Lower-Cost Wind and Solar Will Drive Energy Storage Technology

Source: By Naureen Malik, Bloomberg News • Posted: Thursday, November 19, 2015

Large wind and solar farms can compete in the power market even with low natural gas prices and will drive the adoption of technology to store renewable energy, according to an analysis by financial advisers Lazard Ltd.

The cost to build a utility-scale solar photovoltaic plant has fallen by about 80 percent since 2009 while wind projects have dropped by 60 percent, the financial advisory and asset management company said in a report. Lower costs make large renewable power projects competitive with conventional generators without subsidies.

The need for systems to store renewable energy so it can be used when the sun doesn’t shine and the wind doesn’t blow will drive down the cost of batteries over the next five years, the report said. Batteries aren’t cheap enough to allow renewable power to replace coal- and gas-fired plants.

“Utility-scale solar and utility-scale wind technologies continue to be a cost-effective complement to conventional generation even in a low natural gas environment,” Jonathan Mir, head of the North American power and utilities group at Lazard in New York, said in a telephone interview Tuesday. “Storage may be on the cusp of a pattern very similar to renewables five to seven years ago. This is the critical element.”

Thin-Film Technology

Cheaper utility-scale solar systems are coming. The cost to build a large farm using thin-film technology panels may decline to $43 per megawatt-hour in 2017 from about $50 to $60, report showed. Wind costs about $32 to $77.

By comparison, combined-cycle gas-fired plants, among the most efficient, cost about $52 to $78 while the cost for coal plants ranges from $65 to $150.

“Energy costs can be more expensive outside the U.S. and that relative competitiveness can be even stronger in other parts of the world where there are good wind and solar resources,” Mir said.

The catch is that renewables and battery storage can’t replace so-called baseload generation needed throughout the day to keep the lights on, according to the report. Smaller rooftop solar projects, which can cost $184 to $300, can’t compete with conventional generation without subsidies.

Storage systems are still too costly to replace a gas-fired plant because battery life “is more difficult and costly to increase than the size of battery,” the report found.

Niche Applications

Lithium-ion batteries are becoming cost-effective in niche applications such as maintaining voltage and frequency on transmission lines, and can help defer high-cost projects such as substations, the report found.

“With an increased demand for storage, we will expect to see declines in cost, which creates a virtuous cycle, which enables us to use more renewables and increase volumes,” Mir said.

The cost of a lithium-ion battery used for frequency regulation is about $211 to $275, Lazard said. That compares with $321 to $658 if those batteries are used to replace power plant output needed to meet peak demand.

“For 20 or 30 years people have been asking battery engineers how to make a battery better for cell phones or laptops,” Mir said. “People are only starting to ask how they can apply that to a power grid. The power industry is enormously focused on this.”