EOS: utility scale battery storage competitive with gas

The cost of battery storage is falling quicker than most analysts presume and could be competitive with gas-fired generation –  even in the US, where gas prices are low – within the next 18 months.

That’s the prediction of Steve Hellman, the president of battery storage start-up EOS Energy Storage, which intends to launch its zinc-air battery next year with a price of $200-$250/kWh.

EOS has grabbed the attention of the renewables and the mainstream energy industry with its battery product, which undercuts the pricing of lithium-ion batteries by a significant margin.

EOS actually predicts its storage will be available at around $160/kWh, but that is for D/C battery system. It needs extra costs and additions to be integrated into the A/C system on which major grids operate. Its attractiveness, Hellman says, will be its ability to provide   capacity at prices that compete with current options.

In a recent talk with a US analysts and investors hosted by UBS, Hellman gave a fascinating insight into how he sees the battery storage industry evolving in coming years. Its attractiveness, Hellman says, will be its ability to match gas on upfront capital costs. After that, it has no fuel cost.

“In 2014-2015 energy storage will actually be less expensive or competitive with gas,” he said. “Basically, in utility scales, that’s tomorrow … energy storage will be your default approach for solving standard peak capacity challenges. It will be much more usable as peaking capacity than a traditional generator.”

Not that Hellman thinks that the major energy grids are suddenly going to dump gas and swith to battery storage. These transitions will take time, he notes. But NRG, the largest private generator has already invested in the company, and EOS has been approached by the likes of Con Edison, ENEL, GDF Suez, and National Grid.

(Just to put Hellman’s claim into a little context –  he began his career with commodities giant Glencore, where he built six successful companies in oil production and refining. His bio says that Hellman ... then created his own energy trading company which grew to $8 billion revenues, and built a shipping company of 27 tankers, an energy technology company, and a $150 million real estate company. He speaks Russian and Chinese. He hasn’t just wandered in from an environmental NGO and he’s not a nerd that just emerged with a good idea from a test lab).

Hellman says there was a common myth that people would want to install battery storage to make money by buying cheap off-peak power and selling expensive on-peak power.  In effect, however, the amount of energy lost in such a round trip would probably offset any gains made.

“That’s not your fundamental value proposition,” he says.  It would instead be in its ‘capacity’-like properties, able to be quickly installed in constrained regions, rapidly respond to demands of the grid, and clip scarcity price events. He says the immediate outlook did not suggest merchant build in any meaningful manner in the near term, but development will remain focused on urban utility contract-backed opportunities, such as the 1.3GW mandate from the California Public Utilities Commission, and a similar one in Long Island.

“Ultimately, we view energy storage as a business problem, not as a technology problem. The business problem we are trying to address is: how do you decouple supply and demand on the electricity grid?

“The grid overall is this gargantuan infrastructure that is basically attempting to instantaneously match supply and demand. Though there is variable demand, you have full control of supply. As soon as you introduce the intermittency of generation sources such as wind and solar, you have intermittent supply and demand. This problem becomes a lot more difficult for grid operators without storage to buffer supply and demand.

“There are also very complex infrastructure problems that need to be resolved where storage can play an important role. There is pressure from end users, who would like to lower electricity costs by using micro-grids. Storage becomes a critical component for this. In sister sectors like transportation, for example, energy storage is of course the key to transitioning to an electrically charged transportation grid and electric vehicles. Energy storage plays a crucial role for this transition.

“These factors are leading to an enormous amount of innovation in this space, but they all converge around a certain set of major requirements. To become viable, energy storage needs to be extremely inexpensive in terms of capital costs. It needs to be very long lasting because like other capital assets on the grid you need to be able to amortize those costs over a long period of time.

[continued ...]

Yay methodically driven fact trails