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Lithium-Ion Battery Prices are Declining, Powering Growth and Opportunity in the U.S. Energy Storage Market

As renewable energy penetration increases, utility planners are searching for new approaches to align intermittent electricity generation with demand. Energy storage technologies have emerged as an effective solution to serve the grid safely and economically.

In the three years since SEPA began collecting energy storage data, the sector has seen consistent, yet modest growth. However, according to the 2019 Utility Energy Storage Market Snapshot, in 2018, 760.3 MWh of energy storage capacity was interconnected, a nearly 45% increase over 2017. The deployment and announcement of larger and more ambitious energy storage projects indicate that the market has reached an inflection point. A number of policy and market factors have aligned to spur an acceleration in the U.S. energy storage market, including: a continued drop in lithium-ion battery prices, new state mandates, FERC Order 841, and utility recognition of the beneficial applications of energy storage.

  • Since 2013, lithium-ion battery prices have dropped by nearly 73%, with the combined cost for a cell and pack at $176 in 2018; $474 less than in 2013.
  • As of June 2019, five states had established energy storage targets – California, Massachusetts, New Jersey, New York, and Oregon.
  • FERC 841 was issued in February 2018, and directs grid operators to establish a structure for energy storage participation in wholesale markets.
  • Utilities are beginning to recognize and harness the array of services that energy storage can offer, including applications such as spinning reserves, frequency regulation, ramping, smoothing, peaking, and back-up power.
2018 Annual Energy Storage Deployment Details (MWh)

In 2018, investor-owned utilities continued to lead with 488.6 MWh of energy storage deployed, but both cooperative and public power utilities displayed strong growth with growth rates of 154.4% and 1,435.5% over 2017, respectively.

Significant Projects On The Horizon 

As energy storage prices have declined, more utilities are recognizing and embracing the capabilities of energy storage to integrate the growing supply of intermittent renewable resources on the grid as well as replacing traditional generation sources. Some of the more ambitious projects include:

  • In June 2019, Pacific Gas and Electric received approval for four energy storage projects that are slated to replace three gas-fired power plants; a total of 2.27 GWh of energy storage.
  • In March 2019, the Hawaii Public Utilities Commission approved six solar-plus-storage projects for the Hawaiian Electric Companies; totaling 253 MW of solar, and 1 GWh of energy storage.
  • In March 2019, Florida Light and Power announced plans to build the Manatee Energy Storage Center in Florida; a 409 MW, 900 MWh battery storage system that will be interconnected to an existing solar farm in the state.

Also indicative of market momentum are announcements of large-scale energy storage projects by utilities unprompted by state storage mandates or renewable energy portfolio standards. These include the recent announcement by Western Farmers Electric Cooperative of Oklahoma of a 700 MW solar, wind and energy storage hybrid project and United Power’s deployment of a 4 MW, 16 MWh system that will save members $1 million annually.

Evolving Technologies, Evolving Opportunities

The electric power sector has gravitated to lithium-ion as the predominant technology choice for energy storage — in large part due to price. Driven largely by growing demand in the electric vehicle market, lithium-ion accounts for more than 90% of global and domestic energy storage markets today.

Lithium-Ion Battery Prices 

In order to meet the carbon reduction and renewable energy targets being set by utilities and states across the country, energy storage must play a primary role. Integrating high levels of renewable penetration will require long-duration storage that lithium-ion battery technology may not be able to meet due to economic and technological constraints. Continued research and deployment of other storage technologies are critical to ensure that these technologies match the evolving needs of the grid. Some alternative storage technologies include: flow batteries, zinc-air batteries, compressed air energy storage, and gravitational storage.

Public funding has played a significant role in the research and development of longer duration energy storage technologies. For example, in May 2018, the U.S. Department of Energy announced a $30 million grant to fund the research and development of long-duration energy storage technologies. The grant is providing funds for ten long-duration energy storage projects under the Advanced Research Projects Agency-Energy (ARPA-E) program. The projects include technologies such as thermal batteries, fuel cells, aqueous sulfur systems, and flow batteries.

Some of these longer duration energy storage technology types are already beginning to emerge. For example, in 2017, San Diego Gas and Electric and Sumitomo Electric Industries deployed a 2 MW, 8 MWh vanadium redox flow battery in 2017 as part of a four-year demonstration project. In 2019, the battery was connected to the California ISO, marking the first redox flow battery connection to a U.S. wholesale power market.

Touring SDG&E’s redox flow battery (shown in foreground) while in San Diego for SEPA’s 2019 Utility Conference (Source: Smart Electric Power Alliance)

Favorable policies, combined with falling costs and an increased appreciation of the advantages of energy storage for both the grid and power consumers signal a fast-growing market. The established deployment of lithium-ion batteries in the market today, coupled with the development of longer-duration storage technologies, have laid the foundation for the emergence of energy storage as a significant participant in the future grid.

 

 

 

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