We caught some of the latest updates from energy storage academics and technology developers during the Energy Storage Symposium at the Columbia University Lenfest Center for Sustainable Energy in New York City. Among the presenters was Dr. Jay Apt, an economist and the Director of Carnegie Mellon’s Electricity Industry Center, who shed light on the intricacies of energy storage economics. One of the key findings of his team was that capital cost of the chosen energy storage technology was the single most important metric for determining the economic viability of a project, and that marginal improvements in efficiency have an almost insignificant impact on project economics.
This conclusion lends further support to expectations that lithium-ion batteries for grid storage will lose market share in the mid- to long term to cheaper technologies such as molten salt and flow batteries as lower-priced technologies become commercially available (see the Lux Research Report “Grid Storage Under the Microscope.” Client registration required).
Cost continues to be the most important barrier to widespread grid storage market penetration, providing opportunities for financial institutions and technology developers to develop creative mechanisms for financing distributed commercial and residential projects (Client registration required). One example of such a mechanism is illustrated by Prudent Energy’s (Client registration required) recently commissioned 600 kilowatt, 3.6 megawatt-hour vanadium redox battery at the Gills’ Onions food processing facility. For this project, Prudent Energy retains ownership over the battery and equipment, while sharing with Gills the cost saving benefits that result from peak shaving and demand charge reduction.
Peak shaving and demand charge applications are among the most cost-effective in several of the unregulated markets in the U.S., despite the highly anticipated impact of the pay-for-performance ruling on ancillary service rates (Client registration required). Demand management is, and will remain, the low-cost option for ancillary services in the near- to mid-term, especially compared to storage. Dr. Apt was keen to point out that demand management shows increased potential in unregulated markets in the U.S. and at cooperative utilities, but that privately owned vertically integrated utilities have little taste or patience for demand response projects because the economics do not benefit them. We took a deeper dive into the economics of demand response around the world last week when we moderated a panel, “DR Around the Globe,” with representatives from Japan, Korea, and China at Connectivity Week in Santa Clara, California.