Don’t Neglect Round

Apr 06, 2023

The world is moving toward renewable sources for electricity generation in an attempt to reduce fossil-fuel reliance. But wind and solar can't provide a consistent flow of power 24/7, and grid operators have realized that new electricity generation needs to be paired with storage to manage periods with no sun or wind.

The decreasing cost of lithium-ion batteries has made battery energy storage systems (BESS) more affordable; however, the cost of battery storage systems represents only 20%-25% of any project's lifetime cost. Power equipment, land, site work, cabling, project design and management, grid integration, transportation, and other related up-front costs represent another 25%.

COMMENTARY

So, what makes up the other ~50%? Operations and maintenance, otherwise known as O&M, represent a few percentage points. O&M generally includes expenses associated with maintaining, repairing, and operating energy storage systems over their lifespan. The rest comes from the cost of electricity to charge the system, which is significantly affected by the system's overall round-trip efficiency (RTE).

Levelized cost of storage (LCOS) is a metric used to determine the cost per unit of energy discharged from an energy storage system. The calculation is usually expressed in dollars per megawatt hour (MWh) and includes initial costs plus operating costs divided by the energy discharged over the asset's service life.

There are dozens of potential variables that may be used to determine the true levelized cost of storage, and different vendors will add, omit, or adjust different ones to put their products in the best light. This is why it's so important to understand the role of RTE and cost of energy in a storage system, because they often have the biggest impact. These are also components that vendors with low-RTE technologies will most often discount (or omit altogether).

Round-trip efficiency is a measure of the amount of energy put into a system compared to the amount dispatched, and is expressed as a percentage. A system with a high RTE (75%+) is able to dispatch most of the energy fed into it. A low RTE indicates that the system loses a considerable amount of energy, often to heat arising from irreversible side reactions or high internal cell resistance. Many long-duration energy storage systems have RTEs below 50%, creating a significant amount of energy waste.

For example, lithium-ion batteries generally have RTEs of 90%+. In contrast, lead-acid batteries have lower RTEs of around 70%, meaning that approximately 30% of charge energy is lost. RTEs for flow batteries can range from 50%–75%, while metal-air batteries could have RTEs as low as 40%.

If the electricity used to charge low-RTE batteries was free, efficiency might not matter much. But electricity always comes with a cost. Some might argue that during periods where supply exceeds demand, renewables could be used to charge batteries when they would otherwise be curtailed. There's a logic to that, but curtailment periods can't always be predicted.

Even if you’re using electricity that would otherwise be curtailed, you have to assign a monetary value. If a turbine is spinning or a solar panel is generating electricity and a battery system is storing that electricity, every component in the system is subject to normal wear and tear plus maintenance and replacement protocols—all of which have costs associated. Factors at play include:

Technology lifespan and degradation rate. An energy storage system's service life is determined by technology and cycles. All energy storage systems deteriorate over time, making them less efficient at storing and discharging energy. The same goes for generation sources. From solar to wind to flow batteries to lithium-ion, the more the components are used, the shorter the lifespan and the sooner the need for repair, replacement or augmentation.

Maintenance costs. Solar panels, wind turbines, battery systems, transmission lines, and power equipment all have to be maintained. The more they’re used, the more often components need to be serviced or replaced.

The latest buzzy term in the energy space is "long-duration energy storage," or LDES for short. While there's no single definition of what the term means, the term has generally come to describe a non-lithium storage technology that can provide energy for anywhere from 8 to 160 hours at a lower installed cost per MW than lithium-ion batteries or a standard natural gas turbine.

LDES isn't confined to battery storage; non-battery technologies include compressed air, latent heat, flywheels, and more. In fact, pumped hydro currently accounts for the vast majority of all LDES capacity in the US, and will likely remain in that position for an extended time. Battery technologies being positioned for LDES use include flow batteries, zinc-based chemistries, metal air, nickel hydrogen, and more.

These technologies all work well and are generally safer than lithium-ion batteries, but they come with trade-offs. Many have high up-front costs and must be amortized over 30–40-year periods to be cost competitive. Some have very low energy densities, requiring significant amounts of land for installations above a few megawatt hours. Some are rate-limited and can't discharge as quickly as needed for specific applications. Some have very restricted siting requirements. And maybe most importantly, many have RTEs below 60%, with a few at 40% or lower.

So, what does this all mean? The race is on to build a better storage system, and with no universal standard for calculating LCOS, every vendor is using a model that plays to the strength of their own technology. If you’re investigating a new storage technology, be sure to ask a few questions when LCOS numbers come up, such as:

How many years are they calculating when it comes to system life? Lithium-ion batteries usually have to be augmented or replaced somewhere between 10 and 15 years of use; vendors with low densities or high installed costs may calculate over 30–40 years to lower their LCOS while factoring in two or more replacement cycles for lithium-ion.

What are they using for the cost of electricity to charge the system, and how does that compare with your actual costs? Even if you’re only planning to charge the system during periods you’d normally be curtailing renewables, remember that there's still a cost to running those systems. A system with a low RTE may end up having a much higher LCOS even when you’re paying very little for electricity.

Are they including the cost of land in their calculations? If you’re installing a storage facility in a rural area where land is cheap, this may not matter so much. But if you need to place storage in or near a high-cost-of-living area, cost of land (and availability) could be one of your primary concerns and should definitely play a role in the LCOS calculation.

Are they including installation tax credits (ITCs) or production tax credits (PTCs) in their calculations? If so, be sure that the numbers are correct for your projects, and that the same are being applied to any other technologies you’re evaluating.

—Mukesh Chatter is the CEO of Alsym Energy, a technology company developing a low-cost, high-performance rechargeable battery chemistry that is free of lithium and cobalt.

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