Global: Three dimensions of adjustment to the new reality
COVID-19 has gone far beyond creating a temporary crisis.
Hybrid projects combining battery storage with solar photovoltaic (PV) are continuing to grow in popularity in developed markets due to their ability to maximize renewable energy; storing excess energy generated that can then be utilized at a later time. We have already seen a rise in battery storage and solar PV hybrid technology in Sub-Saharan Africa on off-grid, mini-grid and captive projects, and solar PV and battery grid connected projects are now being developed. It is clear there is potential for the deployment of battery storage to work in conjunction with renewable penetration in Africa, heightened by the continuing decrease in the price of battery technology, but there are several challenges to its adoption on a large scale.
Issues may arise when determining the appropriate remuneration of battery storage and solar PV projects. The monetization of African independent power projects (IPPs) will usually be specified in the power purchase agreement (PPA), not by reference to a market index or regulatory formula. Revenue models will be heavily analyzed by lenders and a conflict may arise between developers and project financiers in monetizing the ancillary services that a battery is capable of providing. We anticipate that the first PV and battery storage projects to reach financial close will have conservative pricing structures.
A lack of policy and regulation around battery storage in Sub-Saharan Africa means that the project documentation must carefully deal with change in law risk. Licensing in Africa is separated strictly between generation, supply, transmission and distribution, which will inevitably cause complications when considering how to regulate and license battery storage. For this reason, as battery storage and solar PV plants come online before energy policy fully encompasses battery storage, there is a risk of retrospective regulation in Africa (as we have seen in other jurisdictions globally as regulators grapple with this technology). Similar concerns are borne out of the fact that battery storage is a relatively new and multifaceted technology, and all public sector stakeholders in the relevant jurisdiction must understand and be comfortable with it.
Despite these challenges, the benefits of battery storage in an African context are clear. It is quick to be deployed, responds to grid demand in milliseconds and improves the quality of the grid, which is key in Africa where grid systems are often fragile and weather patterns unpredictable. When combined with solar PV, it is capable of smoothing the generation output of the PV plant and mitigating against forecasting errors.
A total of 1.4GW/2.3GWh of energy storage capacity was installed in 2017, which is forecast to rise to 8.6GW/21.6GWh by 2022 according to a report published by GTM. Although the research focuses on the energy storage market globally, particular attention is paid to Australia, the USA, China, the UK, Germany and South Korea which are seen to be key markets. The USA is likely to remain the world’s biggest market for energy storage until 2022, with China its closest rival.
A study into the strategy and execution of lithium-ion battery providers in the utility-scale energy storage industry has identified the market leaders in this area. Navigant Research based its rankings on selected criteria such as geographic reach, pricing and staying power and selected only those that manufacture their own battery cells, not outsource them to external manufacturers. Korean companies LG Chem and Samsung SDI were placed top of the leader board, with BYD, Panasonic, Toshiba, Kokam, Saft and Leclanche labelled as contenders, falling into the category below.
GE has announced plans to build an energy storage platform named the Reservoir which already has a pre-launch commitment of 20MW/80MWh. The Reservoir platform is reported to allow for the utilization of cleaner more reliable power and provides a cost-effective solution for distribution and storage. Its Reservoir Storage Unit, a modular system totaling 1.2MW/4MWh and the building block of the Reservoir, is a scalable platform, which is combined with GE’s Blade Protection Unit extending battery life by up to 15 per cent.
Designed to minimize carbon dioxide emissions and help ensure continuity of power, Siemens lithium-ion battery-based solution BlueVault, is applicable to offshore oil and gas assets as well as offshore wind farms. The company will open a fully robotized and digitalized plant in Norway that will develop and manufacture energy storage technologies for both marine and offshore oil and gas applications.
BP is to invest US $20 million in a lithium-ion technology by StoreDot, a developer of ultra-fast charging for batteries for electric vehicles. The so-called flash batteries could help drive large scale adoption of electric vehicles as the technology has the potential to recharge a car battery in the length of time it takes to refill a gas tank. The batteries will be installed into mobile devices in early 2019 and, with the help of BP’s investment, into vehicles shortly after.
Siemens Gamesa and start-up Stiesdal Storage Technologies are simultaneously developing a low-cost thermal energy storage system with the purpose of eliminating the variability of wind and solar. The technology utilizes excess renewable energy to heat crushed volcanic rocks, and when energy is required, the heat is converted back into electricity and delivered to the grid. Siemens Gamesa are in the process of building a 1.5MW demonstration project which will be located near Hamburg, Germany and Stiesdal plan to construct a 5MW/120MWh pilot plant, located in Denmark, in 2019.
Battery vendor Sonnen has joined the NEMoGrid project which focuses on peer-to-peer electricity trading and the stability of local distribution grids, specifically evaluating three business models: centralized utility management, decentralized voltage and power-based tariffs, and a peer-to-peer market using the Ethereum blockchain. The market for residential storage is growing and the use of blockchain combined with battery storage technologies is an innovative solution that will provide residential participants and distribution grid operators with a single distributed ledger of all energy transactions.
At a workshop held in Abuja, attendees raised concerns about the reportedly 110,000 tons of used lead acid batteries (ULABs) generated annually in Nigeria, and the small number of these ULABs which are properly recycled. These batteries are largely produced by the automotive and renewables sectors and, with recent interest in investment in the Nigerian renewables sector, concerns have been raised about how ULABs should be managed in order to minimize risks to the environment and public health.
Sterling and Wilson, an engineering, procurement and construction (EPC) firm, has won a tender for the design, EPC, operation and maintenance of a captive, hybrid, micro-grid powered by solar, diesel and battery storage in West Africa (the location of the micro-grid has yet to be disclosed). Sterling and Wilson will install 30MWh of energy storage across three sites including a single battery installation of 17MWh. The energy stored will be used mainly by behind-the-meter customers in the education sector with the aim of providing autonomy and efficiency to these stakeholders.
Fluence, a Siemens and AES company, will work with Lyons Group, a Brisbane-based renewables developer, and JERA, a joint venture of the Japanese power utilities Tokyo Electric Power and Chubu Electric Power, on utility-scale energy storage development and investment opportunities in Asia Pacific markets. Lyons will be the project developer, JERA an investor, and Fluence the energy storage solution and service provider. The group plans to start with solar-plus-storage projects in Australia.
A new report by the Australian Energy Market Operator (AEMO) has praised the Hornsdale Power Reserve Battery Energy Storage System (HPR) for being smarter and faster than conventional generators. Graphs contained in the report highlight how the HPR was capable of providing a more accurate and faster response to contingency events compared to conventional gas and steam turbines. Tesla teamed up with French renewable energy provider Neoen to connect the battery to their Hornsdale wind farm. Tesla was retained by the South Australian government to help the state combat extreme weather conditions that damaged key energy infrastructure resulting in prolonged state-wide blackouts.
Brooklyn-based LO3 Energy will develop a virtual micro-grid consisting of solar PV, battery storage and demand response technologies in the Latrobe Valley, Victoria. The Australian Renewable Energy Agency said the trial was the first step in transitioning the agricultural region - near the state’s coal-fired power stations - to renewable power. The trial will provide farmers with loans to build solar installations and allow the farmers to profit from trading their own excess generation.
Conergy’s Aus $42.5 million (US $33.6 million) Lakeland Solar and Storage project has begun providing power to 3,000 homes and businesses in far North Queensland. The project combines a 10.8MW (AC) solar farm with a 1.4MW/5.3MWh lithium-ion battery. The project will serve as a test case for deliberate ‘islanding’, where a section of the grid continues to provide power while disconnected from the main grid. The test will be conducted on the remote town of Lakeland, which will be solely powered by solar and batteries for several hours at a time as a form of protection against blackouts.
South Korea’s Doosan Heavy Industries will install a 70MWh standalone energy storage system at its own facilities in Changwon, as well as a smaller battery installation co-located with solar PV. Doosan has signed a contract with SK E&S, a Korean energy developer and supplier, for an energy storage system facility to deal with onsite power demand management to reduce the facility’s use of grid electricity during peak times. Doosan is supplying the storage system, while SK E&S is handling investment and operation for the project, scheduled for completion in September 2018.
Taiwan’s Penghu Chimei smart micro-grid is now operational. The micro-grid includes a solar PV system, which supplies usable power, as well as an energy storage system. At its present size, the micro-grid is expected to save the island approximately NT $5 million a year (US $167,000), which would otherwise be spent using and maintaining diesel generators. Next year the Taiwan Power Company will add wind power facilities to the smart grid and expand the capacity of the PV and energy storage systems.
Gore Street, the world’s first listed investment fund to focus solely on energy storage, recently announced that it will float in London. The fund aims to raise £100 million and is targeting a 7 per cent yield of the fund’s net asset value after one year. The fund will focus its investments on facilities of lithium-ion batteries, and will acquire three seed assets at cost.
EDF announced plans to invest €8 billion in deploying 10GW of new energy storage projects by 2035, in addition to its 5GW existing storage portfolio. Projects will focus on the residential sector in France and Europe. At least three battery projects are intended to launch in the next year. EDF will also expand in Africa with plans to begin extending services via off-grid solar panels and batteries in Ghana within the next 12 months.
Engie recently announced it had reached an agreement to acquire a majority stake in Electro Power Systems (EPS), a French energy storage and micro-grid company. Engie will continue to list EPS shares. The EPS acquisition is the last phase in Engie’s three-year US $12.5 billion investment plan. Engie plans to spend 2018 focusing on consolidation of its recent acquisitions.
Acciona received the first ever prototype DNV GL certificate for a grid-scale energy storage solution for its storage plant in Barasoain (Spain), comprising one fast-response battery of 1MW/0.39MWh (capable of maintaining 1MW of power for 20 minutes) and another slower-response battery with greater autonomy (0.7MW/0.7MWh, maintaining 0.7MW for 1 hour), connected to a 3MW wind turbine. Certification of the Barasoain plant was carried out in line with the GRIDSTOR Recommended Practice.
Enel has joined forces with local wind developer Enertrag and Swiss energy storage solutions company Leclanché to build a hybrid 22MW battery storage project at Cremzow in Germany. The project is intended to provide grid stabilization services through primary frequency regulation to Germany’s Primary Control Reserve market. The first phase of the project was scheduled to be operational in April 2018, with plans for final commissioning by the end of the year.
Enco and Japan’s Mitsubishi Corp completed their 48MW/50MWh battery on 31 May 2018. Located in Jardelund, Germany, the facility named EnspireME is made up of around 10,000 lithium-ion batteries and will provide reserve capacity to the European grid operators.
Nissan, in its new venture Nissan Energy Solar, will join Tesla and Daimler in the energy storage market. On a normal day, Nissan is reported to have shown its solar panels and battery packs store more energy than the daily consumption needs of a regular household, allowing energy to be stored and used in unfavorable weather conditions. Sales will be limited to the UK, with plans for expansion into other European countries in future.
First Solar has partnered with Arizona Public Service (APS) to create a 50MW battery system charged by the output from a 65MW solar PV plant. The megawatt-scale battery system, which is the first in Arizona, will be deployed to meet peak demand during evening hours. This partnership is in line with First Solar’s prior play into the energy storage space through its 2015 investment in Younicos, an energy storage developer. Future storage deployment targets include 500MW over 15 years for APS specifically and, potentially, 3,000MW by 2030 for the state of Arizona.
British Petroleum (BP) has partnered with Tesla to build a battery storage project at Titan I, a BP-owned wind farm in South Dakota, USA. The Tesla Powerpack being installed is a small one (212kW/840kWh) and will be an opportunity to improve battery storage technologies for future use at BP’s other wind and solar farms. BP estimates a 6 per cent increase worldwide in the demand for renewable energy by 2035. BP has installed 13 wind farms in the USA totaling over 2GW and has invested over US $300 million into solar energy in 2017.
Origis Energy, a solar and storage developer, Sungrow, a PV inverter manufacturer, and Greensmith Energy, an energy storage system integrator, are developing a 1MW rooftop solar and 1MW/2MWh battery storage system for a community solar-plus-storage project in Massachusetts, the first of its kind for the state. Utility provider Sterling Municipal Light Department has signed a long-term power purchase agreement to buy solar power and storage services from the project. The project will help Massachusetts achieve its goal of 200MWh of energy storage by 2020.
Growing Energy Labs Inc. (Geli) aims continue positioning its energy battery control software as an operating system for commercial, industrial, residential, and grid energy storage management through the US $5.5 million it has raised. The company currently operates in U.S., New Zealand, and Australia and hopes to enter new markets such as Japan while expanding its relationships with its equipment manufacturing partners, such as NEXTracker. By offering its on-line energy storage design software for free, which connects to Geli's run-time automation, Geli has attracted about 1,500 developers to use it in projects, some of which may soon be secured.
Abu Dhabi-based energy firm Masdar and state-run utility Costa Rican Electricity Institute have signed a memorandum of understanding to share technical knowledge and project experience for renewable energy development, including floating solar PV technology, smart cities technology and battery storage. The two companies also hope to offer advisory services to other Latin American and Caribbean countries on energy diversification. Meanwhile Masdar is supporting the deployment of the US $50 million UAE-Caribbean Renewable Energy Fund, which will deploy projects in 16 countries over the next three years. This year, the fund will complete solar PV installations, battery storage and electric vehicle charging stations in the Bahamas, Barbados and St Vincent and the Grenadines.
Brazilian renewable energy firm CPFL Energía SA will invest US $20 million into three research and development projects that will analyze the impact of storage on the quality and reliability of energy supply. The research will focus on how batteries can optimize the production of electricity from renewables, defer the need for investments in transmission lines and provide voltage support to the distribution system.
Eskom, the South African energy utility, has issued a request for information to identify energy storage technologies. The scope of the request for information is wide; Eskom is seeking information regarding industry stakeholders and current and available technologies. The information collected will be used to inform strategies for the effective implementation of energy storage technology as part of Eskom’s wider strategy to integrate more renewable energy into the South African grid. Eskom has recently concluded power purchase agreements for 2.3GW of renewable energy and energy storage could be a feature of future operations.
The Government of Lebanon has requested expressions of interest for three solar PV projects with co-located energy storage capacity, indicating a change in approach to private investment in the national energy sector. A total of 210MWp to 300MWp is sought across the three projects. Interested developers will need to secure the necessary land rights. The energy storage facilities, irrespective of the individual solar farm’s sizing, must have a minimum 70MW power rating and 70MWh energy storage capacity. Electricité du Liban, will purchase the energy produced by the projects. This may require legislative change to enable private sector companies to sell power to the Lebanese national grid when the current law expires.
The newly elected coalition government has indicated that energy storage could be part of a sector coupling initiative, involving not only co-generation of heat and electricity, but also the coupling of electricity generation with the mobility, the housing and the heating sectors, combined with energy storage. The Umweltbundesamt, the German Environment Agency, has also issued policy recommendations in order to implement a supporting framework for energy storage systems. These political initiatives coincide with several regulatory developments in the existing legal framework for energy storage in Germany, including changes to the system for control reserves and new support regimes for small scale projects.
Several Greek islands for which no interconnection to the mainland is planned are to become self-sufficient “smart islands” using renewable energy and energy storage infrastructure. Closest to full operation is the battery project on the island of Tilos, combining wind and solar PV technology with a prototype battery system and battery inverter. A hybrid renewable energy project combining a 2.7MW wind farm and a 4.15MW pumped hydro system on the island of Ikaria is also due to commence operations this summer. Recently, Astypalai, Symi and Kastellorizo have been chosen to become smart islands as part of an initiative which aims to increase the share of renewable energy to 60-70 per cent of each island’s electricity consumption.
The UK Valuation Office Agency (VOA), a division of the UK tax authority, has called for stakeholders in the energy storage sector to engage in its process of developing business rates (a tax on the occupation of non-domestic properties in Britain) that will be applied to energy storage projects from 2022. The VOA is trying to bring energy storage onto its business ratings list and apply rates to revenues accrued by energy storage technologies. New business rates will potentially be applied to standalone and co-located energy storage technology. The policy change towards energy storage follows other changes to the taxation of renewables in the UK, with an increase in the taxes on solar farms announced in 2017.
The Institution of Mechanical Engineers (IME) in the UK has issued a report calling for government to take steps to promote and invest in hydrogen energy storage technologies. They propose that hydrogen technologies could be used effectively within the UK energy sector, particularly by the gas grid, to store excess electricity for long periods. The IME highlights the potential for hydrogen technologies to support the expansion of renewable power and improve efficiency by integrating hydrogen into other parts of the energy system with potential uses in areas such as transport and industry. The report makes several recommendations and takes note of the potential for the UK to develop expertise in this area.
Governor Phil Murphy of New Jersey signed the Renewable Energy Bill (A3723) and the Zero Emissions Certificate Bill (S2313) that propose achieving 100 per cent of clean energy within the state by 2050. The benchmarks include deploying 600MW of energy storage by 2021 and 2GW of energy storage by 2030, while renewable energy sold within the state will increase to 21 per cent, 35 per cent and 50 per cent in the years 2020, 2025 and 2030, respectively. The Energy Storage Association and the Board of Public Utilities will work together to conduct a cost-benefit analysis and determine how to bring energy storage to the state.
The US Department of Energy will provide up to US $30 million in funding for innovative storage systems that can provide electricity for 10 to 100 hours. The program is called Duration Addition to electricitY Storage (DAYS) and is being run by the Advanced Research Projects Agency. Eligible storage technologies include thermal, mechanical, electrochemical, chemical and others.
The Federal Energy Regulatory Commission (FERC) has denied a proposal put forth by regional transmission organization PJM that would employ a “benefits factor” curve to determine the dispatch of RegA signals and RegD signals in PJM’s frequency regulation market. Opponents of the curve, including the Energy Storage Association, Renewable Energy Systems America and Invenergy, suggest the curve has negatively impacted battery storage economics. The case will be discussed in further detail at an upcoming technical conference in Washington, DC.
FERC issued Order No. 841 in February, mandating US regional transmission organizations (RTOs) and independent system operators (ISOs) to remove barriers to the participation of energy storage resources in wholesale markets. The RTOs and ISOs must deliver their proposals, including actual tariff language, to FERC within a year. Among the more significant changes will be a move from hourly to five-minute settlement pricing. The RTOs and ITOs will also need to propose tariffs that allow distribution-level and behind-the-meter storage to participate in wholesale markets.
There are five main utility-scale storage business models in the USA: (1) a standalone battery being bid into an organized market for market, hourly price; (2) a tolling agreement where a utility pays a battery owner for storage, either based on hourly usage or fixed capacity; (3) a buy-sell model where a battery owner buys electricity when the grid is “slow” and sells excess electricity during peak market hours; (4) a battery that accompanies a solar or wind project and stores that output; and (5) a battery in place of additional transmission infrastructure. There are two main distributed storage models: (1) a storage company installs a battery for a customer and the customer either pays a subscription fee or a percentage of their savings for use of that battery’s storage; (2) a customer leases a battery from a storage company. Arbitrage is a model that while utilized, is difficult at present because the difference in price between what power is bought at and what power is sold at is insubstantial.
Market research shows that anywhere from 5 to 8 per cent of project costs will be attributable to energy storage software costs. Software is the brain that makes a storage system work. It optimizes use of a battery that is supposed to serve multiple functions, weighing the potential revenue from competing uses against the potential wear on the battery. If it does not work, the battery performs sub-optimally or does not work at all. Bankers are starting to focus on the software as part of their diligence.
In 2017 the Latin America region generated 4.1 million tons of electrical and electronic (EEE) equipment waste (9.2 per cent of global e-waste generation) and a total of 104,582 tons in the battery subcategory, prompting governments to review e-waste and battery collection programs. Since 2000, countries in this region have implemented regulations around EEE and batteries, focusing on their end-of-life stage and chemical substance compositions. It is expected that by 2022, 80 per cent of Latin American countries will have implemented e-waste and battery collection programs covering at least 60 per cent of each country’s territory.
India has reached out to what is known as the ‘Lithium Triangle’ in South America, comprising Chile, Argentina and Bolivia, in order to help meet its demand for EVs. India hopes to achieve an all-electric car fleet by 2030. To reach this target, an abundance of lithium will be needed to produce lithium-ion batteries. Latin America is home to some of the largest lithium reserves in the world.
Webinar: International Project Finance Association & Norton Rose Fulbright “Energy Storage: Delivering the Potential” – June 26 (register here)
Solar & Storage Finance Asia – July 2-3, Singapore
COVID-19 has gone far beyond creating a temporary crisis.
On May 20, 2020, the Corporate Insolvency and Governance Bill was published and had its first reading in Parliament.