WEMO24-Compiled Report-Interactive compressed (002) 4154-7882-8116 v.1 - Flipbook - Page 68
Buy low, sell high is normally a certain way to make money—especially
in an electricity system with very predictable price swings across a
day. This looks very low risk, so why aren’t battery owners printing
money?
The battery is a very expensive asset and, by comparison, the
electricity it stores is very cheap. A 1 kWh battery might cost $200,
but the electricity that it stores could be worth as little as $.30.
The spread of cost between cheap and expensive electricity might
be $.25, meaning that the battery needs to cycle 800 times before it
breaks even. The price of electricity typically cycles across the day, so
it would take 800 days to break even.
800 cycles is close to the design life of some forms of batteries, which
means no returns. A battery that can handle 3,000 cycles is possible,
resulting in positive returns after its eight-year life. If the life can be
extended for a further four years, the last years are very profitable.
But this is a long time to wait for returns.
An alternative model for grid operators is to build a big cheap battery
and only discharge it when the conditions are right and prices very
high. These batteries may only cycle a few times, but when they
do, they earn large sums. Relying on automotive manufacturers for
battery supply creates issues for stationary grid batteries. A lack
of standardization means grid operators cannot assume that all
installations will behave the same. A previous assumption that endof-life batteries from the automotive industry could be used for grids
and homes is also looking unsafe, as the calendar life of batteries
is an increasing concern. A potential outcome is that stationary
grid batteries will be built on production lines that are obsolete for
automotive manufacturers. The higher volumes required by the
automotive industry drive faster development of production assets
and reduce price points quickly, so adjacent industries can capitalize
on the benefits of an automotive-first approach. This is also been
seen as cost efficient for both R&D and equipment CAPEX.
Oil & Gas companies are seasoned investors in long-term assets, but
they are used to faster and greater returns than grid scale batteries
can offer.
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Utility companies view assets in the long term and may have investors
willing to wait longer if the risk is also low. A condition is that they
must trust governments and regulators to provide stable market
conditions over this longer term. This will depend on consistent
and clear long-term government policy driven from well researched
governmental initiatives.
FIGURE 2
Annual grid-scale battery storage additions, 2019-2022
All Figures in GW
12.0
10.0
Box – economics of
grid batteries
8.0
Cost = $200 per kWh, elect in = $0.05,
elec out = $0.30, spread = $0.25. 200 /
0.25 = 800 cycles to break even.
6.0
365 days per year = 2 ¼ years to break
even.
4.0
If life of battery is 3,000 cycles then
life is 8 ¼ years. 3,000 cycles x $0.25 =
$750 returns, = $550 pro昀椀t over 8 years.
2.0
If life extended to 12 years then
returns = $1,095.
0.0
2018
China
Source: IEA
2019
USA
2020
European Union
2021
Korea
Japan
2022
WEMO 2024
Stationary grid scale batteries
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