Batteries, offshore slash pricing this year under gas parity

A report from Bloomberg’s New Energy Finance (BNEF) out this week suggests that Lithium Ion batteries are finally down to the pricing levels that could see them used far more often fronting a balanced mix of renewables.

In other words the levelized cost of energy (LCOE) has fallen far enough that a sufficiently large (4 hour) battery alongside solar and wind resources, could make up virtual power plants, which could be connected directly to the grid.

It’s not a revolutionary concept and the idea has been around for about 5 years, but the data which tracks the LCOE is valuable. BNEF says the LCOE for the batteries has come down 35% and sits currently at $187 per megawatt-hour since this time a year ago.

Onshore wind, offshore wind and solar have also become cheaper, with onshore and solar reaching $50 and $57 per megawatt-hour respectively for projects starting construction in early 2019. This is down 10% and 18% on the equivalent figures of a year ago. The LCOE for offshore wind has fallen by 24%.

Ever since Rethink Energy began its coverage we have been repeating the idea that highly efficient Gas Turbines (CCGTs) have finally been overtaken by wind last year and by solar this year, but because they are intermittent, and because of how modern electrical grids work, you cannot simply swap out Gas Turbines for renewables. If you do that the Grid becomes unstable because there is no rapid correcting response when the frequency of the AC starts to drift.

You can achieve that by partnering gas with solar with wind, and then when the wind is not blowing you can turn up the gas turbine. Or you can add a battery and this works even better. But batteries, by their nature only have so much energy. Let’s say you calculate carefully to ensure that the solar that cannot produce energy at night is partly used to top up the battery, and that wind has a variance based on the strength of the wind at various times, but you might have 30% differential between peak power and lowest power. If a low peak hits during the night, you have to turn to the battery, and if that is not big enough to last 4 or 5 hours needed until dawn, you have to turn on the gas turbine. But the price of batteries is really important, and characteristics like “How rapidly can you call on battery stored energy?” and “If your battery is down to 10% of power, does it still have the same output?” make the difference. And how many times can you charge and re-charge or partially charge, your battery in a lifetime?

All of that has led to a drift away from Lithium Ion, towards Vanadium Flow, Frozen air and molten salt type solutions. These latter systems are far more powerful, and they can be used to drive conventional stream turbines, so behave like one. Vanadium Flow is bulky, but has about 3 times as many charges as Lithium and great performance at low charge.

But if Lithium goes down in cost, you just make a bigger battery for the same amount of money, and have a wider range of discharge from full to empty.

Elena Giannakopoulou, head of energy economics at BNEF, commented: “Looking back over this decade, there have been staggering improvements in the cost-competitiveness of these low-carbon options, thanks to technology innovation, economies of scale, stiff price competition and manufacturing experience.

“Our analysis shows that the LCOE per megawatt-hour for onshore wind, solar PV and offshore wind have fallen by 49%, 84% and 56% respectively since 2010. That for lithium-ion battery storage has dropped by 76% since 2012, based on recent project costs and historical battery pack prices.”

You can put the battery at the solar or wind location, and balance its supply to the grid, or you can put it further up the track and use it to balance the supply for many separate renewables suppliers. But the simply truth is that now batteries do not need subsidy because the combo of using renewables plus battery has gone so low.

A sub-text to this is that batteries can be used as a multi-function resource. It can front end multiple renewables or act as a holding pen for spare capacity that can be sold on the energy markets, at a time when you get the best price. It can provide balancing services for the Grid.

BNEF also wanted to bring attention to the numbers on offshore wind, which it says has been seen as relatively expensive compared to onshore or solar. The report says this has fallen to $100 per MWh from $220 five years ago due to falls in capital cost.