WEMO24-Compiled Report-Interactive compressed (002) 4154-7882-8116 v.1 - Flipbook - Page 20
Global
Outlook
Batteries technical improvements: stationary battery storage
improvements include the extension of their life cycle; their
size and physical footprint reduction, cost decrease, limited
use of critical metals and easy recycling.
Over the past decade, Li-ion batteries have become an
increasingly important stationary energy storage technology.
LFP and NMC73 chemistries are the most popular in storage
application. A shift towards LFP for grid-scale batteries is
71 A Battery Energy Storage System (BESS) is a system that uses batteries to store
electrical energy. They can fulfil a whole range of functions in the electricity grid or
the integration of renewable energies https://flex-power.energy/school-of-flex/
battery-energy-storage-system-bess/
72 For example, in California the LCOE cost of PV farm is more than doubled: from $49/MWh
without BESS to $107/MWh with BESS
73 LFP: Lithium-Fer-Phosphate, NMC: Nickel Manganese Cobalt
74 The same shift is happening for EV batteries
The grid-scale market is leaning towards longer duration of
battery storage to accommodate growing volumes of renewable
energy capacity on electricity grids.
Li-ion may not be well suited to long-duration storage in future,
whereas Redox Flow Batteries(RFB)75 can store more than 10
hours of energy. However, this technology is still in its early
stages, with grid-scale proof-of-concept projects starting to
emerge. For instance, in 2022, Sumitomo Electric brought one
of the world's largest vanadium RFBs online in Japan.
Similarly to renewable costs, Li-ion battery costs have decreased
in a spectacular way in the ten last years. In 2021 and 2022, very
high prices for critical materials (Lithium and Graphite) have
resulted in cost growth. In 2023 and H12024, the decrease in
these critical metals price notably Lithium (that decreases by
80% in H1 2024 from its 2022 peak.), have resulted in significant
costs decrease.79
However, at the same time electricity prices have significantly
fallen, erasing part of the cost decrease benefits.
Presently BESS are considered unprofitable in spot market
trading cases, especially in the day-ahead market. According
to AEPIBAL,80 in the current markets first BESS entrants have
between 6 to 8% project IRR.81 These values are low for this
type of business model (high merchant risk and new technology)
so additional revenue streams such as peak shaving and other
ancillary services are needed to reach an acceptable profitability
level. In regions where there are capacity markets82 and/or
subsidies, the BESS projects IRR will be improved.
Batteries manufacturing: Worldwide battery mega factories
are mainly installed in Asia, with a dominant position for China
where over 80% of global lithium-ion battery production takes
place. Europe has succeeded in attracting battery factories built
by European or Chinese or other Asiatic firms. However, some
European battery manufacturers are encountering technical
problems notably linked to the anode76 graphite77 quality and
the factory yield.
Batteries profitability increase: it will of course benefit from
battery costs decrease78 and if it is the case of electricity prices
75 See WEMO 2023
76 Anodes are made in graphite that is imported at 100% from China
77 Graphite is imported from China(see below)
78 Grid-scale battery costs can be measured in $/kW or $/kWh terms. Thinking in kW terms is more
helpful for modelling grid resiliency. A good rule of thumb is that grid-scale lithium-ion batteries
will have 4-hours of storage duration
79 The average 2024 price of a BESS 20-foot DC container in the U.S. is expected to come down to
US$148/kWh, down from US$180/kWh in 2023 and $270/kWh in 2022 according to Clean Energy
Associates https://www.cea3.com/cea-blog/bess-prices-in-us-market-to-fall-a-further-18-in-2024
80 https://aleasoft.com/revenue-stacking-the-solution-for-battery-viability/
81 IRR: Internal Rate of Return
82 https://www.nrg.com/insights/energy-education/electricity-markets-what-s-the-differencebetween-a-wholesale-en.html
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increase that allow quicker amortisation of the “renewable plus
batteries” systems.
WEMO 2024
In certain Chinese regions, association of PV and batteries is
compulsory to connect new solar farm to the grid.
Several USA States have energy storage and renewables
mandates. With more states announcing new battery storage
targets, and expanding older targets (such as New York), this
trend is expected to continue and will be a key driver for USA
BESS growth. Let’s note that the cost of PV farms with BESS are
significantly higher than without batteries72 but better services
is provided.
witnessed because of lower costs, better safety properties,
and longer life cycles.74
20
Clear policy frameworks are starting to be implemented in
some countries as China, Australia where state-level storage
incentives are key drivers for their high historical and forecasted
BESS71 installation growth.
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