Large, powerful batteries are going to be popping up in new places in coming years. They’ll be especially prevalent in the electric industry, as utilities and other companies use huge battery banks to help stabilize the electric grid and homeowners start pairing rooftop solar systems with batteries to store excess energy from the sun for nighttime use. Meanwhile, one company is essentially betting its future on being able to produce large batteries cheaply enough to power millions of electric cars.
Powering the Grid
2015 saw a big jump in the amount of battery storage capacity connected to the electric grid as power companies and big electricity buyers looked for ways to better balance electricity supply and demand. Large banks of batteries, some the size of truck trailers, can store excess energy when demand for power is low and then discharge it back to the grid when usage jumps.
Until recently, such systems were usually too costly to make economic sense. But the combination of falling battery costs and the shutdown of many older power plants that used to provide extra electricity during periods of high demand made 2015 a banner year for new grid-connected battery capacity, according to the Energy Storage Association, an industry trade group. What’s more, ESA projects that demand for such systems will be seven times as large in 2020 as it was last year. ESA Executive Director Matt Roberts is confident that the lithium-ion batteries the industry typically relies on are now cheap enough to make such systems economically competitive in many electricity markets. Think of storage as “a service, not a technology,” he says: A service that will become increasingly valuable to the grid operators who have to constantly keep power generation and electricity demand in balance.
For an example of how the economics of storage are changing, consider the village of Minster, Ohio, where the S&C Electric Co. recently worked with renewable energy firm Half Moon Ventures (HMV) to install a battery storage system capable of holding 3 megawatt-hours of energy, roughly equivalent to the power consumed by a thousand typical homes during one hour. The batteries work in tandem with a 4.2-megawatt solar farm owned by HMV, and they allow the village of Minster to lower its annual electricity costs, says Troy Miller, director of grid solutions at S&C. The system will let Minster avoid the “fairly significant demand charge” that grid operator PJM imposes on days when power demand is especially high, according to Miller. What’s more, it helps provide voltage regulation for the grid, a service for which PJM actually pays Minster. S&C sees future demand for similar installations in New England, California, Caribbean islands and other power markets.
And it’s not just big companies or local governments that will be turning to batteries. Homeowners with solar panels on their roofs will be as well. The amount of power generated from the sun is growing rapidly. But integrating all that newfound energy onto the electric grid is challenging, since peak power output tends to occur around noon, whereas peak power demand usually arrives in the late afternoon, when folks are coming home from work, turning up the air conditioner, etc. And while many states require electric utilities to buy surplus solar power from solar-equipped customers, whether the power company wants it or not, those rules are starting to get watered down as the number of solar-powered homes grows.
Hawaii figures to lead the way on small-scale battery storage to back up solar panels. A sunny state with lots of rooftop panels and no place to send surplus power during periods of high generation, the Aloha State could be the “canary in the coal mine” for the mounting supply-demand mismatch issue, says John Berdner, director of global regulatory compliance at solar tech firm Enphase Energy. Energy regulators in Hawaii recently cut back on the state’s “net metering” program, which requires utilities to purchase residential customers’ excess solar energy. Now, says Berdner, folks who install new solar systems will have a greater financial incentive to incorporate battery storage so they can supply more of their own electric needs, rather than pay for expensive power from the electric company when the sun isn’t shining. And with the cost of home-scale storage systems likely to decline by half over the next five years, Berdner expects battery storage to become increasingly cost competitive.
States in the Southwest will also see interest in solar-plus-storage pick up. Nevada, for instance, recently curbed its net metering program, meaning that solar customers will receive less money over time for the surplus power they sell back to the grid. Again, that tilts the economics in favor of storage, since reducing the amount of power a customer buys from the utility when the sun isn’t shining is now worth more than selling that same amount of power back to the grid at a reduced price.
Eventually, battery storage could be the key to resolving the fight between electric utilities and their solar-powered customers. Utilities understandably don’t want to pay full price for solar power that they don’t necessarily need, while solar customers understandably want to put that excess generation to good use. If more states follow the lead of Hawaii and Nevada in scaling back net metering, battery storage will become a viable way to make both utilities and their solar customers happy.
Enphase Energy’s Berdner likens the current standoff to a blackjack game in which the utility is the house dealer and solar-powered customers are playing against the house: In each hand, one side wins and the other loses. With sufficient battery capacity, the game could look more like poker, where many players participate and the house dealer merely facilitates the game while collecting a portion of each hand’s winnings. In that analogy, the utility would get paid not just for generating electricity but also for allowing solar-powered homes and businesses to sell their stored power to other customers across the utility’s power lines when demand was high. Think of such an arrangement as a “virtual power plant,” in which thousands of separate solar systems store energy and then discharge it en masse when it’s needed.
On the Road
Batteries also hold the promise to bring about significant change to the auto industry. Although electric vehicles and hybrids still make up a tiny share of the market, carmakers are hard at work on them for the simple reason that fuel economy regulations are getting tougher, and electrification offers one way to meet tighter standards.
No company is betting as heavily on batteries to propel future cars as is Tesla, the California upstart founded by tech billionaire Elon Musk. Up to now, the company has earned rave reviews – but not much profit – for building pricey, luxurious electric cars for well-heeled buyers. But with the unveiling of its “mainstream” Model 3 sedan this spring, Tesla is hoping to become a mass-market brand. To do that, it’ll need lots of low-cost lithium-ion battery packs, which don’t quite exist yet. So Tesla is building them itself, at a giant battery factory in the Nevada desert. The idea: Scale up production, drive down costs and sell a snazzy electric car at a price that more folks can afford. (Oh, and turn a profit doing it.)
Will it work? Tesla certainly seems to have a long road ahead of it. With gasoline prices low these days, buyers are snapping up SUVs and pickup trucks. Saving fuel isn’t the priority it was back when gas cost $3 or $4 per gallon. And Tesla is trying to do something no one has done before: Manufacture powerful lithium-ion batteries in huge quantities. What’s more, the company has a spotty track record of delivering new products on time–not a comforting history considering that hundreds of thousands of paying customers are waiting for their new Model 3.
But the company does have at least one potent advantage: Its devoted fan base. Edmunds.com Senior Analyst Jessica Caldwell notes that it will be at least a couple of years before many customers see their new Model 3, even though they’ve already plunked down $1,000 deposits. And yet “they don’t seem to mind,” based on her conversations with Tesla buyers. “People want to be part of the Tesla experience.”
Having loyal fans won’t help Tesla build batteries. But it probably will buy Tesla more time to build them. Caldwell believes that Model 3 production is likely to get delayed, possibly because of hiccups at Tesla’s battery plant. Still, she expects that its customers will largely remain patient and still pay up for the new car when it does come out. We’re inclined to agree. So while Tesla might take longer to drive a revolution in battery production than Musk intends, it’s still a decent bet to deliver in the long run.
Recycling: Costs and Opportunities
One aspect of the proliferation of large batteries that doesn’t get talked about much: What to do with them at the end of their lives. The recycling industry hasn’t traditionally seen many large lithium-ion cells, so it’s not geared up to reprocess them. Recycling them is complicated and potentially difficult, says Joe Acker, president of California-based Retriev Technologies. The industry has been dealing with lead-acid automotive batteries for decades and has largely perfected the process. But lithium-ion battery packs present unique challenges because they have more parts and come in many shapes and sizes.
But recycling lithium-ion batteries will pay off for some recyclers. That’s because they contain valuable materials, such as cobalt, and because many of the cells that come from, say, an electric vehicle, can be reused in other applications, such as storage for the electric grid. In eight to 10 years, says Acker, the battery packs going into today’s early electric vehicles will start showing up at recyclers, and companies such as Retriev stand to benefit from the increased business. And as users such as carmakers start to settle on standardized battery designs, the recycling process should get easier, he reckons.