Alan Greenshields, Director of Europe, ESS Inc.
The ongoing transition to clean energy has spurred new technologies, new markets and new opportunities for investors seeking to invest in a sustainable future and earn solid returns on their investments. Energy storage, a critical component of the clean energy future, is gaining notice by utilities, large-scale energy users and investors. Today, as the world reels from energy shocks stemming from Russia’s invasion of Ukraine and grapples with the ongoing consequences of global warming, investors seeking opportunities in the clean energy space are moving towards the massive opportunity presented by energy storage.
The UK Government recently published its “Energy Security Strategy” which established a target of 95% low carbon electricity by 2030. Achieving this target will require not only significantly more wind and solar generation, but Long Duration Energy Storage (LDES) solutions that can economically store and release clean energy over 10+ hours to balance the inherently intermittent nature of renewable resources like wind and solar. LDES technologies store valuable renewable energy when it is plentiful and ensure that energy is available when it is needed, eliminating the need for fossil fuels.
As the clean energy transition gains momentum, the rapidly growing need for LDES is already driving a new market with ample opportunities for investment.
The Decreasing Cost of Renewables Enables the Clean Energy Transition
Since 2010, the cost to deploy wind and solar energy has declined substantially. Today, they are among the lowest-cost options for new generation capacity. Meanwhile, recent geopolitical upheaval has driven up the price of fossil fuels and underscored the volatile nature of global energy markets. Gas prices have skyrocketed, and the UK energy price cap increased by 54% in April 2022, with speculation that the cap could increase by a further 30-50% in October.
Due to its low costs and both environmental and geopolitical developments, the transition to clean energy is proceeding rapidly. According to the International Energy Agency (IEA), the renewable energy sector is expected to grow 50% between 2019 and 2024.
However, even with improvements in technology, wind and solar remain intermittent sources of electricity. For the successful transition to renewables, the UK will need to couple wind and solar with energy storage to fully utilize these renewable energy resources and replace fossil fuels.
The Opportunity for LDES Technology
Today, the energy system is increasingly supplied by intermittent renewables and primarily balanced by fossil fuel generators which are able to augment the variation in wind and solar generation to maintain grid stability. With Lithium-ion (LI-ion) technology as the incumbent, most battery energy storage projects built to date have durations below four hours. While these can help smooth brief fluctuations in generation, they lack the capacity needed to provide baseload renewable energy and fully replace fossil fuel generators over longer timeframes.
With these projects built on Li-ion technology, the same technology that powers most cell phones and EVs, they suffer from a number of operational and practical drawbacks which make them poorly suited for grid-scale storage. Risk of fire, reliance upon critical minerals and capacity fade, as you have likely observed with cell phone batteries, are just a few of the constraints presented by Li-ion technology.
New long duration technologies are now available which offer advantages over existing battery systems. For example, iron-flow batteries, such as those manufactured by ESS Inc., are now commercially available and offer a number of advantages over their Li-ion predecessors.
The new LDES systems on the market are ideal for long duration, (4 – 24 hour) energy storage. Where Li-ion system costs increase roughly in proportion to storage capacity, iron-flow batteries rely upon a low-cost electrolyte made of iron, salt and water, which is not only non-toxic and fully recyclable, but allows the cost-effective addition of capacity. At long durations, iron flow batteries are the most cost-effective form of energy storage. And, the technology is not theoretical: Iron flow batteries have already been successfully deployed at a number of utility and commercial sites.
Demand for long duration energy storage is already growing with over $3bn invested in technology providers in the last five years. These investments represent a start, but much more LDES capacity will be required in coming decades. According to McKinsey & Co., the world will need between 85 and 140 TWh of long duration energy storage by 2040 to achieve carbon neutrality.
Sustainable Energy Systems
Investments in the energy transition will enable society’s shift towards low-cost renewable energy to minimize climate change and deliver returns for years to come. LDES will be the lynchpin of that clean energy future, enabling wind and solar to provide baseload power and fully retire fossil fuel generators. The opportunity is commensurate with the need for LDES solutions as LDES technologies attract unprecedented interest from governments, utilities and transmission operators. This sector presents both short and long-term benefits which will deliver not only a return on investment, but a lower cost, more sustainable and more secure energy system.