Storage Prices Dropping

McKinsey research energy storage

Storage can benefit utilities by helping them to address the challenges of planning and operating the grid in markets where loads are expected to be flat or falling.

Storage prices are dropping much faster than anyone expected, according to McKinsey.

Energy battery prices are falling rapidly, allowing new combinations of solar, wind, and energy storage to “outcompete” the costs of coal and natural gas plants.

McKinsey storage research

McKinsey research has found that storage is already economical for many commercial customers to reduce their peak consumption levels. Moreover, major players in Asia, Europe, and the United States are all scaling up lithium-ion manufacturing to serve EV and other power applications.

No surprise, then, that battery-pack costs are down to less than $230 per kilowatt-hour in 2016, compared with almost $1,000 per kilowatt-hour in 2010.

At today’s lower prices, storage is starting to play a broader role in energy markets, moving from niche uses such as grid balancing to broader ones such as replacing conventional power generators for reliability, providing power-quality services, and supporting renewables integration.

Demand, supply

Further, given regulatory changes to pare back incentives for solar in many markets, the idea of combining solar with storage to enable households to make and consume their own power on demand, instead of exporting power to the grid, is beginning to be an attractive opportunity for customers (sometimes referred to as partial grid defection). We believe these markets will continue to expand, creating a significant challenge for utilities faced with flat or declining customer demand.

A report from Technavio last year put the compound annual growth rate (CAGR) for li-ion batteries at 72%, hitting 3,130 MW by 2020, compared with a 67% CAGR for the lead-acid battery segment, which Technavio expects to reach 990 MW by 2020.

BMI Research expects li-ion battery technology to “solidify” its dominant position over the coming decade based on the ability of the technology to perform storage tasks across multiple sectors.

Vanadium flow batteries

Meanwhile, BMI expects vanadium flow batteries – a technology that has been cited as a contender to disrupt li-ion’s dominance — will become an attractive storage option in applications that involve isolated or unreliable power systems where the technology can help displace the need for expensive diesel-fired power and support intermittent wind and solar power generation.

Years, not decades

Eventually, combining solar with storage and a small electrical generator (known as full grid defection) will make economic sense – in a matter of years, not decades, for some customers in high-cost markets.

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