More BESS means more failures​

Battery energy storage system (BESS) failures have increased ten-fold since 2016, with “issues pertaining to the quality and performance of BESS” among the major causes, according to a new study published by a leading renewable energy insurer. The report from GCube Insurance – ‘Batteries Not Excluded: Getting the insurance market on board with BESS’ – said the available data on BESS failures suggested the nascent market was “characterized by ongoing challenges and uncertainties across design, installation, operation, and maintenance”.

Hybrid projects are more at risk​

The report also indicated that hybrid solar-plus-storage projects were at particular risk of failure, with 48 per cent of publicly reported failures occurring at such projects. The report acknowledged that solar-plus-storage projects have benefitted from incentives such as the Inflation Reduction Act in the US and therefore such hybrid schemes represent a large proportion of installed BESS capacity worldwide. Indeed, figures from Berkeley Lab – a US Department of Energy Office of Science national laboratory managed by the University of California – show that solar and battery storage is by far the fastest growing resources in the queues. 

Combined, they accounted for more than 80 percent of new capacity entering the queues in 2022. However, the GCube report added that the “predominance of solar-related failures still raises questions around the unique challenges and associated risks of combining battery technology with solar power”. It also concluded that project owners with combined generation and storage contracts may face both the challenges unique to BESS plus the “natural perils risks affecting solar, such as hail and wildfire”.

Recommendations to boost confidence in BESS projects​

GCube said a number of lessons could be learned from the analysis of BESS failure data. Specifically, the report said: “An enhanced emphasis on reliability and quality standards is essential to avert substantial losses and foster the sustainable development of the energy storage industry.”

The availability of BESS insurance varies from market to market, partly due to insurers’ level of comfort and familiarity with the types of technology being used. How can asset owners and developers boost the confidence of underwriters in their assets and projects? GCube has recommended five steps:

In the longer term, GCube recommended that the market takes three steps to advance BESS technology in a “sustainable, safe and reliable manner”:

• Develop spacing standards for BESS units
  To minimize thermal runaway risk, the industry needs to develop and adopt standardized guidelines for the minimum spacing between BESS units. Crucially, these guidelines should account for the different types and characteristics of battery technologies and chemistries.
• Define a liability framework for BESS projects
  The BESS market should develop a clear and transparent framework for liability in case of failures or incidents. It should specify the roles and responsibilities of different parties, such as developers, OEMs, and insurers.
• Involve OEMs in the entire BESS project lifecycle
  Developers and project stakeholders should engage OEMs from the early stages of the project, and involve them in the decision-making process regarding the selection, configuration, integration, augmentation, and testing of battery systems and components.

If you wish to learn even more about BESS, we cover the current state of the EU battery storage market and its trends here. You may also explore how we assist developers with getting the right funding for their storage projects.

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.

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Co-location and its benefits​

Given the numerous benefits of co-locating energy storage with solar or wind projects, it’s surprising that such schemes aren’t more common.

Co-locating allows power to be stored when the wind isn’t blowing or the sun isn’t shining. Additionally, co-located projects offer a price arbitrage opportunity, where power is bought during off-peak hours (when grid prices are lowest) and then stored for use during peak hours (when grid electricity prices are highest).

These projects can also provide grid services like ‘dynamic containment,’ which involves catching and containing any deviations in energy frequency caused by events like the loss of a generator. Moreover, solar plus storage is particularly seen as a way to mitigate the risk of yield and profit compression (known as the ‘solar capture rate’), which refers to the continuous reduction in energy prices when the sun is shining and more solar assets enter the market.

Co-location increases investment returns​

Other benefits of co-location include an increase in the return on investment from renewable projects by reducing the capital outlay required – that is, fewer wind turbines or solar panels are needed to generate the same revenue.

Meanwhile, capital and operational costs can also be reduced by sharing existing infrastructure, land, and grid connections. Combining storage and generation assets also allows more effective utilization of connected grid capacity. As a consequence, the savviest investment funds are taking the step of retrofitting storage to their existing renewables projects. For example, last year it emerged that Next Energy Solar Fund would be retrofitting its 11MW North Norfolk solar farm with a 6MW/12MWh battery system.

Given the multiple benefits of co-location, why aren’t more wind and solar projects linked with storage systems? A key reason is that subsidies for wind and solar projects artificially reduced the high cost of projects and meant that there was less incentive for project developers to do everything possible to optimize the value of projects.

Are declining subsidies incentivizing co-location?​

Now policymakers are providing less by way of subsidy for renewable energy projects so there is a greater onus on project developers to find ways of making schemes more attractive to investors and an effective way of doing this is by co-locating wind and solar with storage. For example, data from the US Energy Information Administration shows that total renewable-related subsidies were about $15.5 billion for both FY 2010 and FY 2013, then dropped to $6.7 billion in FY 2016 (see graph below).

Indeed, even if project developers are not planning to co-locate storage with wind and solar projects at the outset, they are now being advised to ‘future-proof’ their project by ensuring leases, for example, allow for a battery facility in addition to the main generation facility. Developers are also being encouraged to structure planning applications in such a way that they cater to potential battery add-ons in the future as this will maximize the value of the asset.

Yet barriers to co-located wind and storage projects remain. While corporate power purchase agreements (PPAs) have been flagged as offering a potential route to market for co-located assets, there is concern that the greater flexibility offered by co-located assets will result in PPAs that involve much higher premiums – because the extra flexibility is priced in – and this could be off-putting for potential corporate customers.

Hybrid PPAs offer a solution​

One potential solution is the development of hybrid PPAs. There are concerns that negotiating a contract for a hybrid PPA will be more complicated than treating assets as standalone and setting up separate routes to market for each asset. However, the counterargument is that the ability of co-located sites to guarantee more output and meet both peak and baseload energy requirements will enable operators of co-located sites to get a better price for their energy output.

Yet, despite an element of uncertainty about the best way forward for co-located projects, they will be the norm in the future. The appeal to investors of such projects is beyond doubt – witness Intersect Power confirming the $3.1 billion financial close of one of the US’ largest ever solar-storage portfolios, which included the Oberon I and II projects in California, which total approximately 685 MWp of solar and around 1GWh of battery energy storage.

Meanwhile, earlier this year, Copenhagen Infrastructure Partners, on behalf of its Flagship Funds, entered into a partnership with Amberside Energy with a view to developing 2GW of solar and battery storage projects in the UK. Elsewhere, in January, NextEnergy Capital launched a new fund, NextPower V ESG (NPV ESG), which will invest in solar and energy storage assets in OECD [Organisation for Economic Co-operation and Development] countries. NPV ESG is targeting capital commitments of $1.5 billion with a $2 billion ceiling.

The rise of the ‘power couple’​

This is just the start. Co-located solar and storage, which has been dubbed by some market observers as the ‘power couple’, is set to take off. DNV has predicted that, within a decade, around one-fifth of all PV will be installed alongside dedicated storage, and by 2050, this will have risen to 50 percent of all PV. DNV says that, by mid-century, the total installed global solar capacity will amount to 9.5TW, with a further 5TW of solar + storage capacity.

With renewable energy developers less able to rely on government subsidies to make projects viable, and with investors looking to ‘future-proof’ renewables, co-location will be a key consideration when seeking to maximize the value of wind and solar assets.

Want to read more about storage? Read Ben’s article on the 4 alternatives to lithium-ion batteries that are currently exciting investors, or Tamarindo’s Energy Storage Report Intelligence Briefing.

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.

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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.

La entrada 4 Alternatives To Lithium-ion Batteries Currently Exciting Investors se publicó primero en We turn good projects into great deals - Green Dealflow.