Global Solar Storage Market: A Review Of 2015

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Japan and the U.S lead the world in battery storage implementation thus far. However, other countries are also increasing deployment, including Germany and China.

 

The current global data on deployed capacity often underestimates battery storage because they do not include decentralized installations, such as at households or commercial facilities.

 

The small size and private nature of these installations often do not show up in datasets. However, taken together they are significant and an important market opportunity. Small island battery storage is also not represented, though taken together these installations may be significant.

 

The primary drivers of battery installations in leading countries U.S, Japan, China and Germany are presented below. This creates an understanding of factors propelling the market in these countries, both now and in the near future. Although these countries have taken the lead, others will benefit from the technological advancements, know-how and cost decreases established by these first movers.

 

U.S.A.

 

The U.S.A is a market leader in battery storage implementation, though installations represent a small

fraction of overall system size. Growth has been driven by the country’s 2009 federal stimulus package, the American Recovery and Reinvestment Act (ARRA). It is also driven by regulatory changes helping to integrate and value services provided by battery storage. Other drivers are grid reliability issues in parts of the country, state-level storage mandates and renewable support programmes.

 

ARRA provided about USD 100 million for power sector battery storage projects. These were matched by private funds to make a total of USD 222 million towards battery storage implementation. This accounts for about 75 MW of battery storage projects, primarily for renewable energy integration and smart grid demonstration. The stimulus also encouraged the development of U.S EV manufacturing capabilities. It provided USD 2.4 billion for this purpose, a portion of which went to battery manufacturing capability.

 

In addition, constraints on generation and transmission capacity and the integration of variable renewable energy has created grid reliability issues. This has drawn attention to the need to level the regulatory playing field and compensate non-traditional flexibility measures for the benefits they provide. In 2007, the Federal Energy Regulatory Commission (FERC) passed Order 890. 

 

This required that applicable markets consider non-generation resources such as energy storage and demand response for ancillary and grid services. This opened the door for battery and other storage technologies to provide and get paid for grid services.

 

FERC has also taken a position on how these resources should be paid. In 2011, FERC 755 was issued, requiring wholesale markets to pay for the actual quantity and accuracy to the utility signal provided by a frequency regulation resource. The commission found compensation in most ancillary markets was not adequately set.

 

States and areas with relatively high penetration of renewable energy have demonstrated and funded battery storage to help integrate variable renewable energy. Texas, the U.S state with the largest wind generation capacity, has, for example, installed battery storage with large wind farms. This is used for smoothing.

 

Recent examples include the Duke Energy project at the Notrees wind farm in West Texas supported by ARRA and GE Durathon batteries in Mills County, Texas. Islands in the U.S such as Hawaii have also installed battery storage for renewable integration. This includes around 16 planned and operational projects for wind and PV integration with lithium-ion and lead-acid batteries. Some of these received ARRA funding. The government-run utility commission in Puerto Rico, the Puerto Rico Electric Power Authority, has recently mandated energy storage for renewable energy projects. It requires that individual projects have sufficient energy storage for smoothing 45% of the variable renewable energy resources’ maximum capacity. It also requires them to have sufficient energy storage to discharge in ten minutes or less for frequency response for 30% of the rated capacity.

 

California has the most ambitious plans for advanced energy storage in the U.S. It recently approved a requirement for utilities to procure 1.3  GW of primarily nonpumped hydropower storage. 

 

New York is another state moving aggressively to promote battery storage. It has created the New York Battery and Energy Storage Technology Consortium and is introducing incentives. These include a planned USD 2 100/KW battery storage incentive for 50% of the project cost for summer peak demand reduction.

 

Innovative financing models for storage in California include third-party leasing of solar and battery storage from SolarCity. This requires no upfront cost for the battery system (similar to Japanese company plans outlined below). After SolarCity and other private enterprises became frustrated with utility interconnection fees and time lag, the state energy commission stepped in to resolve the issues, largely in favour of companies like SolarCity. This demonstrates the important role local regulations play, even when policy seeks to promote battery storage. California’s mandate, renewable energy objectives, incentives and increasingly favourable economics will drive U.S battery storage implementation and innovation in the power sector in the near future.

 

Lithium-ion battery manufacturing is another notable development. This is traditionally concentrated in Asia with Samsung SDI, LG Chemicals, and Panasonic as major producers. Tesla Motors, an EV producer that uses lithium-ion batteries in its vehicles, is building a production facility in the American state of Nevada to produce 35 GWh of battery cells (equal to global li-ion cell production in 2013), and 50 GWh of battery packs by 2020. The batteries would be used primarily for the company’s EV fleet but could also be sold into the power sector and for consumer electronics. While predictions of widespread cost reductions are speculative, the plan illustrates a potential future model for battery innovation. It also shows the interaction between the automotive and power sector battery storage market segments. Establishing a manufacturing base of lithium-ion development in the U.S would also make this technology even more accessible.

 

There are many reasons the U.S will continue to be a leader in the implementation of battery storage. Drivers in the near future include increased variable renewable energy due to state renewable portfolio standards and regulations that value and pay for fast frequency response. Other drivers are the falling costs of solar PV power, increasing retail electricity rates and the cost and technological development of battery storage.

 

Japan

 

Battery development in Japan has centred on Tokyo Electric Power Company’s large sodium-sulphur installations.

 

Along with the rest of the electricity sector in Japan, this primary driver of battery storage has changed in recent years. The 2011 earthquake and subsequent tsunami resulted in a devastating nuclear reactor meltdown.

 

Subsequently Japan’s nuclear reactors have been shut down. It is unclear what portion of this capacity will come back online due to safety concerns and public resistance. In 2010, nuclear energy provided over 25% of electricity supply, and the country has limited natural resources.

 

These factors have motivated greater emphasis on renewable energy. This includes solar, geothermal, wind and biomass. These provide the majority of renewables in Japan at present. Renewables are incentivised through a FiT. This pays a high fixed price for renewable energy sources over a period of ten or 20 years. This incentive is currently around USD 0.37/kWh for solar PV panel installations of less than 10 kW. This compares to a household retail electricity price of around USD 0.21/kWh. This has spurred a rapid growth in solar PV, with 1.7 GW installed in 2012 to more than 10  GW at the end of 2014. Despite high FiTs, implementation of household battery storage has followed, fueled by a desire for security of electricity supply given the recent nuclear shutdown. Other motivating factors include government subsidies and the avoidance of high retail electricity prices by increasing solar self-consumption. In March 2014, Japan’s Ministry of Economy, Trade and Industry announced a lithium-ion battery subsidy programme worth USD 100 million, and the total volume of applications received has already exceeded the allocated budget before the end of 2014. Subsidy payouts are limited to around USD 10 000 for individuals and around USD 980 000 for businesses, and may cover up to two thirds of the costs. Subsidies available in 2013 prompted more than 100 MWh in household storage installation.

 

This is expected to increase in coming years. Additional subsidies include support for stand-alone renewable energy generation with batteries.

 

The total programme is worth just under USD300,000. The Ministry of Economy, Trade and Industry also grants subsidies for renewables with batteries in areas affected by earthquakes. The Ministry of Environment runs additional programmes to support batteries with renewable generation. In the hope of capturing the benefits of the trends described above, business innovation is further driving household battery storage implementation in Japan.

 

In September 2013, Japanese companies ORIX Corporation, NEC Corporation and EPCO Incorporated announced a joint venture called One Energy Corporation. This offers consumers with solar PV panels the ability to rent a NEC battery with 5.53 kWh capacity. They pay no initial cost but are charged around USD 30-5019 per month over ten years. This is subject to various conditions.

 

The consumer monitors energy consumption and battery output through a ’smart house’ app provided by the company and developed by EPCO. The venture offers to rent the rooftop of households without a solar PV panel. Subject to an initial fee, the company offers to install solar PV, making a monthly payment to the consumer if the roof’s shape, direction and electricity generation volume is favourable. Consumers in a household with a south-facing roof are expected to receive around USD 25 per month over a ten year period following the installation of a 4 kW PV panel. These customers may also rent a battery alongside this. The solar PV panel is used partly for the household’s self-consumption.

 

However, it seems the company expects to benefit from the country’s FiT tariff mechanism by selling exported electricity to the grid.

 

Storage at the grid level is also being explored for larger-scale renewable energy integration. Japan has

several isolated grids with insufficient transmission. Battery storage thus represents a valuable option for grid stability and renewable resource integration, and several projects are in place or under construction. For instance, a project in Rokkasho, northern Japan, combines a 51 MW wind farm with 34 MW sodium-sulphur battery.

 

This is primarily charged at night when demand is low.

 

Lithium-ion battery production is heavily concentrated in the region (Japan and South Korea), and Japan is home to the only provider of utility-scale sodiumsulphur batteries – NGK Insulators. This, along with increasing renewable energy, stability of electricity supply issues, island and off-grid scenarios, as well as government support, will continue to drive battery storage implementation in Japan.

 

Germany

 

Germany is a worldwide leader in renewable energy implementation. The country has a goal of 80% renewable electricity by 2050 according to the economic ministry and environment ministry in 2010. This has been incentivised by a FiT, which pays renewable generation a fixed price over 20 years. Several German nuclear reactors were shut down after the Japanese nuclear meltdown in 2011, and the rest are to be phased out by 2022. As in Japan, nuclear power had previously contributed about 25% of annual electricity production.

 

Germany has a highly interconnected transmission grid. At present levels of about 30% renewable energy penetration (mainly wind and solar), the system has faced very few reliability issues. Renewable energy is rarely curtailed, according to the federal energy network agency and competition authority in 2013.

 

As wind and solar power increase in penetration, and fossil fuel plants go offline, battery storage may become an important option for short and long-term supply fluctuations. This has prompted demonstration projects and research funding for battery storage implementation. A newly contracted 5 MW/ 5 MWh li-ion battery park from supplier Younicos will assist distribution grid WEMAG AG to manage frequency regulation and integrate wind power into their system in Schwering. Energiequelle and ENERCON are installing a 10 MW li-ion battery storage system to provide primary control and to assist the 100% renewable-energy sources town of Feldheim. Another hybrid li-ion and lead-acid 5 MW facility will be operational in 2015, and provide testing, demonstration and frequency balancing in the city of Aachen.

 

Nevertheless, the current drivers of battery storage complement solar PV implementation at the household level. Germany is a world leader in this area. In 2013, the country had the most solar PV capacity installed on a total and per capita basis. General economic trends support greater implementation of solar PV with battery storage in Germany in the near future. These include falling FiTs for solar PV generation (an opportunity cost for storage), rising retail rates for electricity consumed from the grid and decreasing battery costs. Storage allows greater self-consumption of solar PV power, avoiding retail electricity rates. 

 

A proposal now under consideration to tax electricity self-consumption would alter this formula, negatively affecting the economics of storage with solar PV power.

 

Battery subsidies are accelerating the trends listed above. From May 2013, the German government provides a grant of 30% of the battery cost. It also grants low interest loans for the balance for PV panels installed after 2012, according to German development bank KfW in 2013. Its aim is to encourage battery storage adoption with PV systems. In 2013, around 2700 installations were installed. By October 2014, around 6500 battery storage systems with solar PV had been installed as a result of the subsidy, with demand increasing by more than 30% in the last quarter of 2014.

 

Around 4000 systems have also been installed without governmental subsidy; 85% of the total volume of units installed were lead-acid batteries. This means that at the end of 2014 around 12% of solar PV systems were installed with a battery system, and many solar PV suppliers are now offering integrated systems. Eligible types include lithium-polymer, lithium titanate, lead-acid and lead-acid gel batteries.

 

Battery storage is generally not yet economic for new solar PV systems. However, rising retail prices, falling FiTs and decreasing battery costs supplemented by governmental support mean solar PV with battery storage will become increasingly financially attractive. For older solar PV systems unable to capture a FiT, batteries provide an economically attractive way to increase self-consumption and avoid high electricity charges. These now stand at about EUR 0.29/kWh. The consultancy firm UBS provides a range of LCOE estimates for solar PV and battery systems in Germany to 2020, as well as a discussion on current trends.

 

China

 

China is the world’s largest producer and consumer of energy and plays an important role in all global energy markets. Traditionally, growth and development in the power sector has focused on fossil fuels, especially coal. However, the focus has shifted. This is due to the continued growth in electricity demand, supply security concerns, increased attention on energy source diversification and environmental concerns. Natural gas, nuclear and renewables are now in the spotlight.

 

Spurred by a variety of financial and government programmes, China’s renewable energy capacity has grown exponentially in recent years. By the end of 2013, China had the highest installed wind capacity in the world and the second highest solar PV capacity.

 

Nevertheless, these sources still represent a relatively small percentage of the electricity sector – less than 3% of total production in 2013.

 

Lack of transmission infrastructure has already obstructed renewable energy integration. Total installed wind capacity was 75 GW in 2012. However, only 61 GW could be utilised. Given China’s declared goals, the emphasis is on additional transmission along with storage. This is because the country aims to increase wind capacity to 150 GW by 2020 and solar generation capacity to 70 GW by 2017.

 

This is from a baseline of 3 GW in 2012. According to Bloomberg New Energy Finance (BNEF), at least 180 MW of storage has been commissioned or announced in China.

 

The country is concentrating on lithium-ion technology, with 101 MW of storage capacity to come from

lithium-ion batteries and another 30 MW from flow battery technology. Installed projects include a 6 MWh lithium-ion-phosphate battery system in Zhangbei county provided by BYD Energy. This is part of the Golden Sun programme, which provides subsidies for up to 50% of total solar PV system cost in both urban and rural applications. 

 

Smart grid test projects are also in progress. The battery provides smoothing, peak shaving and frequency regulation in combination with 100 MW of wind power and 50 MW of solar. 

 

Grid restrictions (particularly in the North), increasing wind and solar generation as well as changing demand patterns will drive battery and other types of electricity storage in coming years. Renewables must be connected to demand centres, and the Chinese grid must be expanded and made more flexible. Battery storage will play a role in achieving this in the short to medium term.

 

India, Italy and South Korea

 

Other notable countries with huge potential for storage systems include India, Italy and South Korea.

 

India’s power system is growing by about 25 gigawatts (GW) per year, which is more than the total installed capacity in countries like Belgium or Austria.

 

Furthermore, India has ambitious plans to accelerate the deployment of solar energy from the initial 20GW planned for 2022 to more than 100GW, and already has problems to transmit wind power from wind-rich states like Tamil Nadu and Gujarat. Finally, India has ambitious plans to provide access to the 43% of households that are not connected yet through decentralized and distributed renewable power generation.

 

Battery storage is already popular in India with more than 100 million households using batteries as back-up in case of black-outs or load shedding. Furthermore, batteries provide an economical alternative to diesel generators that are used for rural electrification, power supply to telecom towers, and to provide power supply (UPS) to industries during load shedding or peak hours.

 

 

Excerpts From Latest Report Battery Storage For Renewables: Market Status And Technology Outlook © IRENA 2015.

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