An important factor to take into account when assessing storage projects is the high cost of installing new or expanded high voltage or low voltage transmission lines. It isn't just the construction cost but the planning and land acquisition costs. This pushes utilities, regulators and governments to look for cheaper and, in some cases, more politically palatable options.
Energy storage costs need to continue to drop in order to compete head to head with these alternatives. Some experts expect the costs for battery storage to decline as dramatically as they did for solar panels, but whether this becomes a reality remains to be seen.
Many storage technologies and applications are already economically viable and operational in various jurisdictions. Examples include regions with a high penetration of renewable energy or network adequacy issues. Battery storage has been the most topical of storage technologies in the last year, especially for behind the meter applications and arbitrage or ancillary services application.
The combination of renewable energy projects combined with (battery) storage technologies is promising around the world, as energy storage enables the project developer to ‘internally hedge’ the risk of curtailment or low or even negative power prices in times of abundant supply or network restraints. For renewable projects in remote, off grid areas or microgrid scenarios, storage is being seen as a necessary feature in order to deliver stable and reliable supplies of electricity.
For various States in the US, for example in California, targets are ambitious and part of wide-scale grid modernisation efforts. For markets where incentive schemes for the installation behind the meter battery storage is combined with high network tariffs or demand charges, new service providers are offering shared savings and energy efficiency agreements. By managing electricity off take and storage, the goal is reduce total energy costs for both households and businesses alike.
In Europe, the ancillary services market is growing, with network operators contracting for frequency control services through public tenders. In the UK there was a number of successful project financings for STOR (Short Term Operating Reserve) projects. These were small scale flexible generation projects, which received a capacity payment under a long term arrangement with the transmission operator. This type of structure is very easy to project finance, particularly if there is low technology and operational risk. The National Grid's current tender for frequency response has seen intense interest from battery suppliers and developers and is likely to lead to project finance solutions.
Large scale onshore pumped hydropower projects are often subject to various spatial and environmental concerns, but detailed studies have been conducted in, for example, Belgium and the Netherlands to assess the viability of large scale offshore pumped hydro facilities. Such ‘energy islands’, combining storage and large offshore wind developments with climate adaptation and coastal protection projects offer a serious alternative for large scale onshore projects, especially in densely populated countries. Onshore this may also be a viable option for countries with large hydropower capacity, for example Norway, where a consortium including Statkraft has recently announced the construction of the largest onshore wind farm in the world, with a capacity of 1000 MW. One new concept is using abandoned mines for pumped hydro. Why spend millions drilling holes in hills and creating reservoirs for pumped storage when there already is a useable "hole" which may have existing shafts which can contain different bodies of water? One of the leading projects globaly is the Kidston pumped storage project in Australia which is being developed by Genex Power in an historic gold mine.