2016 was the year when the poor relation of the clean energy sector came of age as capacity issues threatened to strangle the rapid growth of renewables
Renewables overtook coal as the biggest source of installed electricity capacity in 2016; Portugal ran entirely on renewable energy for four days in May; and almost half of the UK’s electricity came from clean sources in 2015.
At the same time, a growing roster of the world’s biggest companies – names such as Walmart, Apple, BMW, General Motors, Mars and Microsoft – have committed to procure 100% of their electricity from renewable sources, driving demand for clean energy across economies.
This abrupt advance of clean energy has caused huge dislocation in the power sector, with Germany’s two biggest utilities, RWE and Eon, both splitting in two and separating their renewable portfolios from their legacy fossil fuel and nuclear assets. Countries such as the UK, Finland, France and Canada announced this year that they will close all of their coal-fired power plants by 2030 or earlier.
Grid struggles with demand
But the renewable energy sector has expanded so rapidly that it is starting to become a victim of its own success. As we explored in our briefing on Germany’s Energiewende in September, grids are struggling to cope with the amount of solar and wind power at peak times and with its intermittency, which means back-up sources of energy are needed. On particularly sunny or windy days, Germany has to export power to neighbouring countries such as Poland and the Czech Republic, incurring huge cost for what is known as redispatch. According to Germany's transmission system operators, redispatch costs could rise to €4bn by 2020, when renewables are forecast to rise to a 35% share of the German grid.
In California, the phenomenon is known as the duck curve, because of the shape of the power demand graph, produced by having large amounts of solar capacity on the system at certain times of year. This happens particularly in the spring, when the weather is often cool (depressing demand for air conditioners) but intermittently sunny, while wind energy increases and the wet winter months mean hydro generation is at full capacity as well.
Large amounts of solar depress demand during the middle of the day, when the sun is at its strongest, but lead to a sharp spike in demand as the sun goes down and solar panels stop feeding energy into the grid. California has a renewable portfolio standard that calls for 50% of electricity to come from renewable sources by 2030, so the challenge is only going to increase.
It has long been known that the answer to this problem is energy storage, but for many years, storage was the poor relation of the clean energy sector. In part, this was because there simply was not enough renewable energy capacity for storage to be an issue, but it was also because storage costs were high and many people were unsure which storage technology to use. Options include batteries, flywheels, ultracapacitors, compressed air, and demand-side management.
Grids are struggling to acommodate the growth of wind (credit: Elexeneize)
However, 2016 is the year the sector came of age. Costs are falling rapidly and companies are becoming more aware of the possibilities of different storage technologies. Thanks to events such as the opening of Tesla’s Gigafactory lithium-ion battery factory, research firm IHS Markit said it expects the global energy storage market to more than double from 1.4GWh in 2015 to 2.9GWh in 2016, and reach 21GWh by 2025. It believes that 80% that increased storage capacity will be from lithium-ion batteries. “Energy storage is set to grow as fast as solar photovoltaic energy has in recent years,” said Marianne Boust, principal analyst at the firm.
The World Energy Council predicts that storage costs will fall by 70% in the next 15 years, while the Carbon Trust says energy storage could create system-wide savings of £2.4bn a year by 2030. It could also unlock £5bn of savings by optimising the use of generating capacity and reducing the need for new investments.
Meanwhile, the think tank Policy Exchange, in a recent report Power 2.0: Building a Smarter, Greener, Cheaper Electricity System, says developing a smarter, more flexible power system could save up to £8bn by 2030: the equivalent of up to £90 per household.
Storage brings value
Storage has multiple benefits, including reducing overall demand and thus the need to build new capacity, increasing the amount of renewable energy that can be accommodated on the system, and helping to integrate large numbers of electric vehicles. It can also increase the reliability and resilience of the network, improving security of supply. However, as the World Energy Council says: “Storage is often perceived as too expensive because of the way the calculations are done, which do not fully take into account the value it brings to certain situations.”
In addition, using the standard levelised cost of energy (LCOE) model fails to take into account that storage acts as both supply, when feeding power back into the grid, and demand, as when electric vehicles help to soak up surplus power on the grid. The WEC suggests that storage projects need to be considered individually rather than on the basis of generic cost estimates, but also that storage must be considered as a key component when planning for grid expansion or extension.
Coal has been overtaken by renewables (credit: Yelantsevv)
Regulators see the light
There are signs that this is starting to happen. In the US, the Federal Energy Regulatory Commission (FERC) has taken a major step towards making energy storage a mainstream market by calling on regional transmission operators (RTO) and independent system operators (ISO) to create frameworks to allow energy storage to be part of wholesale energy markets. Current regulations prohibit the use of energy storage unless operators explicitly make a business case for it.
The UK also appears to be seeing the benefits of storage. There has been a lot of concern in recent years at narrowing reserve margins as coal-fired power plants close, but when National Grid procured 201MW of battery storage for enhanced frequency response earlier this year, more than 1GW of capacity pre-qualified for the tender process.
UK Power Networks says its grid-scale battery system proved during a two-year trial in Bedfordshire that energy storage is commercially and technically viable and can play a key role in decarbonising the electricity system. Meanwhile, Centrica has launched a “virtual energy market” in Cornwall that will use a combination of storage and demand-side management to ease pressure on the grid from the county’s considerable wind and solar resources, one of a number of trials around the country. And as we reported in June, Sainsbury’s, Aggregate Industries, United Utilities and Tarmac became the first members of a new partnership led by NGO Forum for the Future called the Living Grid that aims to build a network of 20 firms that will contribute 200MW of flexible capacity to the National Grid by 2020 by agreeing to cut their demand for electricity at peak times.
Half of the UK's electricity came from clean sources in 2015 (credit: I Wei Huang)
There are also signs that the growth in the market is spurring innovation. Batteries are expected to make up the lion’s share of capacity in coming years, with carmakers Nissan and Daimler joining Tesla in expanding battery production. Tesla recently announced that it has powered an entire island in American Samoa with solar panels and its powerwall batteries, illustrating the potential to take entire communities off grid.
Other energy storage initiatives include plans by GE to create a project that combines wind power and pumped hydro storage; schemes to pump water or air into abandoned oil and gas wells; and initiatives that use gravity via mountain railways or ski lifts as a form of pumped storage. Then there are virtual energy storage projects run by companies such as Open Energi, which uses big data and advanced analytics to aggregate demand across thousands of facilities that can be switched on or off as the demands of the system dictates.
Chris Kimmett, commercial manager, says: “Open Energi has modelled flexibility in the UK’s energy use to reveal an estimated 6GW of flexible demand that could be invisibly shifted during peak periods to provide capacity when it is most needed.”
To those in the industry, the advantages of energy storage have been evident for years. Thanks to the advances the sector has made in 2016, companies and consumers throughout the economy should be reaping the benefits soon.
This is issue five in our top 10 issues that shaped sustainability in 2016. You can see the full list here.
coal renewables clean energy electricity wind turbines solar panels