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Seeking Consensus on the Internalized Costs of Energy Storage via Batteries

Schalk Cloete's picture
Research Scientist Independent

My work on the Energy Collective is focused on the great 21st century sustainability challenge: quadrupling the size of the global economy, while reducing CO2 emissions to zero. I seek to...

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  • Jul 11, 2014
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What is meant by “internalized costs”?

Internalized costs are the costs which can be accurately accounted for in our current systems. In energy production, these costs typically consist of capital costs, financing costs, operation and maintenance costs, and exploration costs. Some energy options incur these costs in various stages such as extraction, transportation and refinement. Profits and taxes are excluded wherever possible in order to isolate the pure cost of production.

Internalized costs of energy storage

This article will cover two battery-based energy storage solutions: standard batteries and flow batteries. Three currently mature energy storage technologies – backup thermal power, pumped hydro storage and compressed air energy storage – were covered in a previous article, while synfuels will be covered in the next article.

General comments on battery storage economics

Before we get started, some general comments on battery storage economics are in order. As discussed in the previous article, the most important factors influencing the economics of specialized energy storage technologies are the capital costs and the capacity utilization. Capacity utilization is an especially important issue in energy storage because of a trade-off between capacity utilization and the spread between the price at which the storage facility can buy and sell electricity. At higher capacity utilizations, the initial capital investment will be better utilized, but the spread between the buying and selling price will also reduce.

Germany currently offers a good example of the type of buy-sell spreads available in a system with substantial intermittent renewable energy penetration. As shown from the graph below, a buy-sell spread of about €20/MWh is available for probably about 20% of the average day while spreads of €50/MWh are only available on isolated occasions.

An important feature distinguishing batteries from other energy storage technologies is that storage capacity (kWh) is generally the economically limiting factor instead of output capacity (kW). This implies that a limited battery storage capacity must be utilized at as high a frequency and discharge depth as possible, while facilities like pumped hydro where storage capacity is not such a limiting factor are free to cycle over longer timespans.

The figure above illustrates this issue. As can be seen, significant spreads exist between weeks with high wind output and low wind output as well as between weekdays and weekends. These spreads are not economically accessible to battery technologies which should be cycled very frequently (at least once per day) to more economically utilize the limited storage capacity. In contrast, a pumped hydro facility with a week or more worth of storage capacity can take advantage of these spreads.

In addition to cycle frequency, cycle depth is also an important parameter in battery storage. Since the availability of high frequency spreads will vary significantly from one day to the next depending on fluctuations in renewables output and local electricity demand on weekly and seasonal timescales, the economically viable depth of discharge will also vary significantly. For example, batteries could be useful in Germany over summer when solar PV creates a reasonably reliable daily cycle, but will be of very limited use in winter when solar PV output is minimal and more unpredictable wind power dominates.

Another factor to take into consideration is that depth of discharge is often an important determinant in battery lifetime where shallower cycles can significantly prolong battery life (see above). In addition, battery lifetime is not only measured in cycles, but also in years. For example, reported Li-ion battery lifetimes range from 1000-10000 cycles and 5-15 years. At one cycle per day, 10000 cycles will take 27 years to complete implying that age-related degradation would probably have rendered the battery unusable long before the cycle lifetime is over.

Finally, it must be acknowledged that there exists substantial uncertainty regarding the economics of pre-commercial energy storage technologies like batteries. Numbers utilized in this article are guided by data available from the reviews of Duke University, the IEA and DNV. Various literature sources were also consulted to confirm that data in these reports is reasonable (Mahlia, Chen and Gonzalez).

Standard batteries

Batteries are often the first thing that comes to mind when considering energy storage. Standard batteries are especially attractive to advocates of distributed renewable energy because they can be deployed on small scale.

Even though Li-ion batteries are making all the headlines, most deep-cycle batteries for renewable energy application are still based on mature lead-acid technology. These batteries have the advantage of low up-front costs (~$150-200/kWh at most wholesalers), but have relatively short lifetimes, relatively high temperature-sensitivity, significant maintenance requirements and significant waste-handling challenges.

The breakeven electricity price spread for lead-acid batteries is given below as a function of the average depth of discharge and the capital costs. Other assumptions include a 2000 cycle service life with no degradation, 75% round-trip efficiency, an average of 1 cycle per day, balance of system costs of $150/kWh, O&M costs $20/kWh/yr, an electricity buying price of $30/MWh and a 5% discount rate. Balance of system and O&M costs are not often considered, but, just as is the case with solar PV will probably become a very important factor as battery prices fall. These costs are taken on the lower edges of the ranges given in the Duke University review. The Excel spreadsheet used to create this figure can be accessed here.

Given that most suppliers recommend a maximum depth of discharge of around 50%, it is clear from the above figure why deployment of lead-acid batteries for energy storage is very limited. Even under the lowest cost assumption, a 25% average depth of discharge requires an enormous breakeven spread of $800/MWh.

Li-ion batteries are not yet commonly available as solar backup options. One online supplier sells these batteries for around $1000/kWh which is much more expensive than lead-acid batteries. Tesla-manufactured batteries offered by SolarCity also appear to be in that price range. In exchange, Li-ion batteries offer longer lifetimes, lower maintenance requirements and higher round-trip efficiencies. The above figure is repeated for Li-ion batteries below under the assumptions of a 5000 cycle service life with no degradation, 90% round-trip efficiency, an average of 1 cycle per day, balance of system costs of $100/kWh, O&M costs $10/kWh/yr, an electricity buying price of $30/MWh and a 5% discount rate.


 

The figure shows that, thanks to the longer lifetime, lower maintenance costs and higher round-trip efficiencies, Li-ion batteries at $400/kWh have slightly better economics than lead-acid batteries at $100/kWh. Thus, if deep cycle Li-ion batteries for energy storage applications come down to $400/kWh, the choice between Li-ion and lead-acid will depend primarily on the locally applicable discount rate.

It is clear from the two figures above that battery storage is still about an order of magnitude from being economically viable given the price spreads available in wholesale electricity markets (around $50-100/MWh). However, sufficient subsidization could make batteries a viable option for early adopters in countries where household electricity prices are exceedingly high and feed-in tariffs are being reduced to limit deployment. For example, German households currently pay around $400/MWh for electricity and receive around $180/MWh as feed-in tariff for solar power fed back into the grid. Households can therefore avoid up to $220/MWh by storing more solar energy for self-consumption instead of selling it back to the grid.

This spread will further increase in the future, but will likely remain too small to drive significant deployment for the foreseeable future in the absence of subsidies which are substantially more lucrative than those currently in place.

Flow batteries

Flow batteries, Vanadium Redox Flow Batteries (VRB) in particular, are attractive due to their very long lifetimes even under consistently high discharge depths, their good scalability, and their flexibility in managing power and storage capacity separately. They are generally not suitable for small-scale applications, however, and are therefore targeted more towards grid-scale energy storage. Drawbacks include fairly average round-trip efficiencies and significant O&M costs.

The breakeven spread for VRBs is given below as a function of the capital costs and depth of discharge. Other assumptions include a 14000 cycle service life with no degradation, 75% round-trip efficiency, an average of 1 cycle per day, balance of system costs of $150/kWh, O&M costs $30/kWh/yr, an electricity buying price of $30/MWh and a 5% discount rate. The Excel spreadsheet used to create this figure can be accessed here.

When considering that VRBs can be discharged to 95% without any significant ill effects on lifetime, the figure above starts to look somewhat more promising. Naturally, the average depth of discharge achieved in practice will be much lower than 95%, but this will still improve the economics of VRBs relative to lead-acid and Li-ion batteries which should not be discharged beyond 50%. That being said, however, VRBs remain several times more expensive than pumped hydro storage analysed in the previous article even under the most optimistic cost assumptions.

Commenting

If you have a number that differs significantly from the estimates given above, please add it in the comments section below together with an explanation and a reference. 

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Geoff Thomas's picture
Geoff Thomas on Jul 29, 2014

Gary’s comments are great, but I would like to add that many arguments and summations do not really include product knowledge, the most important driver in renewable energy is new products, – as new products develop, new possibilities arrive in design, cost and efficiency.

As an example, it is important to understand that certain lead acid batteries, ie Tubular Positive batteries, can be cycled down to 80% per day, and even 100% (approx 100 times.)

This expands design possibilities, particularly given that lead acid batteries have a theoretical 100% discharge of 1500 cycles, 3000 at 50% etc, and efficiencies of around 98%, which compares very favourably to the 80% of Lithium.

Then again there may be Lithium configurations that do not get so hot, but data is not presented.

Gary has argued correctly, but the contrary arguments do not take into account the development in Lead Acid, by far the cheapest, and with much higher cycle rates, I believe that these analyses that one sees comparing this sort of battery with that should take a look at the best of Lead Acid before looking at the best (and most expensive) of the Lithium and then comparing apples with apples.

Cheers,

Geoff.

Clayton Handleman's picture
Clayton Handleman on Jul 29, 2014

Usually performance comes at a cost. 

What is the current cost of these specialty lead acid batteries? 

What is the projected cost with increased production volume?

Presumably they are the lead acid battery industry’s answer to Li-ion.  Are you aware of any links comparing these to Li-ion and if so, could you provide them.  Especially of interest is the comparison of the economics.

If you choose to use economics based upon projected costs it is worth noting that Elon Musk has stated that the cost of materials for current Li-ion batteries is about $70 / kWhr.  This sets a reasonable lower bound in the next decade of about $100 / kWhr for vertically integrated applications such as an auto company making their own or that company playing in the peak demand market.  Also my understanding is that people expect to see increasing cycle life for Li-ion.  

Here is a cost analysis done by Navigant a few years ago so now Li-ion is even more favorable.   

Michael Hogan's picture
Michael Hogan on Aug 2, 2014

Nathan, you might be smarter than Goldman Sachs, Forbes, Bloomberg and the University of Cincinnati (among many, many others), but I for one am not banking on it.

http://www.bloomberg.com/news/2014-08-01/goldman-s-icy-arbitrage-draws-i...

http://www.forbes.com/sites/peterdetwiler/2014/06/18/with-smart-energy-p...

Geoff Thomas's picture
Geoff Thomas on Sep 12, 2014

A belated reply to Clayton Handleman of July 29, 2014, he assumed that the long life deep cycle Tubular Positive batteries are the lead acid reply to Lithium, but I have been selling that style of battery for 20 years plus and were developed 40 years previous, it is just that they were not invented in America, but in Germany.

Price I sell at $3;50 per amp at 12 volts, – $14/amp at 48 volts if you like, that is retail so includes all costs and expenses, warranty, taxes and profit. – For a megawatt hour (1.2 meg actually but if you discharge 1.2 to 80% DOD that is a usable megawatt, – cost $350,000; – although I could probably manage 20 or more % off for that size an order.

That would give you 4.9 years of a megawatt hour per day after which the batteries would decline for some years but still have significant storage.

I believe these above figures, being totally based on daily practice in the real world, my business having survived for 30 years, are the genuine article, although I have not had sales of the order of a megawatt hour, the biggest system I have done is 170kW/hrs.

Cheers,

Geoff Thomas.

 
Geoff Thomas's picture
Geoff Thomas on Sep 14, 2014

Just followed up your Navigant table, obviously they don’t sell, install and warrant Lead Acid Batteries, – fancy using the containment for the lead as the main argument as if it was everything, you might as well use the paint on the car as the main arbiter of performance) as they quote lead acid as 500 cycles at 50% rather than the actual 1710 cycles at 90%, so using their figures, and the in-efficiency figure they quote but which has not been factored in, Lead acid on their other figures are less than half the cost for a measly 190 extra cycles with the Lithium, (or .3 years) and the 10% (they claim 8% but where is the research?)  is still the elephant in the corner, swinging it’s trunk slowly. 

Clayton Handleman's picture
Clayton Handleman on Sep 14, 2014

Geoff,

Thanks for your comment.  I had a bit of trouble following some of it.  If you have a moment the following would add a good deal of clarity: 

– Could you regenerate their table substituting your data and using the more current figure of $375 / kwhr for Li-ion. 

– Provide a link to a data sheet showing 1710 cycles at 90% Depth of discharge for lead acid.

– Provide the cost per kwhr of those high performance lead acid batteries.

Thanks

 

Gary Tulie's picture
Gary Tulie on Sep 14, 2014

There is one type of Lead Acid battery which might well perform better than some LiFePO4 batteries on cycle life, and simarly on cycle efficiency, and that is Lead Carbon batteries.

Rather than having the traditional lead plate electrode, these batteries use a highly porous carbon electrode which holds the lead in microscopic crystals within the carbon martix. 

This approach has many advantages. 

1. Sulphation is avoided – sulphation is a major mode of failure for lead acid batteries, and occurs when lead sulphate crystals form in the battery, blocking an increasing proportion of the lead from participating in electricity storage, and increasing internal electrical resistance. At very small scales, lead sulphate micro-crystals will dissolve releasing the lead from the sulphur and allowing it to contunue its work in the battery, however as crystals grow, they become increasingly insoluble until they destroy the function of the battery. In lead carbon batteries, sulphate crystals cannot get larger enough to become effectively insoluble so no sulphation problem. 

2. No electrode corrosion – apart from sulphation, the other major cause of lead acid battery failure is anode corrosion. This too is avoided with the carbon electrodes. 

3. Low internal resistance – carbon is a far better electrical conductor than lead so that internal electrical resistance is greatly reduced improving cycle efficiency. 

4. High power density – lowering internal resistance allows very high power density approaching that of ultra-capacitors for short bursts of power. 

5. Carbon is a very good thermal conductor, so that conbined with very low internal resistance, and high cycle efficiency, the battery is able to lose heat more effectively. This being the case, lead carbon batteries operate at low temperatures with very little internal heating as a result of cycling losses. 

Such batteries are sold as having a >20 year life and capable of thousands of 100% DOD cycles.

The one area they are relatively weak on is energy density so far more suited to static applications where space and weight are not an issue.

Geoff Thomas's picture
Geoff Thomas on Sep 15, 2014

The Tubular positive has many similiar advantages, and is being made commercially.  (for decades).

The designations used commercially are OPzS (flooded) and OPzV – (gel, valve regulated).

Tubular Positive batteries

The rising star in the world of Solar, are a version of lead acid batteries, but

because of their unique construction they are not prone to the problems besetting all

other varieties of lead acid batteries. For a start, the positive plate, being constructed

of a tube filled with powder, can not fall to bits like other batteries- it is already in bits-,

and also, because of the fine powder form, it is extremely resistant to sulphation, the

curse of all other lead acid batteries. – Indeed these Batteries don’t mind being partly

discharged for months at a time as long as they are being used and don’t fall below

about 30% of their capacity. They can actually be discharged to 20% of their capacity –

daily-, (although cannot be left there for too long.) In other words, they are perfect for

solar use as with solar, you want a battery that can handle being in a partially

discharged state while the weather is bad, for however long that is, and will then be

able to be brought up when the sun comes out- otherwise you have to run a generator

whenever the weather is bad. The Tubular Positive is a real work horse, lasting in low

cycling applications 15 to 20 years, and somewhat less in high cycle applications.


Geoff Thomas's picture
Geoff Thomas on Sep 15, 2014

Hi Gary, the link is on your article, not sure if i can regenerate it, but you can just fill in the figures your self.

You should first check that the top quality Lithiums are being sold at the figure you quote, I sell the Tubulars at the price I quote so it is real.

The 1720 cycles is based on the figure of 1500 * 100% cycles, that is just science, and indeed, some battery companies claim their batteries do just that, so, – simply multiply 1500 by 90%.

Not sure I did that calculation correctly, but easy with 50% you get twice as many cycles, (3000).

In practice, it is wise to limit these batteries to 80% DOD (giving you 1875 cycles) and indeed I have read similiar about Lithiums.

I have provided the cost already $3.50; / amp (USD) @12 volt (@ C10) – you can divide the amperage by 12 to get the wattage.

The other interesting thing about Lead Acid is that it is 98% recyclable, after the designated number of cycles the lead becomes “tired”, but simply re-melting it rejuvenates it, any oxide can be removed with charcoal, so as the major cost is the lead, those batteries can be re-used as many times as you like.

Very different figures with Lithium, much harder to re-cycle so I have heard – ? 

Geoff Thomas's picture
Geoff Thomas on Sep 15, 2014

Apologies Clayton for calling you Gary.

Cheers,

Geoff.

Geoff Thomas's picture
Geoff Thomas on Sep 15, 2014

Apologies Clayton for calling you Gary.

Cheers,

Geoff.

Clayton Handleman's picture
Clayton Handleman on May 5, 2015

“If EV battery prices can be used for reliably estimating the cost of Li-ion stationary energy storage applications, why don’t battery suppliers simply sell EV batteries as solar backup solutions?”

They do . . .

http://www.teslamotors.com/powerwall

Clayton Handleman's picture
Clayton Handleman on Jul 14, 2015

” Musk is getting a bit slow…  “

Nah, he’s out front – see here for the first Tesla storage product.

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