The world is at a tipping point of an energy revolution. Until now carbon intensive industry has allowed us to reach the present development stage. But global warming is quickly increasing. This pressures for a swift change to electrify and decarbonize our society at a pace never seen before while continuously investing in renewable energies.

For this mix, renewables will be a keystone. Existing flexibility provided by centralized power plants will be lost and decarbonization will require new flexibility to cope with daily and seasonal volatility. Energy storage will become a central piece of the energy mix puzzle. Without storage, much more renewables would be need, increasing curtailment and respective levelized cost of storage (LCOE).

The automotive sector is moving towards electrification, demanding great developments on Li-ion batteries. Technology is improving while costs are decreasing. This tendency is expected to continue both with incremental (e.g.: reducing Cobalt in NMC batteries) and disruptive (e.g.: solid state batteries) developments. Challenges include energy density, cost reduction, and fast charging capabilities.

" The energy sector will need fast reacting solutions but also storage to last for days or longer "

Static storage has different challenges with its own requirements. Other solutions may be more efficient. The energy sector will need fast reacting solutions but also storage to last for days or longer. Players will need new tools for grid management, asset management, and dispatch as well as disruptive approaches to project financing and adapt to more uncertain ROI.

Below are some of the key development paths to tackle in the future:

Future Grid Needs:

Presently, most energy storage projects deployed (not considering Hydro-storage) have less than four hours of energy. The projects are mainly focused on direct renewables integration, island applications and need for grid resilience with faster response time requirements. Until now Li-ion batteries are responding to these challenges due to their relatively large operation span.

Moving from a system with 30 percent renewables to 75-90 percent will demand new approaches from operators and decision makers to have the capacity backup required, existing and new system services, system black start guaranteed, inertia, voltage, etc.

Among different other technological solutions, investment in longer duration storage systems will be needed. Different technologies – mechanical, electro-chemical, thermal and chemical – are trying to answer these needs. And it can go from daily storage (e.g.: gravity storage/redox flow batteries) to seasonal storage (e.g.: hydrogen).

Storage Design and Management

The use of tools to analyze asset performance based on each specific use case including multi variables (such as plant design, chemistry, and warranties) is crucial to define the correct system size and technology. Developing projects with the longevity of renewable projects (but with more complexity), requires additional tools for planning and dimensioning stage. The access to open source databases on cell models would enable more efficient design tools. It would also open the offering and transparency regarding critical aspects as warranties and analysis of different proposals for a specific tender.

It would also allow projects with better performance and operation. Present Li-ion batteries show a direct correlation between degradation and many parameters (cycling, temperature, standby state of charge). The use of operational data analytics will have enormous value both for downtime reduction and for creating digital twins to estimate future degradation patterns from existing use cases while considering new market opportunities and regulatory / market changes, extending the lifetime of storage assets.

Several start-ups are providing design and operational management systems, still developing their models and creating their own database. But they need to be updated at each novel cell, which are constantly entering the market. Again, the early access to standardized cell model information would allow for more efficient operation of assets and create more competitiveness in this market.

Financial Riskiness

Usually, long-term energy investments are highly capital intensive and involve limited technical risks. As so their cash-flow profile is quite stable, attracting risk-averse investors with low cost of capital.

But the energy storage market is far from mature. Presently we are still seeing very different tender rules based on different needs and opportunities. The readjustment of market rules (such as derating systems while in operation) can change earnings throughout project operation adding risk to the investment. So, investors have less clarity on the revenues which is combined with technological and operational uncertainty. The risk/return profile is thus very different from most renewable projects. Presently promoters are responding with investments on opportunities to come based on expected future price volatility. Also, they are expecting first mover advantages to gain expertise in operation while expecting for market expansion.

It is critical to have a view on the targets and market remuneration system to integrate these new technologies. We cannot forget these new resources may cycle much less than present systems (e.g., long duration storage). How will promoters be able to support investment on longer duration systems? How will they operate and compete with existing storage, generation, EVs, demand response, etc., while still maintaining financial viability? Regulators and decision makers will need to create the regulatory framework for a level playing field while guaranteeing grid resilience and security of supply.

Conclusions

The challenges up ahead are relevant, and they will need to be tacked in parallel.

Opportunities are widespread and other industries will benefit. Recycling is now growing and will be key in the value chain.

Solutions are being tested and are desperately needed as the energy sector embarks on a 20 years revolution without parallel in the last century. Thrilling times up ahead.