As interest in stationary energy storage grows, it is tempting to assume that energy storage systems (ESS) in general—and battery energy storage systems (BESS) in particular—will follow a similar growth curve as solar photovoltaics (PV). In this world view, ESS markets are trailing perhaps five to 10 years behind solar and therefore are poised for dramatic expansion resulting from inevitable technological innovations and learning-curve cost reductions.
While compelling, this narrative is also flawed. The process of developing and monetizing solar-generated energy is effectively the same for all applications and markets. The process of developing and monetizing energy storage is far more complex. Since energy storage is monetized by a number of project-, building load- and utility-specific use cases, much more work goes into the process of developing and selling ESS as compared to solar PV.
Solar PV Project Development
By and large, crystalline-silicon (c-Si) PV cell technologies represent the bulk of the solar market. This is an important distinction, as the learning curves associated with semiconductor devices are somewhat unique relative to other technologies. This unique learning curve plays directly to the solar PV value proposition, which is relatively easy to model.
Semiconductor learning curve. Between 2010 and 2019, every doubling in installed PV capacity has resulted in a 36% decline in levelized costs of energy (LCOE). These improvements in LCOE explain why solar is overtaking other forms of renewable- and fossil-based power sources in terms of new generation capacity.
Simple revenue stream. In addition to a relatively predictable and accelerated learning curve, solar PV technologies benefit from having an elegantly simple use case—namely, producing kilowatt-hours. As its LCOE decreases, the value proposition for solar-generated energy becomes more compelling. Today, solar is the leading source of new power generation capacity in the U.S. precisely because the LCOE for solar is increasingly competitive relative to other energy generation technologies. Moreover, it is easy for stakeholders to model PV system performance; drop the production estimate into a proforma; and sell the project.
Energy Storage Project Development
As compared to solar, the use cases for stationary energy storage are far from simple. Moreover, ESS technologies are not as consolidated as solar.
Complex revenue stream. As illustrated in this infographic from RMI, stationary BESS can provide many potential benefits to multiple stakeholders in a wide variety of applications.
Power system operators: In front-of-the-meter or behind-the-meter applications, stationary energy storage can benefit power system operators by moving energy in time; providing frequency regulation and voltage support; enabling back start; or providing reserve capacity.
Utilities: In front-of-the-meter or behind-the-meter applications, stationary energy storage can benefit utilities by addressing transmission congestion; resource adequacy; transmission deferral; or transmission deferral.
Consumers: In behind-the-meter applications, stationary BESS can benefit C&I or residential customers by providing backup power for resiliency; increasing PV self-consumption; monetizing time-of-use (TOU) rate structures; or reducing demand charges.
While the ESS value proposition is impressive, there are in fact relatively few markets in the U.S. where utility rate structures support ESS business models based on reducing peak demand or shifting energy in time to take advantage of TOU rates. Considerable changes in policy and regulation are required to realize many of these benefits. Moreover, stationary ESS is rarely economical based on any single value stream, but rather requires “stacking” value by providing multiple services.
Monetizing multiple value streams not only creates competing and conflicting interests, but is also complex in terms of system design and control software logic. As a result of these complex use cases, ESS projects are difficult to develop and sell, which means that ESS markets are challenging to scale.
Unconsolidated technologies. Electric vehicles represent the largest market for energy storage. On the one hand, this emerging market is driving technological innovation and cost reductions in energy storage, especially in lithium-ion (Li-ion) technologies. On the other hand, there are significant differences between motive and stationary energy storage applications. Vehicle electrification, for example, requires high-performance batteries that pack a lot of power into a small space. Stationary applications, meanwhile, are less sensitive to power density and weight and will favor more economical solutions over time.
From a technology standpoint, the solar market is largely consolidated around different flavors of crystalline silicon-based PV cells. By comparison, stationary BESS technologies are less consolidated. For short-duration applications, especially behind the meter, lithium-manganese-cobalt-oxide (NMC), lithium-iron-phosphate (LFP) and lithium-nickel-cobalt-aluminum-oxide (NCA) battery chemistries are dominant today. In large-scale application in front of the meter, various redox flow battery chemistries look promising in early in-field applications. Scaling any of these technologies is far from simple.
Though energy storage and solar PV are very different technologies with unique learning curves, these are also symbiotic technologies. Integrating and pairing energy storage with solar PV systems can facilitate microgrids for power system resilience. Integrating BESS into large-scale PV power plants can improve plant availability and limit energy losses by moving clipped or curtailed energy in time. These solar-plus-storage systems are dispatchable assets that can address California’s “Duck Curve,” as an example, and provide other system benefits. Best of all, solar-plus-storage savings are relatively easy to model and monetize.
Many energy storage markets will be slow to develop. However, solar-plus-storage systems are being deployed today and are becoming increasingly widespread, both behind and in front of the customer meter. Due to the inherent complexity of pairing solar PV with stationary energy storage, it is critical to have a qualified and experienced engineering partner to qualify equipment, optimize system performance and ensure long-term financial returns.
If you are looking for engineering support for solar PV, ESS or solar-plus-storage applications, contact Pure Power Engineering to learn more about our value-engineered design and construction drawing services.