Battery storage already competitive with fossil fuels – in the right circumstances: Report

A new report from US investment bank Lazard says battery storage is already competitive in some situations – particularly at the utility scale and in providing services such as frequency regulation that was previously the province of conventional fuels.

In its first report on energy storage, Lazard compares a range of technologies and how they might be applied to the energy system, ranging from “front of the meter” applications such as grid integration and services, to “behind the meter” applications such as micro-grids and rooftop solar.

Its principal finding is that some energy storage technologies are already cost-competitive with certain conventional alternatives in a number of specialised power grid uses. This includes grid stability and substituting for peaking gas plants.

The second finding is that because storage costs are expected to decrease significantly in the next five years, driven by increasing use of renewable energy generation, governmental and regulatory requirements, and the needs of an aging and changing power grid, then those cost-competitive applications will broaden quickly.

“Although in its formative stages, the energy storage industry appears to be at an inflection point, much like that experienced by the renewable energy industry around the time we created the LCOE study eight years ago,” said George Bilicic, vice chairman and global head of Lazard’s Power, Energy & Infrastructure Group.

Still, Lazard says that battery storage is not yet cost-competitive to the point where it can drive the “transformational scenarios envisioned by renewable energy advocates.” In that it refers to grid defection, pointing to the issue of battery life rather than capacity. But it may not be far away.

“Based on our analysis of storage technologies and our experience with LCOE, we expect to see rapid declines in the costs of energy storage,” Bilicic says.

It notes most of the near to intermediate cost declines are expected to occur as a result of manufacturing and engineering improvements in batteries, rather than in balance of system costs (e.g., power control systems or installation).

“Therefore, use case and technology combinations that are primarily battery-oriented and involve relatively smaller balance of system costs are likely to experience more rapid levelized cost declines.” Lazard says.

“As a result, some of the most “expensive” use cases today are most “levered” to rapidly decreasing battery capital costs.

© 2015 Solar Choice Pty Ltd

Giles Parkinson

Giles Parkinson regularly contributes unique content to Solar Choice News. Giles is the founder and editor of clean energy industry news service RenewEconomy. He is a journalist of 30 years experience, a former Business Editor and Deputy Editor of the Financial Review, a columnist for The Bulletin magazine and The Australian, and the founding editor of Climate Spectator.
Giles Parkinson