As the world transitions to a low-carbon future, renewable energy sources such as wind and solar are becoming more prevalent and affordable. However, these sources are also intermittent and variable, meaning they do not always match the demand and supply of electricity. To overcome this challenge, energy storage systems are needed to balance the grid and ensure reliability and security.
Energy storage systems can be classified into two categories: short term and long term. Short term energy storage (STS) refers to systems that can store and discharge energy within minutes or hours, such as batteries, flywheels, and supercapacitors. Long term energy storage (LTS) refers to systems that can store and discharge energy over days, weeks, months, or even years, such as pumped hydro, compressed air, hydrogen, and synthetic fuels.
LTS technologies have the potential to provide multiple benefits for the energy system, such as:
- Enhancing the integration and utilization of renewable energy sources
- Reducing the need for fossil fuel backup generation and transmission capacity
- Providing ancillary services such as frequency and voltage regulation, spinning reserve, and black start
- Improving the resilience and flexibility of the grid in the face of extreme weather events, cyberattacks, and natural disasters
- Supporting the decarbonization of other sectors such as transportation, industry, and heating
However, LTS technologies also face significant challenges, such as:
- High capital and operational costs
- Low round-trip efficiency and energy density
- Long payback periods and uncertain returns on investment
- Technical and environmental risks and uncertainties
- Regulatory and policy barriers and gaps
In this blog, we will explore the different types of LTS technologies, their market potential and outlook, and the policy and regulatory frameworks and incentives for their development and innovation.
Types of LTS technologies
LTS technologies can be categorized into four groups based on the form of energy they store: mechanical, thermal, electrochemical, and chemical. Each group has its own characteristics, advantages, and disadvantages, as well as some examples of existing or emerging projects around the world.
Mechanical LTS technologies
Mechanical LTS technologies store energy in the form of kinetic or potential energy, which can be converted back to electricity when needed. The most common and mature mechanical LTS technology is pumped hydro energy storage (PHES), which uses excess electricity to pump water from a lower reservoir to a higher one, and releases it back through a turbine to generate electricity when demand is high. PHES accounts for more than 90% of the global installed energy storage capacity, with over 160 GW of operational projects. PHES has high scalability, reliability, and durability, as well as low operational costs and emissions. However, PHES also has high capital costs, long construction times, and limited site availability, as well as environmental and social impacts such as land use, water consumption, and displacement of local communities.
Another mechanical LTS technology is compressed air energy storage (CAES), which uses excess electricity to compress air and store it in underground caverns, tanks, or pipelines, and releases it back through a turbine to generate electricity when demand is high. CAES has lower capital costs and site constraints than PHES, as well as higher energy density and efficiency. However, CAES also has lower scalability and reliability than PHES, as well as higher operational costs and emissions, as it requires natural gas or other fuels to heat the air before expansion. There are only two operational CAES projects in the world, one in Germany and one in the US, with a combined capacity of 440 MW. Several new CAES projects are under development or planning, such as the 300 MW Apex project in Utah, the 50 MW Hydrostor project in Australia, and the 317 MW Highview project in the UK.
Electrochemical LTS technologies
Electrochemical LTS technologies store energy in the form of electrical charge, which can be converted back to electricity when needed. The most common and mature electrochemical LTS technology is batteries, which use chemical reactions to store and release energy. Batteries have high energy density, efficiency, and scalability, as well as low operational costs and emissions. However, batteries also have high capital costs, limited lifespan and durability, and environmental and safety risks such as resource depletion, recycling, and fire hazards. Batteries are widely used for STS applications, such as electric vehicles, grid services, and distributed generation. However, batteries are also being explored for LTS applications, such as seasonal storage, remote area power supply, and microgrids. Some examples of battery LTS projects are the 300 MW/1200 MWh Moss Landing project in California, the 100 MW/400 MWh Hornsdale project in Australia, and the 50 MW/250 MWh Escondido project in Mexico.
Another electrochemical LTS technology is flow batteries, which use liquid electrolytes to store and release energy. Flow batteries have lower energy density, efficiency, and scalability than batteries, but higher lifespan and durability, as well as lower capital costs and environmental and safety risks. Flow batteries are suitable for LTS applications that require long duration and high power output, such as peak shaving, load leveling, and renewable integration. Some examples of flow battery LTS projects are the 200 MW/800 MWh Rongke project in China, the 15 MW/60 MWh Sumitomo project in Japan, and the 2 MW/8 MWh UniEnergy project in Washington.
Chemical LTS technologies
Chemical LTS technologies store energy in the form of chemical bonds, which can be converted back to electricity or other forms of energy when needed. The most common and promising chemical LTS technology is hydrogen, which can be produced from water electrolysis using excess electricity, and stored in tanks, pipelines, or underground formations. Hydrogen can be used to generate electricity via fuel cells or turbines, or to power other sectors such as transportation, industry, and heating. Hydrogen has high energy density and versatility, as well as zero emissions at the point of use. However, hydrogen also has high capital and operational costs, low round-trip efficiency and scalability, and technical and safety challenges such as leakage, embrittlement, and explosion. Hydrogen is expected to play a key role in the decarbonization of the energy system, especially for hard-to-abate sectors and regions. Some examples of hydrogen LTS projects are the 10 MW/100 MWh HyBalance project in Denmark, the 5 MW/5 MWh H2FUTURE project in Austria, and the 1.5 MW/1.5 MWh Power-to-Gas project in Germany.
Another chemical LTS technology is synthetic fuels, which are derived from hydrogen and carbon dioxide, such as methane, methanol, ammonia, and dimethyl ether. Synthetic fuels have similar characteristics, benefits, and challenges as hydrogen, but with higher energy density and compatibility with existing infrastructure and applications. Synthetic fuels can be used to generate electricity or to power other sectors such as transportation, industry, and heating. Synthetic fuels can also reduce the emissions and dependence on fossil fuels, as well as create new markets and opportunities for renewable energy. Some examples of synthetic fuel LTS projects are the 6 MW/6 MWh STORE&GO project in Italy, the 2 MW/2 MWh ETOGAS project in Germany, and the 1 MW/1 MWh SOLETAIR project in Finland.
Market potential and outlook of LTS
The market potential and outlook of LTS depend on various factors, such as the demand and supply of electricity, the penetration and variability of renewable energy sources, the cost and performance of LTS technologies, and the policy and regulatory frameworks and incentives for LTS development and innovation.
According to a recent report by BloombergNEF, the global energy storage market is expected to grow from 9 GW/17 GWh in 2018 to 1,095 GW/2,850 GWh in 2040, with a cumulative investment of $662 billion. The report estimates that STS will account for 85% of the installed capacity and 80% of the investment, while LTS will account for 15% of the installed capacity and 20% of the investment. The report also projects that the levelized cost of storage (LCOS) for LTS technologies will decline by 40-80% by 2040, depending on the technology and application.
The report identifies four key drivers for LTS deployment and adoption:
- The increasing share and variability of renewable energy sources, which create a need for long duration and seasonal storage to balance the grid and ensure reliability and security
- The decreasing cost and improving performance of LTS technologies, which make them more competitive and attractive for various applications and markets
- The increasing demand and value of flexibility and resilience in the energy system, which create new opportunities and revenue streams for LTS technologies and services
- The supportive policy and regulatory frameworks and incentives for LTS development and innovation, which reduce the barriers and risks and increase the benefits and rewards for LTS stakeholders and participants
However, the report also identifies four key barriers for LTS deployment and adoption:
- The high capital and operational costs and low round-trip efficiency and scalability of LTS technologies, which limit their economic viability and feasibility for various applications and markets
- The technical and environmental risks and uncertainties of LTS technologies, which affect their performance, safety, and sustainability
- The long payback periods and uncertain returns on investment of LTS projects, which deter the financing and funding from public and private sources
- The regulatory and policy gaps and challenges for LTS development and innovation, which create market distortions, misalignments, and disincentives for LTS stakeholders and participants
Policy and regulatory frameworks and incentives for LTS development and innovation
Policy and regulatory frameworks and incentives are crucial for the development and innovation of LTS, as they can influence the demand and supply, the cost and performance, and the risk and reward of LTS technologies, projects, and services. Policy and regulatory frameworks and incentives can be categorized into four types: targets and mandates, subsidies and grants, markets and tariffs, and standards and codes.
Targets and mandates
Targets and mandates are policy instruments that set specific goals or requirements for the deployment and adoption of LTS, such as capacity, generation, or emission targets or mandates. Targets and mandates can create a clear and stable signal and direction for LTS stakeholders and participants, as well as drive the demand and supply of LTS technologies, projects, and services. However, targets and mandates can also create market distortions, misalignments, and disincentives for LTS stakeholders and participants, as well as increase the cost and complexity of LTS implementation and compliance. Some examples of targets and mandates for LTS are the California Energy Storage Mandate, which requires the state’s three investor-owned utilities to procure 1.3 GW of energy storage by 2020, and the European Union Clean Energy Package, which sets a binding target of 32% renewable energy share by 2030.
Subsidies and grants
Subsidies and grants are policy instruments that provide financial support or incentives for the development and innovation of LTS, such as research and development, demonstration and deployment, or operation and maintenance subsidies or grants. Subsidies and grants can reduce the capital and operational costs and risks and increase the benefits and rewards for LTS stakeholders and participants, as well as accelerate the learning curve and cost reduction of LTS technologies, projects, and services. However, subsidies and grants can also create market distortions, misalignments, and disincentives for LTS stakeholders and participants, as well as increase the fiscal burden and opportunity cost of LTS funding and allocation. Some examples of subsidies and grants for LTS are the US Department of Energy’s Energy Storage Program, which provides $185 million for LTS research and development, and the Australian Renewable Energy Agency’s Advancing Renewables Program, which provides $70 million for LTS demonstration and deployment.
Markets and tariffs
Markets and tariffs are policy instruments that create or enable market mechanisms or signals for the valuation and compensation of LTS, such as capacity, energy, or ancillary service markets or tariffs. Markets and tariffs can reflect the true value and cost of LTS technologies, projects, and services, as well as create new opportunities and revenue streams for LTS stakeholders and participants. However, markets and tariffs can also create market distortions, misalignments, and disincentives for LTS stakeholders and participants, as well as increase the uncertainty and complexity of LTS participation and integration. Some examples of markets and tariffs for LTS are the UK Capacity Market, which provides payments for LTS to ensure security of supply, and the German Feed-in Premium, which provides payments for LTS to support renewable integration.
Standards and codes
Standards and codes are policy instruments that establish or enforce technical or environmental rules or guidelines for the design and operation of LTS, such as safety, performance, or quality standards or codes. Standards and codes can ensure the reliability, security, and sustainability of LTS technologies, projects, and services, as well as create a level playing field and trust for LTS stakeholders and participants. However, standards and codes can also create market distortions, misalignments, and disincentives for LTS stakeholders and participants, as well as increase the cost and complexity of LTS implementation and compliance. Some examples of standards and codes for LTS are the IEEE 1547 Standard for Interconnection and Interoperability of Distributed Energy Resources with Associated Electric Power Systems Interfaces, which defines the technical requirements for LTS interconnection and operation, and the ISO 14001 Environmental Management System, which defines the environmental requirements for LTS management and improvement.
Conclusion
In conclusion, LTS is a key enabler for the transition to a low-carbon and resilient energy system. LTS technologies can provide multiple benefits for the grid and other sectors, such as enhancing the integration and utilization of renewable energy sources, reducing the need for fossil fuel backup generation and transmission capacity, providing ancillary services, improving the resilience and flexibility of the grid, and supporting the decarbonization of other sectors. However, LTS technologies also face significant challenges, such as high capital and operational costs, low round-trip efficiency and energy density, long payback periods and uncertain returns on investment, technical and environmental risks and uncertainties, and regulatory and policy barriers and gaps.
To overcome these challenges and unlock the potential of LTS, policy and regulatory frameworks and incentives are crucial, as they can influence the demand and supply, the cost and performance, and the risk and reward of LTS technologies, projects, and services. Policy and regulatory frameworks and incentives can be categorized into four types: targets and mandates, subsidies and grants, markets and tariffs, and standards and codes. Each type has its own advantages and disadvantages, as well as implications and impacts for LTS stakeholders and participants.
Therefore, it is important to design and implement policy and regulatory frameworks and incentives that are coherent, consistent, and comprehensive, as well as adaptive, flexible, and responsive, to address the specific needs and characteristics of LTS technologies, projects, and services, as well as the dynamic and complex nature of the energy system. By doing so, policy and regulatory frameworks and incentives can create a conducive and supportive environment for the development and innovation of LTS, as well as foster a fair and competitive market for the valuation and compensation of LTS.