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Future cost of energy storage and its impact

• n CO2 emissions from the power sector

Oliver Schmidt, Kate Ward, Iain Staffell

International Association for Energy Economics 06 September 2017 | Vienna

1976 2015 100 1.000 10.000 100.000 0,001 0,01 0,1 1 10 100 1.000 Product Price (US$2015/kW) Cumulative Installed Capacity GW)

Cost projection method

Experience curves are a scientific tool to model these cost reductions

2 Solar PV (23%, Module)

Source: Liebreich, M. Keynote - Bloomberg New Energy Finance Summit 2016. (Bloomberg New Energy Finance, 2016).

Dataset

We derive a 1st-of-its-kind experience curve dataset for storage technologies

3

Source: O. Schmidt, A. Hawkes, A. Gambhir & I. Staffell. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017)

50 100 200 500 1.000 2.000 5.000 10.000 20.000 0,001 0,01 0,1 1 10 100 1.000 10.000

1983 2013 1989 2012 2013 2016 1995 2011 2013 2016 2010 2015 1997 2014 2007 2015 2008 2015 1956 2014 2004 2015

Product Price (US$2015/kWhcap) Cumulative Installed Nominal Capacity (GWhcap)

Pumped hydro (Utility, -1±8%) Lead-acid (Multiple, 4±6%) Lead-acid (Residential, 13±5%) Lithium-ion (Electronics, 30±3%) Lithium-ion (EV, 16±4%) Lithium-ion (Residential, 12±4%) Lithium-ion (Utility, 12±3%) Nickel-metal hydride (HEV, 11±1%) Sodium-sulfur (Utility, -) Vanadium redox-flow (Utility, 11±9%) Electrolysis (Utility, 18±6%) Fuel Cells (Residential, 18±2%) System Pack Module Battery

Capital cost projection (capacity)

... that enables evidence-based cost projections

4 50 100 200 500 1.000 2.000 5.000 10.000 20.000 0,001 0,01 0,1 1 10 100 1.000 10.000 Product Price (US$2015/kWhcap) Cumulative Installed Nominal Capacity (GWhcap)

Pumped hydro (Utility, -1±8%) Lead-acid (Multiple, 4±6%) Lead-acid (Residential, 13±5%) Lithium-ion (Electronics, 30±3%) Lithium-ion (EV, 16±4%) Lithium-ion (Residential, 12±4%) Lithium-ion (Utility, 12±3%) Nickel-metal hydride (HEV, 11±1%) Vanadium redox-flow (Utility, 11±9%) Electrolysis (Utility, 18±6%) Fuel Cells (Residential, 18±2%) System Pack Module Battery

Source: O. Schmidt, A. Hawkes, A. Gambhir & I. Staffell. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017)

280-400 150-200 135 Price ranges

Capital cost projection (time)

The cost of installed utility-scale lithium- ion systems fall to 290-740 $/kWh by 2030

5 200 400 600 800 1.000 1.200 1.400 2015 2020 2025 2030 2035 2040 Product Price (US$2015/kWhcap) Lithium-ion (Utility, 12±3%, System) Experience Rate uncertainty + Growth Rate uncertainty 740 $/kWh 290 $/kWh 460 $/kWh

Source: O. Schmidt, A. Hawkes, A. Gambhir & I. Staffell. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017)

Modelling scenarios

We model storage in the power system where it reduces CO2 emissions at a cost

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20 40 60 80 100 120 140 160 180 200 1960 1980 2000 2020 2040 2060 Installed Capacity (GW) Storage Solar Wind OCGT CCGT CCS CCGT Coal CCS Coal Nuclear 100 200 300 400 500 600 1960 1980 2000 2020 2040 2060 Energy Output (TWh) 20 40 60 80 100 120 140 160 180 200 1960 1980 2000 2020 2040 2060 Installed Capacity (GW) Solar Wind OCGT Gas CCS Gas Coal CCS Coal Nuclear 100 200 300 400 500 600 1960 1980 2000 2020 2040 2060 Energy Output (TWh)

Baseline Storage Carbon Price: 200 £/ton Strike Price: 89.5 £/MWh Renewables: 70 GW Curtailed: 159 TWh Emissions: 3.14 GT Net Spend: £113 bn Storage capacity: 14 GW (20%) Storage duration: 6 hours Storage efficiency: 75% Curtailed: 117 TWh (-25%) Emissions: 2.94 GT (-6%) Net Spend: £130 bn

2010 - 2060 2050 2010 - 2060 2050

Source: Own analysis

Impact of Energy Storage

The varying impact on renewables curtailment and CO2 abatement...

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0% 2% 4% 6% 8% 10% 12% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 5% 10% 15% 20% 25% 30% Abatement (relative) Curtailed Energy (relative) Energy Storage Penetration (% of Renewables) 0% 2% 4% 6% 8% 10% 12% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 5 10 15 20 Abatement (relative) Curtailed Energy (relative) Storage Duration (hours)

Penetration Storage duration The impact of storage duration on curtailment reduction and abatement improvement appears more pronounced than that of higher storage penetration

@ 6 hours, 75%AC-AC @ 20%Share, 75%AC-AC

Source: Own analysis

+6%

• 25%

+6%

• 25%

50 100 150 200 250 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 2500 2600 2700 Marginal abatement cost ($/tCO2) Abatement Potential (MTCO2)

PtG5 PtG10 PtG15 PtG20 PtG30 Redox5 Redox20 Redox15 Redox10 Redox30 Li-ion5 Li-ion10 Li-ion15 Li-ion20 Li-ion30

Marginal abatement cost curve

... is reflected in the marginal abatement cost of different storage technologies

8 ~300

Source: Own analysis

PtG Redox Li-ion Duration 20h 6h 3h Efficiency 30% 75% 85% Lifetime 15y 15y 15y

Oliver Schmidt | PhD Researcher in Energy Storage Grantham Institute - Climate Change and the Environment Imperial College London, Exhibition Road, London SW7 2AZ Tel: +44 (0) 7934548736 Email: o.schmidt15@imperial.ac.uk Website: www.storage-lab.com

Questions?

GWP of battery manufacturing

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Source: M. Hiremath, K. Derendorf, T. Vogt, Comparative life cycle assessment of battery storage systems for stationary applications., Environ. Sci. Technol. 49 (2015) 4825–33. doi:10.1021/es504572q.

Vanadium redox-flow & Power-to-Gas

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250 500 750 1.000 1.250 1.500 1.750 2.000 2015 2020 2025 2030 2035 2040 Product Price (US$2015/kWhcap) Fuel cells (Residential, 18±2%, Pack) Experience Rate uncertainty + Growth Rate uncertainty 200 400 600 800 1.000 1.200 1.400 1.600 1.800 2.000 2015 2020 2025 2030 2035 2040 Product Price (US$2015/kWhcap) Redox-flow (Utility, 11±9%, System) Experience Rate uncertainty + Growth Rate uncertainty 60 80 100 120 140 160 180 200 2015 2020 2025 2030 2035 2040 Product Price (US$2015/kWhcap) Electrolysis (Utility, 18±6%, Pack) Experience Rate uncertainty + Growth Rate uncertainty

Sanity Check 1 – Raw material cost

Raw material costs suggest that these cost projections are not infeasible

12 0,001 0,01 0,1 1 10 100 1.000 10.000 Cumulative Installed Nominal Capacity (GWhcap)

Pumped hydro (Utility, -1±8%) Lead-acid (Multiple, 4±6%) Lead-acid (Residential, 13±5%) Lithium-ion (Electronics, 30±3%) Lithium-ion (EV, 16±4%) Lithium-ion (Residential, 12±4%) Lithium-ion (Utility, 12±3%) Nickel-metal hydride (HEV, 11±1%) Vanadium redox-flow (Utility, 11±9%) Electrolysis (Utility, 18±6%) Fuel Cells (Residential, 18±2%) System Pack Module Battery

109 87 72 52 51 20 15 14 12 10 100 1.000 Raw Material Cost (US$2015/kWhcap)

Introduction

The power sector needs to be close to complete decarbonisation by 2050

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IPCC Fifth Assessment Report

• Annual emissions from power generation

must reduce to max. 5 GtCO2 by 2050 (glob.)

• The power sector is among the first energy

sectors to completely decarbonize

Source: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)], IPCC, Geneva, 2014.); Future Energy Scenarios, National Grid, 2017.

• 20
• 10

10 20 30 40 50 Baseline 450ppm with CCS 450ppm w/o CCS Annual emissions (GtCO2-eq/year) 0% 5% 10% 15% 20% 25% 2015 2020 2025 2030 2035 2040 2045 2050 Storage vs. Renewable capacity 2015 2016 2017

National Grid – Future Energy Scenarios

• The UK targets an 80% reduction of

emissions by 2050 compared to 1990 levels

• National Grid foresees storage capacity at

5-25% of renewable capacity to succeed

2030 2050 2100

Methodology

Including storage cost forecasts in power system models informs on abatement cost

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Experience Curves Power System Model (UK) 1. Determine experience rates for storage technologies 2. Combine with market forecasts to project future cost of three storage technologies

• Lithium-ion 15y, 3h, 85%AC-AC
• Redox-flow

15y, 6h, 75%AC-AC

• Power-to-Gas 15y, 20h, 30%AC-AC

1. Model baseline scenario for 80% emission reduction by 2050 2. Model storage scenario for three technologies at 5-30% share of Ren. 3. Determine marginal abatement cost for 80%+ emission reduction with storage