May 18, 2020
Battery Storage now competitive with gas plants for peak loads
Professor Brian Sturgess

Large scale investment in battery storage is essential to green the economy and the economic case is growing stronger. New data just published by BloombergNEF illustrates that the achievable levelised cost of electricity (LCOE) for battery energy storage means that “new-build batteries can be competitive on cost with gas peaker plants.” Below two-hours duration, batteries are already cheaper for peak shaving than open cycle gas turbines (OCGT), traditionally the go-to technology for that purpose. “If you need to shave a peak in the load, it’s going to cost less to install a battery than OCGT or gas reciprocating power plants, peaking plants,” according to BloombergNEF analyst Tifenn Brandily. A massive investment in battery storage in the UK could rapidly push downwards the share of fossil fuels in electricity generation in order to meet the government’s climate change targets. In 2019, gas, including baseload and peak, still accounted for 38 per cent of total electricity generated. This can be reduced further since BloombergNEF expects battery storage to become the cheapest source of new flexible power up to four hours of discharge and to zero marginal cost generators like wind and solar will help investment in storage achieve that.

The BloombergNEF report shows that the LCOE of battery storage systems has halved in just two years, to a benchmark of US$150 per MWh for four-hour duration projects. According to BloombergNEF analyst Tifenn Brandily the data company has only been tracking the battery storage space for the past couple of years as the market was “relatively limited” > But “since then we’re really seeing a trend now - the LCOE has come down quite tremendously, actually faster than PV or wind”, said the analyst.

The LCOE report explains that manufacturing scale and standardisation, as well as technology improvements on the upstream side have contributed to this rapid decline in costs, but on the installation side - battery projects are getting bigger and bigger, both in megawatt (MW) and in megawatt-hour (MWh) metrics. Projects in 2015 had about 1.5 hours’ duration of storage on average, “recently financed” projects reached about 1.8 hours, whereas projects going ahead in 2020 are estimated to reach about 2.2 hours’ duration on average. In terms of the power output in megawatts, the average project in 2015 was about 2.9MW, “relatively small utility-scale batteries,” whereas in 2020, the average is more like 21MW. “That’s really significant because you can play on both power outputs and storage duration to reduce the cost per MWh of storage,” 

“So, beyond the technologies and the chemistries getting better and more energy dense, beyond the manufacturing scale-up also, which will also reduce costs because of standardisation, producing things in batch [volumes], you also have an effect which is much more in the downstream of the industry - developers are looking to scale up those power output and storage durations as a way to reduce the levelised cost of discharge, or the levelised cost of electricity” said the BloombergNEF analyst. “For short term balancing it’s already cheaper to install new-build battery storage than peaking plants and as we go to 2025, we’re seeing that that extends until probably around four or five hours of discharge, that’s pretty significant. Peaking plants never generate more than 15% or 20% of the time so that means batteries on a new-build basis will be competitive on that segment.


 


Source: BloombergNEF 2020

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