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Factors that prove that energy storage is on the rise – is Europe different from the US?

Paul Gardner, Global Segment Leader, Energy Storage, DNV GL

Paul Gardner, Global Segment Leader, Energy Storage, DNV GL

My colleague, Davion Hill on our US energy storage team, recently wrote a blog on 10 factors that prove energy storage is on the rise, based on his recent experience in workshops and panel sessions with players in the US battery industry.  Particularly for a finance audience, his main message was: deploy your capital in energy storage starting today. You’ll be glad you did. In today’s blog, I’ve identified how these 10 factors for stationary battery storage applications also apply in a European context.

1. Li-ion costs have been consistently dropping 8-15% per year since 2009 and have no sign of stopping.

Clearly, this also applies for European installations.  Batteries are effectively in a global market, approaching commodity status.  Further, Li-ion cost reductions are driven principally by the EV market, which is around 10x the volume of stationary storage, and European vehicle manufacturers are piling into EV production.

2. More opportunity for projects which are increasing in both scale and quantity.

US stationary battery projects are getting larger: 120 MWh for just one of the projects built to replace gas-fired peaking plant in the wake of failure of the Aliso Canyon gas storage facility in 2016.  And of course, in Australia, the proposed 129 MWh Tesla installation has grabbed the headlines.  Nothing this large is in operation or under construction in Europe, but projects of 100 MWh and more are under discussion.

European markets are arguably as diverse as American, including for example large numbers of residential installations in conjunction with PV in Germany, and small numbers of large installations for ancillary services markets in the UK.

3. Battery energy storage is not a maturing or emerging technology. It is commercial and off the shelf.

Although this statement clearly applies in Europe, with suppliers with adequate track record and acceptable warranties, one difference from the US is that contracting structures are arguably more diverse, and less mature in Europe.

DNV GL’s experience is that one very important factor for cost reduction is the presence of EPC contractors with sufficient track record and volume of projects to gain the ‘learning by doing’ effect: these are certainly now emerging in Europe.

4. Duration is getting cheaper and cheaper.

The most important impact of this undoubted reality in Europe is in conjunction with PV: it’s now credible in some markets to consider battery storage with solar economically viable if there is sufficient duration to time-shift useful amounts of surplus solar into the evenings.

Also, network operators and regulators are starting to understand the potential benefits for avoiding or deferring reinforcement of grid bottlenecks, to meet peak demands; 2-4 hour duration will achieve this.

5. Behind-The-Meter solutions are utility solutions.

One distinction that can be made between US utilities and European network operators is that aggregated demand response appears to be treated seriously by more players in the US.  This awareness is naturally extending to include aggregated energy storage devices.  Europe appears to be lagging in implementation, which may be because there is a stronger distinction between energy suppliers, and network operators.

6. Storage is competitive with gas peaking plants today when permitting and fuel costs are considered over the project life.

This is harder to judge in Europe, as there is little new-build gas turbine activity to use as real-world evidence of true project costs.  It’s certainly true that battery storage won a reasonable fraction of the recent capacity market auction in the UK, in competition with thermal generation.

However, as well as cost, there’s another factor identified by Davion which has significant value in the European context: battery storage can be built fast.  Three to four months on site for 100 MWh is entirely feasible; in addition, battery storage is likely to gain consents and permits faster than gas peaking plants.  This, and its modular nature, make battery storage very flexible for project developers, and also for network operators running ancillary services markets.  It’s much easier to size the project to the requirement, with less need to make guesses about what the market will need when the project starts operating.  As European ancillary services markets become defined in terms of the needs, rather than what the conventional technology can do, this will become a substantial market.

The comparison against pumped-hydro storage is even stronger; even if it’s significantly cheaper per MWh of storage capacity, the long permitting and construction timescales mean more risk.  And you can’t easily increase the capacity next year if you want to.

As Davion concluded for the US, these factors indicate that battery storage markets in Europe will only get bigger. “The market can grow fast or it can grow faster; the latter will occur when project developers and energy project lenders take immediate action to build storage projects.”

If you’d like to learn more about DNV GL’s role in energy storage visit www.dnvgl.com/storage. For questions or comments you can contact our storage teams around the world at www.dnvgl.com/contact-storage.

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