The real value of energy storage

Wednesday, 20 January, 2016

The World Energy Council has stated that a narrow focus on cost alone may be leading to misconceptions about the real value of energy storage. The report ‘E-storage — shifting from cost to value’, written by 23 experts from the World Energy Council Storage Knowledge Network, is calling for the true value of energy storage to be recognised by taking into account both its cost and revenue benefits.

The report looks at a number of storage costings across the technology spectrum to conclude that the widely used levelised cost of energy methodology is hindering the progress of energy storage. The analysis identifies the following problems with the methodology: arbitrariness, which does not allow for differences in application cases; and incompleteness, as only a limited account of revenue is taken.

“Too often the industry only talks about one half of the profit formula, namely cost,” said Christoph Frei, secretary general of the World Energy Council. “Policymakers should recognise the wide span of market places that can benefit from energy storage. These range from bringing down the cost of home solar systems, enabling the electric car industry to grow, helping electricity suppliers to manage problems when the grid goes down or there is grid overload to taking advantage of market price fluctuations and selling electricity across borders.

“To take full advantage of the growing wind and solar electricity shares, policymakers must review electricity market design so as to incentivise the build-up of storage capacity and ensure reliable and affordable electricity supply,” Frei added. In order to create the right policy environment, the report makes the following recommendations to policymakers:

  • Go beyond just costs — cheapest is not always best.
  • Examine storage through holistic case studies — generic cost estimates are not sufficient.
  • Work with operators and regulators to accelerate the development of flexible markets — often the full value of flexibility is not sufficiently recognised and monetised.
  • Establish supporting policies and an enabling regulatory framework to facilitate further commercial deployment of storage technologies.
  • Consider storage as a key component for grid expansion or extension.

The report also warns that the value of stored energy needs to be assessed on a case-by-case basis, with revenue streams varying over time and between countries as they are dependent on the market, policy regime and variability of competing resources.

The report estimates that with the many new technologies in the pipeline, storage costs of energy will fall by as much as 70% over the next 15 years. Solar storage will become more competitive as new battery technology drives prices down, while wind storage will become more attractive as technical advances enable the power generated by wind turbines to increase. While batteries are currently too expensive for large-scale use, improving technology is cutting costs, which means storage systems could replace some plants, avoid the need for new ones and reduce demand for oil.

The report can be found here.

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