators.

Despite limited integration into utilities, there have been significant developments in the various storage technologies, with a variety of batteries, pumped heat electricity storage and liquid storage devices all rapidly evolving. In addition thermal energy storage systems, are already seemingly well-equipped to reduce the amount of heat that is currently wasted in the energy system.

Although energy storage technology has developed quickly, costs remain a major stumbling block to its deployment. It has remained relatively expensive compared to alternative resources and, although some technologies are competitive in off-grid and rural community applications, significant CAPEX costs to the utilities have hindered large-scale deployment. Currently, outside of California, neither the utility sector nor the grid is able or willing to take on the total costs and risks of introducing energy storage. This is the situation in the UK.

The knock-on effect is that, without commercial roll-out, it is impossible to unlock project finance and lower the costs of deploying the technology. Without delivering high economies of scale, the vast majority of technologies, which are still in the early phases of development, will continue to fare poorly against non-storage technologies and are, therefore, unlikely to become financially viable.

However, there have indeed been exceptions, with some exciting energy storage projects being funded by the government, including over £8 million to develop a technology to store air in liquid format, which can then be used to supply electricity at times of high demand. The technology will be connected to the National Grid and will be used to test balancing supply and demand using stored energy. Overall, DECC has announced more than £16m into energy storage projects over the past six months and a further £50 million planned for an auction round in 2015.

Although public investment in energy storage research and development is leading to advancements and significant cost reductions in the integration of the technology, it is not in itself enough to create commercially viable solutions immediately. Further targeted efforts by the government, industry and financial sector are needed to overcome the existing barriers.

Investments in projects that maximise resource efficiency by using technologies that incorporate multiple forms of energy and utilise a hybrid system will be key.

Greater effort to develop ownership structures is also needed. For example, within the utility sector the benefits of smoothing the flow would accrue to the grid while the power being stored would belong to the utility. Sorting out these roles and who would get the return on investment continues to be a challenge.

The sector is at a crucial point, with growing emphasis on electricity grid stability, increasing access to renewable energy, encouraging self-consumption and self-production and improving energy system resource efficiency all driving the deployment of energy storage.

The ability to move from the theory to practical applications will be pivotal. When a technology is proven to work on a commercial scale then CAPEX will fall and investment will follow.