Smart Buildings

Predictions Suggest a Sharp Fall in Energy Storage Costs

A report published by the Australian Renewable Energy Agency last week predicts a “mega-shift” to energy storage adoption, driven by demand. The report expects to see the costs of lithium-ion batteries fall by 60% in less than 5 years, and by 40% for flow batteries, and all this without significant changes in chemistry and technology, simply through economies of scale. The report prepared by AECOM, suggests demand will come from both the supply side (as networks work to adapt to increasing distributed and renewable energy capacity) and from consumers wishing to store their solar energy; as well as knock on effects from the rapidly changing economic proposition. The average global cost of installing residential energy storage systems will fall from US$1,600 per kWh in 2015, to US$250 per kWh by 2040, according to the latest Bloomberg New Energy Finance (BNEF) report. In BNEF’s ‘New Energy outlook 2015, long-term projections of the global energy sector’ forecast […]

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A report published by the Australian Renewable Energy Agency last week predicts a “mega-shift” to energy storage adoption, driven by demand.

The report expects to see the costs of lithium-ion batteries fall by 60% in less than 5 years, and by 40% for flow batteries, and all this without significant changes in chemistry and technology, simply through economies of scale.
Battery Storage 2

The report prepared by AECOM, suggests demand will come from both the supply side (as networks work to adapt to increasing distributed and renewable energy capacity) and from consumers wishing to store their solar energy; as well as knock on effects from the rapidly changing economic proposition.

The average global cost of installing residential energy storage systems will fall from US$1,600 per kWh in 2015, to US$250 per kWh by 2040, according to the latest Bloomberg New Energy Finance (BNEF) report. In BNEF’s ‘New Energy outlook 2015, long-term projections of the global energy sector’ forecast a boom in solar over the next 25 years, with PV accounting for 35% (3,429GW) of new power capacity additions worldwide.

An official BNEF statement said: “The real solar revolution will be on rooftops, driven by high residential and commercial power prices, and the availability of residential storage in some countries”.

BNEF analyst, Logan Goldie-Scot, said that near-term growth will be relatively limited for residential storage, because of “challenging economics” and “belligerent noises” from policy makers, however, Germany and Japan are already seeing strong opportunities in this area. Uptake worldwide will increase in the long-term with falling costs.

Goldie-Scot highlighted one caveat to the calculation of US$1,600 per kWh as the average cost for global residential storage in 2015, which is that Tesla Motors is already taking orders for lower prices, even though its 'Gigafactory' is not yet up and running.

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Elon Musk took the energy storage world by storm with his announcement of the much-anticipated Tesla Powerwall battery. The Powerwall is sleek, modular and oozes with the high level of design quality Tesla has become known for. More important, it’s cheap — much, much cheaper than anyone was expecting. The Powerwall is advertised at $350/kWh for its 10 kWh battery (the smaller 7 kWh battery costs $429/kWh), and the Powerpack (a utility-scale battery solution) is priced even lower at $250/kWh.

Industry analysts and organisations focused on the relationship between battery costs and adoption are still wrapping their heads around these cost announcements. However, similar values have now been seen by other major manufacturers such as Panasonic.

A recent report by Lux Research estimates that frontrunners such as Panasonic could drive down the price of Li-ion battery packs for electric vehicles by 35% to as low as $172/kWh in 2025. However, only the best-in-class players will achieve that cost threshold, while others will lag at $229/kWh.

Technological innovation and economies of scale backed by big balance sheets are helping leading Li-technology battery manufacturers to widen their competitive advantage and lower costs. Li-ion battery system prices have already dropped 33% in the last five years, according to London’s FC Business Intelligence’s analysis of recent utility evaluations, and are expected to continue to fall.

Some of the benefits of Li-ion cost reduction could spill over to the stationary storage market, though they will not address added costs like land, construction and integration. According to Lux, installed stationary systems for residential and grid-scale use will hover around $655/kWh and $498/kWh in 2025, respectively.

Falling battery costs are good news for Li-ion systems because batteries are the single most expensive item in a storage system, accounting for about 60% of capital expenditure, followed by power conditioning system (PCS) costs with 20%, and balance of plant and controls costs with 10% each.

With all predictions pointing to a dramatic fall in battery prices the stationary energy storage industry is expected to bloom. In turn this will benefit the solar PV industry and stimulate the smart building, or building internet of things (BIoT) sector, spurred on by greater power independence within the built environment.

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