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Falling Cost of Energy Storage to Enable Mass Adoption in 5 Years

Deutsche Bank predicts that the cost of energy storage

A recent report from Deutsche Bank predicts that the cost of energy storage – the “missing link of solar adoption” – will drop dramatically. Stored energy will also be technologically ready to be deployed on a large-scale basis in the next five years about his.

This solar industry report, published on the first week of March 2015, revealed that while costs for the greater majority of available battery technologies remained high, economically competitive batteries were the “holy grail” as well as the “killer app” of solar penetration.

The Deutsche Bank report indicates that this ultimate solar and renewable energy objective might not be far out of reach since many costs are already lower than published literature’s have suggested.

“Using conservative assumptions and no incentives, our model indicates that the incremental cost of storage will decrease from about 4 cents per kWh today to around 2 cents per kWh within the next five years,” says the report.

“When overall system cost decreases are considered, we believe solar + batteries will be a clear financial choice in mature solar markets in the future,” the report continues.

According to the Deutsche Bank report, the current cost of a typical lead-acid battery may be as low as $200 per kWh, while best in class lithium-ion technology was producing commercial/utility packages in the $500 per kWh range at the end of 2014. This is half the cost of the $1000 per kWh in the previous 12 months.

“We believe 20-30 per cent yearly cost reduction is likely (for lithium-ion batteries), which could bring (them) at commercial/utility scale to the point of mass adoption potential before 2020,” explains the report.

Deutsche believes that the commercial-scale market will be one of the first areas where battery deployment will prosper because of clear logical reasons.

“Commercial customers are often subject to demand based charges, which can account for as much as half of the electric bill in some months,” says Deutsche.

“We think companies with differentiated battery solutions coupled with intelligent software and predictive analytics that work with the grid to avoid these charges and smooth electric demand will pave the way for mass adoption,” Deutsche adds.

If electrical utility companies are properly incentivized, the report indicates that they could start to combine neighbourhoods of solar + batteries that will function as a single source of load reduction.

“Batteries could be dispatched as needed to reduce peak demand across the system,” continues the report. “In a high grid-penetration scenario, this could reasonably lower the necessary capacity from conventional generation sources,” the report explains.

“In turn, we think it is reasonable to hypothesize that lowered capacity needs from lowered peak demand would simultaneously lower the need for large up front capital investment in peaker plants,” the report adds.

Deutsche believes there will be two possible scenarios that would allow this kind of utility-driven household battery deployment:

  • third party leasing companies and individuals working with the utilities, or
  • a shift in regulatory framework which will enable utilities to include residential solar in their rate base.

“Both of these scenarios would likely significantly improve reliability, enable micro grids to function as needed, and improve grid resiliency during emergency situations,” the report concludes.

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