Co-authored by Andreas Fornwald, Head of Energy Practice and Partner at Ward Howell International
The global market for electrical energy storage is dynamic, urgent and at nearly a gigawatt, rapidly growing. The world is experiencing a surge in intermittent power generation facilities such as renewables, but great challenges remain.
Renewables facilities, for instance, require ever-more backup capacity. In addition, utility companies have to balance demand and supply by building up huge reserves the like of which have never been seen before.
Moreover, regulators are introducing new rules; energy bidding is becoming more sophisticated and electrical energy prices more volatile. On top of this, electrical grid stability and frequency control are far more complicated than in the past.
Currently, there is great hype about the capabilities of lithium batteries. The main application where lithium excels is mobility, due to its good power density and relatively small size. Major companies such as Tesla, LG and BYD advocate this technology as the best and brightest solution for global electrical energy storage needs. Many believe that lithium will become the new oil and some countries, like China, are heavily subsidizing the industry in order to gain political leverage and market share.
Lithium batteries, however, are not the magical one-solution-fits-all for energy storage requirements. Indeed, lithium has recently experienced a significant drop in price, and huge over-production capacities have been built up. Driving this downward trend are above all Tesla, which is building a “Giga Factory” in Nevada, and China, which actively plans to increase lithium battery manufacturing.
But despite the hype from these major players, the fact is that lithium has many downsides compared, for example, to flow batteries and other emerging battery technologies. The extensively covered cases of exploding Samsung smartphones caused by their lithium batteries have raised grave safety and reliability concerns.
Below are some additional disadvantages of lithium based batteries:
1. Lithium battery duration is low; battery life is merely two years if charged and discharged once daily
2. Each lithium battery has to be specifically designed for various applications and requirements, as, for example, between power and energy applications: this creates many add-on costs
3. Lithium batteries have toxic chemical, fire and health and safety issues
4. The charging capacity of lithium batteries decreases by 5% or more; less than 80% of charge is accessible
5. Lithium batteries have high life-cycle costs: a maximum seven-year lifespan plus expensive recycling after end-of-life
6. High insurance premiums and low bankability also plague lithium batteries
On top of these disadvantages, other significant challenges confront the proponents of lithium batteries. The price and power densities, for example, claimed by lithium manufacturers are in reality not crucial for utility applications. More than ever, discharging cycles and charging curves influence how batteries can be used in utility-scale applications. New standards published by the PJM power pool, favor batteries with longer life cycles – significantly, lithium is not always the best solution. Indeed, a major utility-scale lithium battery would be more than a million times larger than a smartphone battery, so public perceptions of feasibility, health and safety risks are largely justified.
Flexible gas plants, which can handle both peak power and grid stability, pose another threat to lithium batteries for big utility scales. Meanwhile, battery deployments are increasingly easier to commission. As both of these technological trends expand they could and most likely will clash in competition. Gas turbines, it is instructive to remember, can function for more than 30 years; unfortunately, no lithium battery can work for 30 years charging and discharging on a daily basis.
And now we must consider the mighty California effect. As always this powerful, populous and prosperous state is at the forefront of the energy revolution. California mandates that utilities test batteries by adding more than 1.3 gigawatts of electrical power storage capacity by 2020. As an example, Southern California Edison has begun making energy storage deals to alleviate the risk of predictable blackouts. All of these projects are scheduled to be completed in record time -- less than six months. This is unprecedented in the world of power transmission and electricity generation.
With all of this in mind, many analysts also expect that lithium batteries will suffer the same fate as poly-crystalline solar panels and will drop significantly in price over time and scale. Yet there are, however, some noteworthy differences: the main raw materials and components used in solar panels are abundant, and the manufacturing of wafers for solar panels are easier to scale-up and not as complicated as in the manufacturing of batteries. Plus, in the solar panel industry there has been relative price stability and experts do not predict any major drops in price; now it is the race for efficiency.
Batteries, in contrast, have much higher recycling costs and deteriorate faster than solar panels. Thus, a replication of the price patterns of poly-crystalline solar panels will be difficult to achieve for lithium batteries.
Additionally, the market for lithium batteries is tightening, and consolidation is taking place, driving many small and medium players out of business, such as California companies Aquion Energy and Imergy. Other players, like Yunicos, are seeking salvation under the umbrella of diesel generator providers.
Thus, the price of lithium batteries could flatten out when all the economies of scales come into play. Equally, it must be noted, prices could rise due to increased short-term demand.
The best and most future-oriented bet lies in many new emerging technologies including flow batteries, zinc air, silver-zinc, sodium-sulfur, salt–water, nickel–zinc and nickel–hydrogen, driven by exciting research going on at Stanford University, the University of California Berkeley, MIT, and also institutions in China, Japan, South Korea and Germany.
In conclusion, batteries are the future, but at the moment it seems doubtful that lithium batteries represent that future. Current research, physics and market forces indicate that other, more efficient and reliable types of batteries will dominate the market, and that the current hype for lithium batteries is a well-intentioned fad that will soon transform into something more robust and sustainable.