With lithium-ion batteries raising ESG-related concerns, investors are increasingly seeing value in long-duration energy storage. This article explores 4 alternatives to lithium-ion batteries currently exciting investors.
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Introduction
It’s the question being asked by the biggest movers and shakers in the energy storage industry – which type of storage will challenge the dominance of lithium-ion batteries? Lithium-ion batteries are currently the indisputable technology of choice for storage developers, representing 90 percent of the total amount of storage deployed globally in 2020 and 2021. But energy storage investors are starting to think twice about lithium-ion, partly because lithium-ion carbonate prices soared more than ten-fold between 2021 and 2022 – prices have since fallen, but lithium carbonate is still around five times as expensive as it was two years ago. Other concerns include the fact that the mining of lithium can have negative social and environmental impacts. As a result, lithium mining companies are facing increasing scrutiny from investors regarding their environmental credentials. Fears have been expressed that an ESG-related “investor backlash” could derail the lithium mining industry – there have also been allegations of toxic chemicals from lithium mines polluting water supplies.
The ‘next big thing’ in energy storage?
In light of such controversy, companies are racing to find the ‘next big thing’ in energy storage, focusing on alternative technologies that are likely to raise fewer environmental concerns. However, other factors also play a role in determining the appeal of alternative storage options. Managing frequency-response, which involves maintaining grid frequency at around 60 hertz in the US or 50 hertz in the UK and Europe to prevent system instability, is one of the primary applications for energy storage today. This often requires storage for durations of an hour or less, where battery storage is most cost-effective. But as the future shifts towards using energy storage for price arbitrage or capacity provision, the focus will increasingly turn to developing long-duration storage technologies. Investors are recognizing the value in these technologies more and more.
So, which types of long-duration storage are currently attracting the most interest from investors? Here, the Energy Storage Report highlights four to watch. Let’s take a look at them.
Compressed air energy storage (CAES)
In the 1870s, engineers deployed primitive CAES systems to provide effective, on-demand energy for cities and industries. Although many smaller types of CAES exist, Germany established the first utility-scale system in the 1970s, with a nameplate capacity of over 290 MW. This technology is now starting to gain significant attention from investors, with one international bank revealing to Energy Storage Report that it is currently in discussions about a potential investment in CAES.
The momentum began in January last year when Canadian CAES company Hydrostor secured a $250 million preferred equity financing commitment from the private equity and sustainable investing divisions within Goldman Sachs Asset Management. Investors view Hydrostor as well-positioned to become a market leader, and many are convinced that the need for utility-scale long-duration storage is becoming increasingly urgent.
Elsewhere, at the end of last year, Australian energy developers Sunshine Hydro and Energy Estate said they were exploring the possibility of utilizing long-duration energy storage technologies, including compressed air. In February this year, compressed air energy storage company Corre Energy raised approximately €8.9 million via the placing of new shares. This came a month after the company launched a subsidiary in the US – the US Department of Energy has ranked CAES as one of the lowest-cost long-duration storage technologies.
Flow batteries
Flow batteries appeal to investors because they are safe and non-toxic, which makes them more robust when installed in harsher environments. These were among the main drivers behind Energy Storage Industries Asia Pacific’s decision last year to enter a strategic partnership with ESS for the provision of up to 12GWh of iron flow batteries in Australia, New Zealand, and Oceania. Indeed, some observers have tipped ESS’ product to become the “gold standard in the flow battery industry”.
However, flow batteries do score highly in other areas among investors. For example, they make use of low-cost materials – vanadium, the most commonly used electrolyte in flow batteries, is widely available. Vanadium can be recovered from waste products such as mining slag, oil field sludge, and fly ash (a coal combustion product that is composed of the particulates that are driven out of coal-fired boilers together with the flue gases). As a result, flow batteries are appealing to investors from an environmental, social, and governance (ESG) perspective as they do not utilize ‘conflict’ materials such as cobalt.
In September last year, the Sacramento Municipal Utility District (SMUD) in California placed its faith in long-duration iron flow batteries with the announcement of a deal with ESS for the provision of 200MW / 2GWh, which will be integrated into the SMUD electricity grid from 2023. Last year also saw special purpose acquisition company (SPAC) Mustang Energy PLC enter into an agreement with Acacia Resources to acquire its 27.4 percent interest in VRFB Holdings – a shareholder in Austrian vanadium redox flow battery system manufacturer CellCube – for US$10.5 million. In August last year, Largo Clean Energy, part of Largo Inc, signed a ‘non-binding’ memorandum of understanding with Ansaldo Green Tech to negotiate the formation of a joint venture for the manufacture and commercial deployment of vanadium redox flow batteries in the European, African, and Middle East Power Generation Markets. Also in 2022, Australian energy developers Sunshine Hydro and Energy Estate said they were exploring the possible use of flow batteries.
Gravity-based storage
Some analysts expect gravity-based storage to figure much more prominently in energy systems around the world in the coming years. In September last year, it was announced that Energy Vault’s gravity energy storage technology will be deployed at a 2GWh storage project in China being developed by Atlas Renewable LLC, the Investment Association of China, environmental management company China Tianying and a group of provincial and local governments.
Meanwhile, in February this year, underground gravity storage technology company Gravitricity signed a memorandum of understanding with Czech state enterprise DIAMO with the aim of working together to seek EU funds to transform the former Darkov deep mine into a large-scale energy store, a project that could be a pathfinder for projects Europe-wide.[5] A month earlier, Gravitricity appointed corporate finance specialists Gneiss Energy to spearhead a £40 million funding drive with the goal of building three demonstrator projects in the next five years. However, some gravity-based energy storage technologies have been plagued by skeptics who question their effectiveness.
Last year, Energy Vault – despite its roots in gravity-based storage – signed a contract for the deployment of a 275.2 MWh battery storage project at W Power’s Energy Reliability Center in Stanton, California, in a move it said reflected the company’s new “technology-agnostic” integration and software strategy – ultimately, it was a development that added fuel to the gravity-based storage skeptics fire.
Zinc-based chemistries
Zinc-air batteries are appealing because they have a higher energy density and better cycling stability than other batteries. Zinc8 Energy Solutions, which manufactures zinc-air batteries, says the technology has no fire and explosion risk, which makes it much safer. The company also says the batteries have “no capacity fade over an extensive lifetime”. Earlier this year, Zinc8 was approved for a $9 million grant from Empire State Development, a New York economic development corporation.
The grant took the form of tax credits offered as an incentive for the company to locate and establish its first US-based production facility in New York State. Meanwhile, in January this year, zinc-powered long-duration energy storage system provider Eos Energy Enterprises received $13.75 million in investment from a number of investors including Clear Creek Investments, LLC, Ardsley Advisory Partners and AltEnergy, LLC. Elsewhere, in December last year, Oregon-based Nickel-zinc battery-based systems company ZincFive raised $54 million in Series D funding, bringing the company’s total funding since inception to $139 million. Despite, the undoubted potential of zinc-based energy storage systems, concerns have been raised about possible limitations on future zinc supplies.[6]
With demand for long-duration storage set to rise in the coming years, investors are aware that the use of long-duration storage will become more commonplace. DNV has forecast that long-duration technologies such as CAES, flow batteries, gravity-based storage, and zinc-based technologies will “enter the market at scale” in the second half of the 2030s. Prior to that, despite some reservations about some types of gravity-based storage, we can expect notable growth in the deployment of all these types of long-duration storage in the near future.
About the author
Ben Cook is the Insights Director at Tamarindo. Tamarindo delivers insights, connections, and communications for the global energy transition. He heads up Tamarindo’s Energy Storage Report. An experienced editor and journalist, he has worked as a writer and contributor for national newspapers, including The Guardian and The Times. He also spent six years as the Madrid-based editor of a legal magazine and website and previously worked as chief editor for a Paris-based legal and financial ratings agency. He has also previously worked as chief editor for a Milan-headquartered legal publisher.
