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Capturing the Value within Distributed Energy Storage

The use of energy storage has the ability to improve both power quality and power costs. We argue that locating storage close to end users, in the form of Distributed Energy storage, offers the greatest benefit to both investors and consumers.
The increased use of intermittent energy sources in the UK creates issues for the stability of our national power system. The intermittent nature of solar and wind power — even with the sun passing briefly behind a cloud or a brief lull in wind speeds—can lead to voltage surges and drops, causing brownouts and power cuts.

Moreover, maintaining a consistent level of power becomes increasingly important now modern digital devices from computers to advanced medical equipment require a steady voltage and frequency – with far less tolerance than the clunky electronics of a few decades back.

One solution is to limit the power output from solar by restricting new installations (as both Hawaii & Australia have done) or introducing equipment to physically limit solar output (mandating the use of products like VoltLogic or GridGEM).

Another solution is the development of flexible fast-response generation, which is able to respond within seconds to reduced output from other generation sources.

A third solution is to introduce equipment which stores excess power and delivers this power when clouds pass or wind varies.

The impetus for energy storage was given a big boost by the state of California, which through its Assembly Bill 2014 required utilities to procure 1.3GW of storage by 2020. On the back of this, a number of players have emerged, building 20-40MW projects using lithium-ion technology. Outside the US, other technologies have gained a foothold, including the use of flow technology for 20-30MW projects (which have lower efficiencies than lithium- ion (70% vs 90%) but are better at adjusting quickly to power density requirements).

Whilst centrally-located storage has a number of advantages, such as greater control and the capability to kick-start large power plants, there are a number of disadvantages. The most obvious is the need for an extensive Transmission and Distribution (T&D) system to move the power from the centralised location to the area of demand. This T&D system is expensive to both build and maintain.

An alternative is Distributed Storage, where energy storage is situated close to or at the location of demand. This effectively de-bottlenecks all the upstream T&D infrastructure – and with lower loads on the upstream assets, there are associated and measurable improvements to both power quality and grid stability.

 

Further, studies in California have put some numbers around Distributed Storage. Where straight solar exports from homes attract a 13-42c/Kwh value, a combined solar-plus-storage solution adds 25c/KWh to that power – in other words it doubles the value of the power. This is supported by separate studies by the Rocky Mountain Institute. Analysis of air conditioning, hot water heating, and timed electric-vehicle charging estimated a 40% saving in energy costs for those with suitably-sized storage solutions.

With regard to the equipment, there are a number of manufacturers emerging in the Distributed Storage market. Tesla have the 5KW Powerwall, whilst European manufacturer Sonnenbatterie produce a 8KW battery which also incorporates energy management and intelligent self-learning software. PowerLegato have developed a 7.2KW product, whilst LG Chem have also introduced a 6.4KW product. These batteries typically have 5,000 cycle lives, but research is underway to increase cycle life.

The investment opportunities with Distributed Storage are largely split between equipment and service. On the equipment side, manufacturers of batteries and metering systems have the potential to tap 26m UK households – which based upon prices falling to £1,000 over the next 5 years equates to a £26bn addressable market. The market for installation and software services is arguably of the same magnitude.

Over and above serving the existing market requirements, it is clear that the market for Distributed Storage is closely linked to the market for Electric Vehicles. With 76% growth in global EV registrations last year, the market for Distributed Storage is on the cusp of something substantial.

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