Batteries are key to clean energy — and they just got much cheaper

Clean energy future might be closer than we previously thought

Eric Holthaus  April 10, 2019 8:00AM (UTC)  salon.com

This post originally appeared on Grist.

Batteries are critical for our clean energy future. Luckily, their cost has dropped so low, we might be much closer to this future than we previously thought.

In a little less than a year, the cost of lithium-ion batteries has fallen by 35 percent, according to a new Bloomberg New Energy Finance report. Cheaper batteries mean we can store more solar and wind power even when the sun isn’t shining or wind isn’t blowing. This is a major boost to renewables, helping them compete with fossil fuel-generated power, even without subsidies in some places, according to the report. Massive solar-plus-storage projects are already being built in places like Florida and California to replace natural gas, and many more are on the way.

The new battery prices are “staggering improvements,” according to Elena Giannakopoulou, who leads the energy economics group at Bloomberg NEF. Previous estimates anticipated this breakthrough moment for batteries to arrive in late 2020, not early 2019.

According to the report, the cost of wind and solar generation is also down sharply — by between 10 to 24 percent since just last year, depending on the technology. These numbers are based on real projects under construction in 46 countries around the world.

The lower battery prices have big implications for electric cars, too. There’s a key cost threshold of about $100 per kilowatt hour, the point at which electric vehicles would be cheap enough to quickly supplant gasoline. At this rate, we’ll reach that in less than five years.

Now that cheap batteries are finally here, we’re well on our way to electric modes of transportation and always-on renewable energy — and not a moment too soon.

What’s driving the plunge? Giannakopoulou cites “technology innovation, economies of scale, stiff price competition and manufacturing experience.” Other storage methods, like pumped hydro, still account for the vast majority of energy storage capacity, but lithium-ion batteries are much more flexible and don’t require specific locations or environmental conditions to work. Like everything in the built environment, lithium-ion batteries also require mining and manufacturing. There’s still a chance that some new exotic battery technology will quickly supplant lithium-ion, but its ubiquity and — now — cheapness will be hard to beat.

Electric vehicles will become cheaper to own and operate than gas ones. In places like California, Texas, and Germany, electricity prices have occasionally dropped below zero — a sign that the grid wasn’t yet ready to handle the glut of renewable energy produced there. Now, more of that cheap power will be stored and passed on to consumers. This could be the moment when renewable energy starts to shut down fossil fuel for good.

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Income from rents/royalties/bonus is about one tenth of one percent of the national budget.

How Much Income Has the Government Collected From Oil and Gas Leasing?

All told, the gross income (before payments to states) from onshore oil and gas resources averaged $3.0 billion annually from 2005 to 2014, comprising the following amounts:

  • About $230 million per year in bonus bids,
  • $50 million per year in fees for nonproducing leases, and
  • $2.7 billion per year in royalties from production.

Revenue streams and rates

Oil and gas

Phase

Bonus

Rent

Royalty

Onshore

Bonus

$1.50 annual rent per acre for the first 5 years, $2 annual rent per acre thereafter

12.5% of production value in royalties

Offshore

Bonus

Water depth 0–200m: Years 1–5 rent is $7/acre, year 6 rent is $14/acre, year 7 rent is $21/acre, year 8+ rent is $28/acre


Water depth 200–400m: Years 1–5 rent is $11/acre, year 6 rent is $22/acre, year 7 rent is $33/acre, year 8+ rent is $44/acre
Water depth 400+: Years 1–5 rent is $11/acre, years 6+ rent is $16/acre

12.5% for leases located in water depths less than 200 meters
18.75% for leases located in water depths of 200 meters and deeper

Revenue policy provisions

While royalty rates can reach as high as 18.75%, and the federal corporate income tax rate can reach as high as 21% depending on company income, companies may pay less. Revenue policy provisions, including royalty relief and tax expenditures, can result in smaller revenue and tax payments to the federal government to promote other policy goals.

Royalty relief

To create incentives for companies to produce additional oil and gas on certain leases on the Outer Continental Shelf where extraction is anticipated to be unprofitable, the federal government may grant some lease holders royalty relief. Royalty relief means that these lease holders do not have to pay royalties on some amount of production, or they pay a smaller percentage of royalties, for the oil and gas they extract. There are four situations in which a lease holder may gain royalty relief:

  • Leases in deep waters with depths greater than 200 meters in the Gulf of Mexico. (This type of relief has not been offered for several years, though existing leases do include it currently.)
  • Leases in shallow waters with depths under 400 meters for deep gas production
  • Leases toward the end of their lives in which halving royalties would encourage additional production
  • Special cases in which continued production under existing terms is projected to be unprofitable

In some situations, if oil and gas prices rise above certain thresholds, lease holders that previously gained royalty relief must start paying royalties at the regular rate again.

Tax expenditures

Tax expenditures are defined in the law as “revenue losses attributable to provisions of the federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” These exceptions may be viewed as alternatives to other policy instruments, such as spending or regulatory programs.

The Treasury estimates the total dollar amount of each tax expenditure in a given year and publishes a report of these estimates.

 

I'm sort of interested in batteries.  It seems energy storage is and will be a growing need in the future.  And I'm interested in the process of keeping those new generation batteries powered up.  Post more on this when available.

Wind and solar are low density energy sources, so it takes a lot of capital investment to capture the energy. Both of those sources are intermittent so backup energy generation system or a storage system is required to provide electricity on demand. As long as the wind or solar system is "tacked on" to an existing grid that can provide electricity on demand the price for the renewable system is not onerous. But, if the renewable system is designed to "stand alone" then the price with current technology is very high. It is highly unlikely that lithium batteries will ever be cheap enough to provide the storage for an entirely renewable electrical grid. Here is some analysis using real cost data:

So-called “renewable energy” sources are inherently intermittent with wind turbines producing when wind velocity is high enough and solar producing when the sun is high in the sky. These favorable conditions do not perfectly match electricity demand so to have an entirely renewable electrical system there is need for a storage system. In Texas in 2017 wind turbines produced about 30% of rated capacity. Output from utility scale solar photovoltaic (PV) systems in India report annual production at 24% of rated capacity. Thus, an entirely renewable system requires 3 to 4 times the installed capacity of a conventional fossil fuel system, as well as an energy storage system.

Wind farms cost about $2000/kW, recently constructed utility scale PV solar systems cost about $1000/kW (residential rooftop systems cost about $3000/kW), and a recently completed Australian lithium battery storage system cost about $700/kWh. By comparison, a modern combined cycle gas turbine (CCGT) system costs about $700/kW, and it doesn’t need the electricity storage system. Thus, in addition to the storage system an entirely renewable electricity generating system takes about 6 to 8 times as much invested capital as a CCGT system. And the storage system is very expensive as will be shown below.

Tesla completed a 129kWh electricity lithium-ion nattery storage system in the Hornsdale Power Reserve near Jamestown South Australia for a reported capital cost of $90 million or about $700/kWh. The battery life was estimated as 15 years with annual maintenance estimated at $4 million to $5 million, or about 5% of installation cost.

TCU Mechanical Engineering Professor E. E. Michaelides did a thorough detailed study to determine what it would take to replace the 69% of electricity generated in the Texas Grid with fossil fuel with renewable wind and solar. (See “Making Texas Green,” Mechanical Engineering, March 2019, pp. 36-41.) The study concluded that the fossil fuel produced energy (based on 2017 data) could be replaced with 30,800 MW capacity of wind turbines plus 52,200 MW of solar PV cells and 16,020 GWh of storage. (It was assumed that the existing nuclear systems that provide about 11% of electricity generated would remain in service.) Based on the capital costs given above the combined capital costs of the wind and solar generating systems would be $113.8 billion. (Because wind and solar are “low density” energy sources they require a lot of land, in this case an estimated 4600 square miles, acquisition of which would be a formidable task.) If we assume that substantial improvements are made to the lithium-ion battery system (batteries, enclosures, heating, air-conditioning, etc.) getting the cost down to $300/kWh, the cost of the storage system would be an astronomical $4.8 trillion. To put that in context, the annual GDP of Texas is a bit less than $2 trillion. This suggests that a lithium-ion battery system is a non-starter for long-term storage. (Note: the Hornsdale system does not provide long term storage to back up the grid, rather it smooths out the short-term fluctuations inherent in wind generation systems.) 

Michaelides did not provide an estimate of cost for the storage system but suggested an alternative to batteries involving electrolysis of water to produce hydrogen which would be stored underground until needed when it would be used as fuel in gas turbine electricity generating systems. I don’t have a cost estimate for that approach, or for utility scale “flow” batteries being developed by Lockheed Martin and others.

Making Texas entirely “green” would be even more expensive than noted here because it would entail eliminating natural gas for heating homes and gasoline and diesel for transportation. Those changes would increase the amount of electricity needed substantially. There is a lot of competition for allocation of capital so it is unlikely that Texas would be willing to devote more than three years of GDP to making Texas energy entirely “green.”

Attribution, please.

Report: Global Energy Storage to Hit 158 Gigawatt-Hours by 2024

We project a thirteenfold increase in grid-scale storage over the next six years, led by the United States and China.

“Over the last five years, the world began to experiment with storage; in the next five, storage will become a key grid asset,” says Ravi Manghani, Wood Mackenzie Power & Renewables director of energy storage. 

Wood Mackenzie,  4/19/2019

As I stated, the primary source that I used was the article “Making Texas Green” by TCU Engineering Professor E. E. Michaelides in the March 2019 issue of the ASME publication Mechanical Engineering, pp. 36-41. This article is the first attempt I have seen to determine how much storage would be required to make viable an electrical grid that uses only solar and wind (with some nuclear in this case) with no fossil fuel backup. Michaelides did a detailed analysis of the Texas grid electricity consumption throughout the year and generation of electricity with wind and solar throughout the year. There is a lot of seasonal variation in both supply and demand, and these do not perfectly match. The result is that a lot of energy must be stored for long periods, not just storage while the sun is out for use overnight. The amount of storage required was determined to be about 16 times the daily average use in Texas. That seems like a lot, but when seasonal variation is considered, and experience in Germany and England where there have been periods for as much as a week in which wind and solar produced only 1 or 2% of nameplate capacity is considered, it may be reasonable. I let the “Making Texas Green” article speak for itself, I did not attempt to critique it.

All I did was take results presented in the ‘Making Texas Green” article and applied typical installation costs as discussed below.

The Tesla Hornsdale battery capacity is initially 129 MWh and the cost was $90 million, yielding an initial  $697/kWh cost. (The battery capacity declines over time.)

https://www.abc.net.au/news/2018-09-27/tesla-battery-cost-revealed-...

The 2019 Tesla Powerwall has capacity of 13.5 kWh and costs around $10,000 installed for a total cost of about $740/kWh.

https://www.solarreviews.com/blog/is-the-tesla-powerwall-the-best-s...

The cost of lithium-ion batteries at the time Hornsdale was done was about $240/kWh and is now about $200/kWh and is expected to decline to $62/kWh by 2030. That is speculative, of course. A utility scale battery will require housing, ancillary sensors and controls and a thermal conditioning system. If I assume that the Hornsdale battery cost $240/kWh, then the housing and ancillary equipment cost about $460/kWh. If I assume that battery cost falls to $60/kWh and the housing and ancillary cost (which will have a less steep “learning curve” than the battery) is cut in half, I get a total cost of $300/kWh. (Even if I just use the anticipated future battery cost of $60/kWh then 16,020 GWh of storage would cost a significant $960 billion)

Solar farms cost about $1000/kW to build.

https://news.energysage.com/solar-farms-start-one/

Wind farm cost varies from around $1300/kW to $2200/kW:

http://www.windustry.org/how_much_do_wind_turbines_cos

The need for energy storage to make large scale renewable (wind and solar) electricity generation systems viable causes interest in developing alternative utility level storage systems that are less expensive than lithium-ion batteries. Lockheed Martin is one such company:

 

https://www.lockheedmartin.com/en-us/capabilities/energy/energy-sto...

https://www.lockheedmartin.com/content/dam/lockheed-martin/mfc/docu...

Note that Lockheed Martin’s flow batteries are intended for short-term and medium-term utility-level storage, not the long-term storage indicated as being required by Michaelides.

I have a Master’s Degree in Mechanical Engineering with over 50-years experience. I worked for over 40 years for Lockheed Martin (retiring at the end of 2003) and worked for a consulting company and a construction company before that. I designed missiles, spacecraft, and rockets and know nothing about Lockheed Martin’s energy storage business except for what is publicly available.   

Thanks for the additional information, James.  I should have been more clear in my question regarding attribution.  Maybe I missed somewhere in the article what data Professor Micaelides was using in his analysis.  When I have a little more time I will try to look through some of your hyperlinks to see if I can find that.  Although the article is March 2019, I was wondering if it was based on 2018 data or earlier.

James, I have one observation for the article by Professor Michaelides.  It is not his analysis which I think is likely correct.  The problem inherent with trying to model a fast evolving technology is that by the time sufficient data is available, the technology has changed.  The professor is using 2017 data.  The articles that I post, and my comments based upon them, are current (2019).  Part of my interest and a reason for the number of articles on the subject is the stunning strides in improved efficiency of latest solar technology and how much less expensive PV modules have become.  The same evolutionary arc is ongoing for batteries.  The entities deploying utility scale solar globally are reporting surprising costs per kWh.  Along with the willingness of capital markets to invest in those projects, it appears we are fast reaching the point of price equivalence with hydrocarbon generated electricity grids.  

According to the article it was based on Texas Grid data from 2017. Given the publication date I would surmise that the analysis, which probably took several months, was done in 2018. 

European solar comes of PPAge

April 20, 2019  pv magazine  (excerpt, link to full article at the bottom)

Last month, a single contract signed into existence 708 MW of photovoltaic arrays to be built across the Iberian Peninsula. The mammoth deal between offtaker Audax Renovables and developer WElink will roll out as much solar capacity as was installed in Spain and Portugal from 2013 to 2017 combined.

It is no isolated event. Artur Lenkowski, Senior Associate at IHS Markit, says that solar PPA activity in Europe grew from 360 MW in 2017 to more than 2.4 GW in 2018. These projects bring together a colorful range of investors and operate across diverse jurisdictions, but one point many have in common is that they are being built without government subsidies.

“We are competing head-on with market rates,” says Peter Alex, head of investor relations at Energiekontor, which has just signed a 15 year PPA with electricity supplier EnBW for an 85 MW solar farm near Rostock, Germany. “The project came as a big surprise to the market and politicians, but we can already sell solar electricity in Germany that is competitive with fossil fuels and nuclear.”

“We see a lot of projects across Europe, especially in the south,” says Anne Joeken, head of communications at Statkraft, a leading supplier of renewable energy in Europe. Her employer notably closed a 175 MW PPA in early 2018 to buy electricity from the Don Rodrigo solar power plant near Seville in Spain. “There are various sources for funding new PV capacity with PPAs becoming a more relevant one as grid parity evolves,” she says.

The news offers timely respite to Europe’s battered solar sector as governments across the region phase out financial incentives for renewable energy. “In the past, there was a lot of solar implementation in Europe, but it was usually supported by subsidies,” says Georg Hoefler, Investment Director in the renewable energy team of Allianz Capital Partners. “The difference now is that offtakers are private and there is no government support.”

https://www.pv-magazine.com/2019/04/20/the-weekend-read-european-so...

How wind and solar became America's cheapest energy source

By Irina Ivanova April 22, 2019 / 5:00 AM / MoneyWatch cbsnews.com

  • The price of renewable energy has been dropping exponentially over the past decade—and shows no sign of reversing.
  • In most of the U.S., it's now become cheaper to build a new solar or wind farm than to keep an existing coal plant running.
  • Part of the reason is better technology—solar panels and wind turbines have gotten more effective at generating power 
  • Economies of scale help, too: "When renewables get cheaper, we buy more, and then they get even cheaper and we buy even more," one expert said.

In late 2009, as America was clawing its way from the worst recession in 80 years, fiscally pressured local and state governments were doing everything they could to slash costs. That included cutting back on clean-energy initiatives. Here's how the New York Times described the case of Durango, Colorado, a town of 18,000 in the southwest part of the state:

But for many other groups, even green-minded ones, the higher price of clean electricity has caused soul-searching and hesitation. Early this year, the city government of Durango, Colo., stopped buying renewable power from its utility, saving $45,000 a year. The clean electricity had cost 40 percent extra.

Ten years later, nearly one-third of Colorado's electricity comes from renewable sources, the state's biggest utility is moving to entirely carbon-free energy, and its voters have elected a governor who promised to set the most aggressive clean-energy standard in the nation. 

That story is mirrored in dozens of other states, where consumers have demanded cheap power and corporations have moved into clean-energy projects in droves. Behind this shift is not just increasing environmental awareness, but simple economics. The price of renewables has been dropping exponentially—and shows no sign of reversing.

Rapid price drops

In most of the U.S. today, it's cheaper to build a new solar or wind farm than to simply keep an existing coal plant running. Most of those cost decreases have happened just in the last 10 years, to the surprise of some energy analysts.

Part of this is technological improvement—solar panels and wind turbines have gotten steadily more effective at generating power. But most of it is economies of scale, said Rushad Nanavatty, principal at the Business Renewables Center at the Rocky Mountain Institute, a sustainability think tank.

"When renewables get cheaper, we buy more, and then they get even cheaper and we buy even more," Nanavatty said. "When you're talking about wind and solar, the cost declines are driven mainly by manufacturing volumes and the cost declines that come with it."

Since the first large-scale wind project in the U.S. took root in California in 1981, wind turbines have gotten taller and wider. Taller turbines are more effective because they can access the steady wind that blows at higher altitudes, while larger rotors mean turbines can create more energy. A mid-sized turbine today creates as much energy as 15 of the earliest model.

Larger turbines also mean lower installation and construction costs. "Instead of deploying 10 turbines and moving your crane from site to site to build 10 foundations, you only have to build one foundation, and you are able to access more wind," said John Hensley, vice president of research and analytics for the American Wind Energy Association, or AWEA. Modern turbines also make it easy to identify problems and breakages, so repairs take less time and often don't require shutting down the machine.

Corporations bought in

Utilities—the large entities that historically buy power and sell it to homes and businesses—are no longer the only buyers for electricity. Increasingly, big business is buying power directly. 

What started as a marketing exercise to win over the "green" consumer has become more and more of an economic proposition, as corporations from AT&T to Anheuser-Busch InBev sign deals to purchase large amounts of clean power.

"In many cases, the motivation is to do the right thing, but what makes these deals viable is that it makes economic sense," said RMI's Nanavatty.

Last year, a record 37 corporations signed contracts for wind power, with nearly half of them being first-time buyers, according to AWEA. Contracts like these kick off the process of building new wind resources, which will be coming online in future years. The pipeline of projects seems long. The group noted that among the "Renewable Energy 100" — a group of companies that pledged to move to 100 percent clean energy—just 25 percent of the total corporate demand has been met to date.

The power of groups

It's not just big business. Medium-sized business, increasingly, is getting in on the renewables game.

A handful of companies and nonprofits last month launched the Renewable Energy Buyers Alliance, a project to make it easier to buy clean power projects. The group's aim is to grow corporate renewable energy deals threefold in the next six years.

That matters because, as clean energy finds more and more buyers, these customers will need help navigating the byzantine world of electrical systems and electric purchases, where the barriers to entry can be high.

"When you look at the market for deals, typically only a very large, sophisticated buyer with a large energy team was in a position to transact," Nanavatty said. "Now you see a situation where a group of buyers, each one of which might have a relatively small load, can come together and go to market with a much larger volume that would be attractive to developers, and make a deal that much more viable."

World's Largest Battery Proposed:

Florida Power and Light is proposing to build the world's largest battery to smooth output from solar farms. The 900 megawatt-hour capacity battery is expected to cost $400 million. That is $444/kWh. Here is an article discussing the proposal:

https://www.americanthinker.com/articles/2019/04/battery_foolishnes...

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