Energy Energy Storage

Challenges remain in understanding energy storage as an investment

Energy Storage

Summary

Discusses challenges in evaluating energy storage as an investment due to its nascency, and argues that energy storage should be considered an investment rather than an expense.

Perspectives and insights

  • Projections suggest energy storage deployments will grow 13-fold over the next six years, from 12-gigawatt-hours in 2018 to 158-gigawatt-hours in 2024.
  • As a nascent industry, battery storage lacks historical data, requiring investors and lenders to familiarize themselves with its unique qualities.
  • Installing energy storage is highly individualized from one project to another. So extrapolating risk and returns from any given asset is not straightforward.
  • Batteries in a storage project have shorter lifespans (10 to 15 years) compared to solar or wind energy assets that may last twice as long.
  • A recent report pins the 2019 levelized cost of electricity storage for Li-ion batteries at $187 per megawatt-hour, a 35% reduction from the 2018 estimate.

Xoologue - a discussion between Xoo and Moo

Moo: A 13-fold increase in 6 year, Xoo, that’s almost 60% CAGR, Wow!

Xoo: I see that age hasn’t dulled your math skills. Yet, these numbers are nothing.

Moo: Surely, Xoo, 60% CAGR is something.

Xoo: Not when you look at the overall numbers. Consider this: the world consumes about 25000 terawatt hours of electricity every year. And we are talking about 60 gigawatt hours by 2024, 1/150000 of the total electricity consumed. I’d not even bother to calculate the exact fraction - it’s pretty much zero.

Moo: It’s indeed minuscule the way you put it, but energy storage cannot be compared directly to energy consumption. Besides, energy storage is not needed for a very large portion of the demand

Xoo: Now, you have a point there. So let me only consider renewable electricity - mainly wind and solar power - where storage is more relevant.

Moo: That sounds more relevant, yes. I remember the number for solar and wind. With about 1.2 TW of solar & wind power installed capacity end of 2019, these two should be generating about 2000 TWh per year worldwide in 2020.

Xoo: We are finally getting somewhere in this, Moo. 2000 TWh in 2020 could mean at least 3000TWh by 2024, given the pace at which the solar & wind are growing. So, its 160 GWh against 3000 TWh which makes the tidal energy storage market at 1/20000th of the total electricity produced from solar and wind. Even agreeing that only a fraction (say 5%) of total solar & wind power need to be stored, just imagine the potential for storage.

Moo: Remarkable, Xoo, indeed.