Making Long Duration Energy Storage Viable

According to the latest WoodMac research, renewables currently make up a 26% share of US generation capacity, which is expected to amount to 43% by 2030. WoodMac expects batteries to make up 14% of the renewable supply stack by 2030, which will double to 29% by 2050. A large majority of this storage deployment will come from FTM projects, with just over 500GW being added by 2050.

But where does long-duration storage fit in this story? In a world where baseload demand will need to be met with renewable energy, primarily from variable sources such as wind and solar, there is a key technology need to ‘firm up’ that variable capacity, ensuring grid stability, reliability and flexibility.

Long duration energy storage (LDES) - which flow battery company ESS, inc. defines as 4-to-16 hours of capacity-  can bridge that gap, stabilizing the grid, complementing, and accelerating the growth of renewables, and enabling distributed generation. A recent California Public Utility Commission grid planning study called for 1GW of long-duration storage in as soon as five years. Recent research from the California Energy Storage Alliance showed the West Coast state will need to deploy up to a staggering 55 GW of LDES by 2045 to support its 100% clean electricity goals.

Out of the myriad of non-lithium-ion battery technologies advancing long-duration storage capabilities, flow batteries are gaining momentum.

In conversation with WoodMac’s Senior Energy Storage Analyst, Vanessa Witte, as part of WoodMac’s recent Power & Renewables Virtual Conference, ESS’s CEO Eric Dresselhuys acknowledged that energy storage has been a big question since the early days of the renewables industry in the United States, back when wind and solar were a single-digit attrition in the market: “Back in those days, people already looked ahead and said, how are we going to keep the system stable, reliable, resilient on a 24/7 basis?”.

Eric Dresselhuys founded smart grid network provider Silver Spring Networks in 2002, taking the company public and then selling it to Itron. He recently took the helm at ESS as CEO and serves as a board member at energy software player AutoGrid, the block-chain-enabled IoT company Helium Inc., and as a Non-Executive Chairman at Enian. Eric sees the LDES space as “a market right on the cusp of happening and being formed, which makes it an exciting time to jump into these things.”

Eric made a nuanced distinction on the state of the LDES market: “Is it nascent? Maybe the numbers say it is. I say from a market perspective, [it is] really on the cusp of maturity. You really are at a moment where the market is going to be formed, as changing attitudes, economics and regulation are all coming together”.

With Silver Spring Networks, Eric helped build the market for smart meters well before it was deemed ready for such an advancement. So what similarities and differences does he see between the smart grid space 20 years ago and LDES technology today?

“When we were working on smart grids back in the late 90s and early 2000s, smart grid wasn’t even a term, IoT hadn’t come into vogue,” he recalled. “We would go to people and explain what the smart grid was all about and they would say – ‘I’m not even sure that is a good idea, you’re going to connect everything and it’s all going to talk to each other and be on a network in real time’. Fast forward a few years, as people really started understanding the new use cases that were coming through the energy transition, through distributed resources, through enabling consumers, and all of a sudden the market turned really quickly. In 2004, if you would have looked at how many RFPs came out and said ‘please build a smart grid for me’, the answer would have probably been zero. In 2009, almost 100% of the RFPs that came out got away from looking at earlier technologies and were all looking for smart grids.”

So, can the 2021 excitement around long-duration storage compare to that state of unprecedented acceleration smart grid technology saw almost 15 years ago?

“When we look at the storage RFPs that come out today, most of that is short duration: 1 hour, 2 hours, sometimes 4 hours. And then an announcement like the one in California happens, calling for 1.4 GW [of long-duration storage] on the system in the next 3-4 years. Once people start to realize that there’s better technology available with compelling business cases and benefits, I think markets move pretty quickly,” Eric noted.

However, as with every emerging technology, there are key questions around the cost, feasibility and scalability potential of LDES systems. There are even voices asking whether we are ready for long-duration storage right now, or even in a few years’ time.

Eric’s answer to that question is crystal clear: “It is needed now, and it is going to grow more in the future”. Eric finds the compelling use cases are for utilities aiming for truly 24/7 decarbonised systems. He added: “ They don’t just want to feel good, they don’t say ‘most of the time I’m doing good things with renewables, but I’m willing to turn on that gas-fired peaker plant to get me through the 4-to-9pm range’ or something like that. So we get calls from utilities that are really thinking deeply about creating a 24/7 [decarbonized] system.”

“These utilities realize that, if we’re going to hit the types of timeframes [and emission reduction targets] we’re talking about – New York as an example is 70% by 2030, 100% by 2040; the President has called for 2035 to be decarbonized. If you do that math, and say, what do I have to implement to get there, the moment is now to get going on deployments,” Eric argued. “We (ESS) are actively engaging with IPPs, developers and utilities scoping LDES projects and the level of technology and cost due diligence that we are supporting tells me that this market is already moving quickly.”

But the case for accelerating energy storage growth is also based on economics: “On a more practical level, you look at things like California dumping about a GW of renewable energy there just was no market for, or you see prices are now going negative on a pretty regular basis in places like the Midwest. If you’re a developer with a solar plant, your economic model is now seriously under threat, and so you have to find a way to take that, perhaps, free solar – if we were going to ground it anyway – and shift it to evening and night-time hours and that economic model is now really compelling.”

In addition to California’s recent RFPs for long duration storage, utilities in other US territories are starting to outline the need for LDES in their resource planning. So what are the main hesitations ESS faces when sitting down with executives at utilities from states that are leading the charge on storage deployments?

At the tip of the spear, there is deep engagement and real RFP opportunities for LDES. But in the broader market long duration storage technologies, business cases and LCOS still need to be better understood. Eric explained: “The first thing is there still isn’t much awareness that these products and solutions even exist. You can buy LDES systems today – the technology exists and the economic model is great.”

“The other thing I find quite often is that when we talk about long-duration storage, people have a tendency to look at it as ‘either/or.’ Either I’m going to get long-duration bulk storage or I’m going to use a shorter-term battery, probably lithium, to do ancillary services, frequency regulation, some of those power-centric use cases. They’re usually surprised to learn they can also do all those relatively short-duration things with a long-duration battery – but also get long-duration energy use cases [storage capacity] out of it. So the economic model is really a value stacking opportunity. Once they understand that, the wheels start to turn,” he explained.

There is a need to understand the critical differences between the use case for short-duration and long-duration storage, and also how these two capabilities can complement each other. Eric also highlighted that he doesn’t believe there’ll be a time in the near future where widely used short-duration lithium-ion batteries will go away. However, with the volume of EV growth projected over the next decade, there could be a situation where lithium becomes “too precious” for the grid because there are no technologies other than hydrogen as a longer-term play to decarbonise transportation. From that perspective, long-duration storage technologies like flow batteries, that also hold short-duration capabilities for grid services, represent a flexible resource.

In terms of market segmentation for energy storage, Eric sees a clear demarcation between short-term energy storage, LDES, and what he defines as ultra-long energy storage. This categorisation can help model the conversation around what long-duration storage actually is, and the value it can deliver.

There has been a historic market for short-term energy storage, which is used primarily to smooth out little bumps in the system and provide ancillary services, which caps out at around 4 hours of capacity. Then there is this notion of LDES, which caps at 12 or maybe 14 hours of capacity. Anything longer would move you into that next, ultra-long-duration storage category, which is an evolving part of the market. However, Eric believes that is too low a bar today, preferring to “snap the line” at 24-hour capacity. Beyond that, these are ultra-long-duration seasonal energy storage systems, for weeks or even months of capacity.

According to Eric, the key differentiation in this taxonomy would be that anything that happens in less than a day would arguably be used on a more frequent basis: daily, perhaps multiple times a week, but pretty frequently. As soon as you get into ultra-LDES, that could be thought of almost as an insurance policy: when you look into it more closely, the use cases are likely to be scenarios that get talked a lot about, like ‘what happens when the sun doesn’t shine for three days?’ or ‘what happens when there’s no wind for a week?’.

These ultra-LDES resources might not be cost-effective on a daily basis, but their value proposition looks a lot better when there’s no alternative. The bottom line is short-duration energy storage delivers almost nothing incremental to create a 24/7 decarbonised electricity system. ESS’s iron flow battery technology is unique in that it delivers both the short duration capabilities like ancillary services and long duration use cases, providing 4-12 hours of capacity with a single asset and a lower levilised cost of storage (COS) than lithium-ion.

One long-duration storage application ESS hears about most commonly, particularly in California, due to its high renewable penetration, is ramp support: from that ‘Nessie’ curve that is looking more like a two-humped animal, not a duck curve, to that afternoon ramp that goes something like 12-13 GW on the extreme end, starting to approach 6 hours. That bulk energy storage needs to come online for ramp support and energy shifting, carrying that into the evening when the solar is dropping off but you still have climbing demand peaking in the evenings. Related to that, it’s the morning peak, where you have another ramp issue. That is what ESS considers a classic use case for FTM long-duration storage.

ESS has also identified resiliency as a key LDES application. With bulk storage, grid operators have the ability to ride through extreme weather events while making changes to the system in case of significant grid outages. Short-duration batteries may be able to do part of that, but if you have whole swaths of the system that are going to need significant capacity, that’s not going to cut it.

Delving into the policy variables that will help the LDES market push forward and consolidate in the US, Eric outlined two fundamental factors: “The first is already happening, which is price signals as they go out driving activity. The second thing is, as people are doing their longer-term capacity planning in places like California, New York, Oregon or Connecticut, they are doing the math of what it’s going to take to fully decarbonize the system. They’ve come to the conclusion that you have to have LDES as part of your integrated resource planning. And when that happens, all the right things start falling into place.”

In addition to state policy mandates, the Biden Administration has recently pushed for DoE initiatives at a federal level that will help drive exponential growth for LDES. According to Eric, “things like the investment tax credit or the Made in America credit are great, that helps drive business and adoption into the market. Right away, it makes the economics marginally better for the end user. Just as we’ve seen in solar or EV adoption, some near-term incentives take the edge off of the economics and make it easier and faster for people to adopt. We wish the lawmakers working on these plans the best of luck on getting them concluded.”

“The DoE initiative [on reducing the cost of LDES by 90%] is in a different category,” he noted. “At this point I think that is really just an aspiration that we can all agree with. We were super excited to see the focus that Secretary Granholm has put on long duration. We think it’s such a critical piece, and we agree with the long-term price targets that have been mentioned. But at this point there’s nothing more than a goal, there’s no program behind it, there’s no funding behind it. But it’s still great to get those markers out there”. Getting government grant work and the assistance of the National Labs can be critical. But the LDES market is well past that stage.

Beyond policy support, a critical question concerning the long-duration storage market opportunity revolves around what the exact use cases are for these technologies, starting with who the key end users are and what the business case is for them.

In that sense, Eric shed some light on current ESS customer applications: “We have a commercial customer who is using our Energy Warehouse product, and that had already put solar panels on their manufacturing facility, which is big. Standalone solar didn’t solve all of their problems: they had a very high peak demand charge from the utility in the early morning, and they happen to be a factory in an area of California that has been subject to public safety power shutoffs. If there is a threat of high winds or a fire risk, they might all of a sudden have their power disconnected from the utility and they may or may not have enough solar to ride through that problem. So they needed to buffer that. And then what they wanted to do was play the markets with their excess capacity, bid it into the markets. That’s the value stacking we’re talking about, and they’ve made a great business case for that. For point of reference, just the avoidance of the power loss so that they could keep their factory running was enough to make the business case positive in three years. Everything else is kind of gravy at that point.”

When it comes to playing the markets, flow batteries don’t have a lot of the challenges that lithium does in terms of very specific operating parameters and charge/discharge cycles. Eric explained, “with a flow battery you can use a little bit, and then stop and start recharging again or you can take it all the way down to no charge and then charge it all the way back up. You could be halfway to fully recharged and put the battery back to work without causing it any harm. So it’s really flexible from that standpoint. And then it can go from a dead cold start to fully rated power in less than a second. When you want to play the capacity or frequency control markets, you can flip the switch on and off as much as you want.”

Of course, one of the biggest questions around LDES is whether costs are just too high now – and if they are, when can we expect to see price parity with lithium-ion. Eric believes flow battery costs are competitive: “Different [LDES] technologies have different cost models. We see some technologies that may just be cost-prohibitive based on chosen technologies and chemistries. In our case, we’re seeing that as you start to get beyond 4-hour duration you start to see parity between lithium-ion and flow batteries. So we’re getting there right now.”

In addition to the potential for price parity of flow batteries versus lithium-ion in plus-4-hour-duration scenarios, Eric highlighted the importance of looking at long-duration storage costs more holistically: “The other piece is we still find people really focus on upfront CAPEX, but as the market is starting to get smarter about these things, levelized cost of storage (LCOS) is becoming the metric that everyone is focusing on. When I look at the total lifecycle cost, not only the CAPEX, but the operating expense, how many kilowatt/hours can I transact through the battery and what is that cost over its life? And that is a big part of the DoE’s call to action, which was to really focus on levelized cost of storage – which we thought was terrific. What does it take to transact a kilowatt/hour of electricity through the battery over its life, including disposal costs? When you do that, our environmentally sustainable, safe iron flow battery looks fantastic when compared to lithium-ion.”

Touching back on expectations of flow battery cost reduction, Eric explained “costs come down based on volume, like any technology. When you come in with a new product, you’re competing against really mature, fully cost-optimized products. We’re still very early in the curve, so you’re going to see substantial drops in costs as the volume ramps up. We manage that with our customers today with forward pricing, so we absolutely have confidence in our pricing for projects with CODs starting in 2023 and beyond, as the LDES market really takes off.”

Addressing concerns from more risk-averse developers worried about higher upfront costs, Eric argued “when you weigh all of the pros and cons, and the comparisons of technologies, flow is actually the lowest-risk option to go forward with. This is not going to blow up, it won’t start a fire. It’s going to work regardless of how you use it for a long period of time. You’re not going to have a battery cell refresh in year 7 or something like that, which you might have to do with lithium. If you want low risk from a technical, from an operational, from a cost perspective, you really need to get your head around what iron flow batteries are doing as opposed to lithium, cause I think it’s the safest thing you can do.”

From Eric’s unique vantage point, there is reason to be hopeful on the push to achieve unprecedented GHG emission reductions: “The biggest thing I’m seeing now is there’s more of a coalescence around the end goal. We can only have so many conversations today that we are going to decarbonize the system. But the conversations are shifting to how do we do it and how do we do it faster? And that takes a lot of people, that takes a lot of parts. It takes everybody rowing in the same direction. But I’m more optimistic than I’ve ever been, simply because it seems like we all broadly agree on the end goal.

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