In order for intermittent sources of renewable energy (such as solar and wind) to become mainstream, we need to have an economical way of storing power. Luckily, energy storage prices are dropping faster than most people have predicted.
Many people see economical energy storage as the missing link between renewable energy and mass public adoption of the technology. Over the last several years, the battery storage industry has certainly been moving in the right direction. In 2010, it cost almost $1,000 USD for a 1 kWh battery unit. Today, the same battery would cost only $230 USD.
Depending on your application, battery storage may be economically attractive even at today’s prices.
In our opinion, low cost battery storage has the potential to disrupt the power industry in three key ways.
- Circumvent/arbitrate variable electricity rates.
- Allow “grid-scale” renewable energy.
- Reduce effects of government policies.
Circumvent/Arbitrage Variable Electricity Rates
Low cost energy storage will allow users to arbitrage any variable rate scheme that utilities create. This is because storage will allow customers to use their own generation to cover more of their electricity needs during peak hours. Furthermore, the customer can also make money off of the utility company if net metering is allowed. Consider the following two scenarios.
- Scenario 1: The local utility normally charges 10 cents per kWh, but increases the rate to 15 cents per kWh during peak electricity usage times. A customer who has energy storage will charge up their batteries at 10 cents per kWh or through their own generation, and not use any energy from the grid during the times when rates are 15 cents per kWh.
- Scenario 2: The local utility normally charges 10 cents per kWh, but increases the rate to 15 cents per kWh during peak electricity usage times. Furthermore, the local utility company allows net metering. A customer who has energy storage will charge up their batteries at 10 cents per kWh or through their own generation, and sell this power back to the utility at 15 cents per kWh during peak times. In this scenario, you can actually make money off of the local utility company.
Allow “Grid-Scale” Renewable Energy
Most renewable energy sources are intermittent, and this causes issues for the electricity grid since it is constantly trying to balance supply with demand. The situation is exaggerated if a large portion of the electrical generation comes from renewable energy.
For instance, imagine a large cloud passes by and blocks out the sun. The solar generation for the area under the cloud could drop by 90% within a minute. The electrical grid needs to be able to quickly respond to the drop in solar generation capacity by bringing other generation sources online, or disburse power from power storage units.
To help utility companies respond to rapidly changing electrical demand, many cities are seriously examining updating their legacy electricity grids to a smart grid.
Reduce Effects of Government Policies
The political appetite for renewable energy is constantly changing. Economical energy storage will allow consumers to generate and consume their own power – rather than relying on policies such as net metering to make renewable energy practical.
Once consumers have the option to defect from the local utility grid while still maintaining their lifestyle, we will see a significant shift in the electricity market.