Energy Storage: When does the money overtake...

Energy Storage: When does the money overtake the hype?

Chris Hartshorn, Ph.D. VP – Research Lux Research, Inc.

Prepared for iNEMI Workshop20 October 2010

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Lux Research

We help clients capitalize on science‐driven innovation

We focus on emerging technologies in the chemicals and materials sector and the energy and environment sector

We have practices in Power and Energy Storage, Solar, Green Buildings, Nanomaterials, Water, Biosciences andTargeted Delivery

We have clients on five continents – blue‐chip corporations, govt agencies, universities, investors, and SMBs

We source our intelligence from direct interaction with key execs and experts at cutting‐edge technology firms in our sectors of focus

We draw on our network to:• Continuously monitor emerging technologies• Identify discontinuities in technology commercialization• Assist with company and technology evaluation

We have global reach, with 50+ employees in New York, Boston, San Francisco, Seoul, Amsterdam and an office in Singapore as of September 2010

Research team is 67% scientists, 33% business analysts

Testimony to U.S. Congress

Svalbard Global Seed Vault, Norway

Suntech Power factory, China

Qatar Science and Technology

Park

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Agenda

Grid scale energy storage: Looking for a catalyst

Electric vehicles: Match the market, not the hype

Implications: Massive growth, careful navigation

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Two main applications for grid‐scale storage: Power and Energy

First, an analogy for review:• Energy storage is to water capacity as…• Power delivery is to water flow

Comes down to short discharges (power function) or long discharges (energy‐type)• Some possibilities for overlap too

Flow Capability (Power)

Capacity Capability (Energy)$/kWh

$/kW

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Wide range of applications – winning technologies will address multiple

Minutes

Seconds

Days

Hours

10 kW 100 kW 1 MW 10 MW 100 MW

Spinning reserve ancillary service

Renewables firming

End‐user electric service reliability

Renewables shifting

Frequency regulation

ancillary service

Energy arbitrage/ commodity storage

End‐user rate reduction

T&D upgrade deferral

Discharge duration

System power

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The regulatory environment must be mapped on to incentives to derive a true deployment timeline

This is a possible method for determining “scenarios for integrated roll‐out;” this considers market models, smart grid components/modules, and geographies:

•China•Eastern EuropeMonopoly

•British Columbia•South AfricaSingle Buyer

•Texas, New York•Western EuropeOpen Access

•NE U.S., California•SingaporePower Pool

•U.K.•Eastern Australia

Fully Contestable

• Distributed• Centralized• Renewable • Fossil

• Distributed• Centralized• PHEV

• Improved T&D

• Appliances• Insulation

• TOU• Demand response

• Carbon trading

• CCS• Offsets

Generation Energy storage Efficiency Demand

Management Other

•Renewables standards•Energy demand growth rates•Geographic constraintsKe

y geograph

ies

(market models) x (smart grid modules) x (geographies)

= “Integrated energy roll-out scenarios”

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Available technologies span a range of capabilities

Electrochemical (batteries)• Molten salt• Lithium‐ion• Advanced lead‐acid• Flow batteries

Non‐electrochemical• Compressed air

energy storage• Thermal storage• High‐speed flywheels

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Efficacy of grid‐scale storage varies by region

RegionGeneration mix (major energy

source(s))Geography Regulation

Comparable regions

New YorkLimited renewables; (31% natural gas, 29% nuclear)

Long transmission lines, congestion in urban area

RestructuredEngland, Russia

CaliforniaHigh renewables and aggressive RPS; (55% natural gas)

Long transmission lines in protected land, congestion in urban areas

Partially restructured

Spain, Argentina

HawaiiHigh renewables and expensive fossil fuels; (83% oil)

Small island grids, no interconnections

Fully regulated, with some merchant power

Japan, Indonesia

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Power applications are only economical in very limited markets

Li‐ion is attractive in specific markets now, but needs improvements in cycle life to be truly competitive

Flywheels may be cost effective in high value frequency regulation markets with cost reduction

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Incremental solution: in CA/HI, it’s ice energy storage

Ice is very attractive due to long life and modest up‐front cost

Ice is a form of distributed storage and thus can be implemented incrementally

Li‐ion batteries are close to profitability today, and costs for other batteries will drop over time

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The outlook from two sides of the table:Technology developers

The majority of grid energy storage developers are targeting applications to address high renewables penetration – primarily wind, but also solar and tidal.• With the exception of CAES and pumped hydro, grid energy storage technologies

are clearly excluded from the wholesale energy markets for arbitrage applications.

Most of the storage technology developers do not have a sense of the true market for energy storage, and are unclear on the business models that will be successful.• Both power and energy applications lack the compensation framework and

storage‐specific regulations to build a complete business model.

Multiple functionality (e.g. wind ramping and wind shifting) is a must for initial grid energy storage installations for new technologies.• As there is little demand “pull” for specific applications, installations that can

serve multiple applications will see greater success by serving several concurrent needs.

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The outlook from two sides of the table:Utilities

Renewables penetration – particularly distributed generation – will drive the growth of grid energy storage.• Utilities and policy makers across the globe see renewables intermittency as a top

driver for grid energy storage, particularly in the distribution layer where renewable intermittency will impact the voltage regulation of the network.

It’s still a lot cheaper to build a new peaker plant than to invest in grid energy storage.• Efforts to evaluate the future value of storage are frustrated by the uncertainty in

pricing for some fuels – including carbon taxes and nuclear fuel taxes.

A driving economic case for electrochemical grid energy storage will take “a long time” to develop.• Without storage‐specific regulations and tariffs, electrochemical storage cannot

complete with conventional generation and grid regulation in the short‐term.

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When can penetration of renewable energy force adoption of energy storage?

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Renewable Generation Cost Determines Addressable Market

Decreased $/Wp = Increased

addressable market

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Challenges for Wide‐Spread Renewables Adoption

#1: Utility adoption

#2: Increasing natural gas availability

#3: Grid stability

#4: Low capacity factor

Today

10+ years

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#3: Grid stability


Today

10+ years

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Challenge #3: Grid Stability

Challenge: Large amount of intermittent renewables (wind & solar) threatens grid stability

Czech Republic – stability issues realized at 3% renewables

Belgium – stability issues likely at 8% renewables

Germany – stability issues likely at 20% to 25% renewables

Continuous U.S. – stability issues likely at 20% to 25% renewables

Hawaii – stability issues possible at 30%

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~15% addressable

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#3: Grid stability


Today

10+ years

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Challenge #4: Low Capacity Factor

0

5

10

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30

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Supp

ly vs. Dem

and (GW)

Hour of the day

Demand (GW) Available Resources (GW)

Source: California ISO

Baseload

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0

5

10

15

20

25

30

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Supp

ly vs. Dem

and (GW)

Hour of the day



5 GWp of solar in CA

Baseload

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0

5

10

15

20

25

30

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0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23

Supp

ly vs. Dem

and (GW)

Hour of the day



Baseload

Energy Storage


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0

5

10

15

20

25

30

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Supp

ly vs. Dem

and (GW)

Hour of the day



Baseload

Energy Storage


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Solar as a Percentage of Generation in 2015

4.7%

0.25%1.6%

0.7%

0.3%

1.1%

0.7%

0.16%

5.7%

1.2%

5.6%

2.0%

0.9%

0.9% 1.5%

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With cheap energy storage, 100% of market is

addressable by renewables…

…but highly unlikely given long lifetime of existing capacity and

need for technology mix

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Agenda




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Types of electric vehicles

Vehicle type Subtypes Relevant battery chemistries

Typical fuel savings

Micro‐hybrid N/A Lead‐acid, advanced lead‐acid,supercapacitors

5% to 15%

Hybrid electric vehicle (HEV)

Mild NiMH 15% to 30%

Full NiMH, Li‐ion 40% to 50%

Plug‐in hybrid vehicle (PHEV)

Series/ parallel Li‐ion 55% to 85%

Series Li‐ion 55% to 85%

All‐electric vehicle (EV)

N/A Li‐ion 100%

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The fundamental question with electric vehicles: Will people buy these cars?

Toyota Prius Chevy Volt

HEV (NiMH battery)~$23,00051 mpg city/48 mpg highway

PHEV (Li-ion battery)~$40,000 ($32,500 after incentives)40 mile all-electric range

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EVs must overcome range anxiety

I'm only a few miles from home. Could I borrow a socket?

EV (Li-ion battery)~$32,800 ($25,300 after incentives)100 mile all-electric range

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Historical Li‐ion costs for consumer electronics and future costs for automotive

$500

$550

$600

$650

$700

$750

$800

$850

$900

$950

$1,000

2010 2011 2012 2013 2014 2015

Li‐ion cost (US$/kWh)

Cell cost Automotive pack cost

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Demand‐driven market model

Analysis accounts for: • Technology improvements (including ICE technologies)• Component cost reductions• Gas/electricity prices• Driving habits• Governmental subsidies

Model is based on relative payback periods of electric vehicles vs. ICE vehicles and has two phases:

• A “hippie phase” (logarithmic growth) • A “growth phase” (logistic growth)

Types of vehicles modeled:• HEV: contains a NiMH battery pack (like the Toyota Prius)• Light PHEV: a PHEV‐12 with a Li‐ion battery pack (like Toyota’s planned PHEV)• Heavy PHEV: a PHEV‐40 with a Li‐ion battery pack (like the Chevy Volt)• EV: contains a Li‐ion battery pack (like the Nissan Leaf)

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Global automotive sales by vehicle type: three scenarios

Source: Lux Research Source: Lux Research Source: Lux Research

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The U.S. market is primed for light PHEVs, if oil prices play along

Source: Lux Research Source: Lux Research Source: Lux Research

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No electric vehicle will threaten ICE vehicles by 2020

Source: Lux Research



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Micro‐hybrids dominate, accounting for 37% of vehicle sales in 2015

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Relatively small numbers of PHEV/EVs have large effects on global battery sales

Source: Lux Research Source: Lux Research

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The charging station value chain matures ahead of electric vehicle critical mass

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EV cost: Cost per vehicle remains exceedingly high based on payback calculations, and only incentives are driving adoption while this is the case.

Consumer behavior: EV owners will not want to wait more than eight hours to charge at home overnight, nor more than five minutes to charge at a station, and don’t want special charging hardware installed inn the home.

Standards: Given the relatively low number of vehicles on the road as infrastructure develops, EV charging stations must be interoperable to enable the charging any vehicle.

Grid stability: It will be some time before enough EV charging load is in place to cause significant impact on grid operations.

Aggregating a critical mass of EVs will require years of government support

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Agenda




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Global storage markets for transportation applications

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Global storage markets for grid applications –significantly smaller opportunity

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Large format Li‐ion batteries will grow, but disappoint the over‐stimulated value chain

11 GWh of sales compared to 18.2 GWh of capacity

Overcapacity of more than 65%

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Summary

Electric vehicles tend to be overhyped, but still represent a massive new market for large‐format Li‐ion batteries and electronics manufacturers alike, under most reasonable scenarios

Grid applications will slowly emerge in areas with aggregated renewables penetration, but need to be catalyzed by a high profile grid failure

There will be a glut of energy storage capacity by mid‐decade. Electronics manufacturers must scale to match the actual markets and focus on partnerships in the growth geographies.

Lux Research Inc. 234 Congress St Boston, MA 02110 USA Phone: +1 617 502 5300 Fax: +1 617 502 5301 www.luxresearchinc.com

Thank youChris HartshornVice President – Research +1 617 502 5313+1 646 943 [email protected]

Energy Storage: When does the money overtake...

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