Batteries For Small Scale Energy Storage Start To Come Of Age

|
Includes: ABB, BP, BYDDY, CLF, GM, LGCLF, NSANY, PCRFY, SIEGY, SNE, SPCL, TSLA, VLKAF, XOM
by: Keith Williams

Summary

Many Small Batteries Start Transforming The Energy System.

Everyone is releasing home storage batteries; Australia test market.

The EV industry hots up, with China planning 5 million EVs by 2020.

GM making big push with 200 mile, $30,000 Bolt for release at the end of 2016 and 180,000 orders at opening for $35,000 Tesla Model 3.

In the past decade, lithium batteries for powering small devices (phones, iPads, computers, cameras, watches, toys) have come of age and, while there is still some capacity anxiety attached to phones, there is general agreement that the batteries do the job they are given to do. Batteries for more demanding roles (e.g. powering cars, storing household power generated by solar PV) have been talked about a lot over the last couple of years, but for many it is all hype and little substance as they have been thought to be too expensive and not to have enough capacity to the kinds of jobs energy users want them to do.

Here I cover two applications of battery technology that are transforming the renewable energy landscape. The first is a grass roots revolution in residential power storage, which will have a major impact on either how utilities manage residential power, or how they will be made redundant. The second involves Electric Vehicles (EVs) and almost a "sci-fi" view of power management that might create chaos for the old centralized power model.

Each of these innovations has battery storage at the core, but there are different messages to draw from the stories.

Home storage batteries, Australia as test market

2016 starts with many battery manufacturers seeking to test the market in Australia as a place where there is already substantial adoption in home solar PV power generation (1.5 million homes).

Australians are worried about electricity price increases and they resent Government obsession with fossil fuels. This means that a lot of people are happy to buy batteries even if the economic case isn't quite there. This week Australian network operator AusNet Services released a report on a study which started in prehistoric times for residential battery storage (2011!!) with data collection in summer 2013/14 and 2014/2015 and the cost of batteries decreasing from $A20,000 at the start of the study (2011) to $A12,900 in 2015. The storage systems used were 6.6kWh lithium ion Kokam batteries.

Four potential features of residential battery storage were considered :

i) flattening residential customer demand profiles;

ii) managing peaks in network demand driven by residential customers;

iii) improving integration of residential solar power into the network;

iv) financial benefits of battery storage to the network and customers.

The last point, "benefits to networks" might be of interest to US networks who are on a mission to kill residential solar and who no doubt are significant drivers for residential battery storage in the US even if they haven't thought this through. The report indicated clear, and approximately equal, benefits to both customers and the networks.

A recent comparison of storage products available in Australia compares battery offerings in terms of price, capacity, depth of discharge and a number of other parameters. At this stage, customers have various reasons for investigating battery storage.

i) go off-grid?;

ii) have a backup in case of power outage?

iii) have a hedge against time-of-use pricing?

iv) self-store energy for use at night?

The above article refers to a Table produced by SolarQuotes.com.au which compares 11 battery offerings in Australia. These are :

LG Chem's RESU6.4EX,

Samsung ESS AIO,

Sunverge's SIS (using South Korean, Kokam batteries),

RedFlow ZBM-2*,

Tesla Powerwall,

SimpliPhi PHI2.6 Smart Tech,

Alpha-ESS STORION S5,

Fronius Solar,

Aquion S 30-0080*,

Enphase AC,

Magellan RES1.

The table gives :
i) battery type (* all except the RedFlow ZNBR flow battery and the Aquion S 30-0080 are Lithium-ion based),

ii) price ($A2000-$A15000),

iii) storage capacity (1.2 - 11.6 kWh),

iv) pros and cons, weight (25-510kg),

v) dimensions,

vi) power (0.26-5.0kW),

vii) expected lifetime (5-10 to 25+ years),

viii) cycle life (2000-10000 cycles),

ix) whether off-grid capable,

x) compatibility with software/hardware management systems,

xi) whether the system has an inbuilt inverter (5 of the 11 offerings have inbuilt inverter),

xii) all but 2 are single & three phase compatible,

xiii) warranty (six have 10-year warranty; four have 5-year warranty; one has 2-year warranty).

SolarQuotes concludes that the LG Chem RESU6.4EX has the best combination of price & performance and LG Chem is taking growth of the Australian market very seriously.

LG Chem RESU 6.4RX battery Click to enlarge

Legend : LG Chem RESU 6.4RX battery.

Missing from the above list is Germany's E.ON which has just launched its home storage system, based on Solarwatt's MyReserve.

Last week, Sonnen, Europe's biggest battery storage product provider with 40% of the market, announced that it would enter the Australian battery storage market (with Sony lithium ion phosphate batteries in the range 2-16kWh) through True Value Solar (Australia's biggest solar PV installer). Sonnen produces an integrated battery, plus inverter, plus manager and monitor for easy and space-efficient installation. An innovation Sonnen will bring is "peer to peer" trading, where households with battery storage can trade energy with neighbors. It does this already in Europe.

The utility companies are starting to pay attention. Having customers generating a lot of their own power and now contemplating building substantial storage capacity is interesting to the utilities if they can get to manage these assets. This will give them an important role going forward if they get it right.

With 4GW of household solar PV in Australia, that represents substantial power capacity being financed by private citizens (with Government incentives). The Australian residential battery storage market is expected to grow 20 fold in 2016 even without subsidies (from 1.9MW in 2015 to 44MW in 2016), with a report from Greentech Media predicting 40% of Australian homes will have 11.2GW of battery storage capacity by 2035.

The above shows how batteries are starting to have an impact on the Australian energy network and the projections make clear that ignoring a storage capacity that will become a significant part of the energy storage network makes no sense and indeed will endanger the business models of utilities which ignore it. Australia leads the world in the adoption of residential solar, but it also gives a sense of where this is going.

It is easy to see why Australia is getting so much attention currently as it is a sophisticated market that is ahead of the world in terms of residential solar PV and community readiness to adopt battery technology. While behind the meter deployments in the US were considerable in 2015 (35MW and 5x greater than in 2014), the big focus for storage in the US is front-of-meter deployments (187MW in 2015).

Community scale programs

The above addresses battery storage for individual houses, which have their own solar PV energy generation capacity. An emerging area of solar PV generation is Community-Scale Solar PV, which involves 0.5-5MW installations that are shared (e.g. by residents who don't have access to solar PV on their roofs). Here is an interesting report describing how this distributed medium scale power generation has massive potential, a multi GW market.

I assume that already these kinds of schemes are looking at battery storage as a core part of the system. An example of this kind of storage is a recent 0.66MW battery installation in a property housing more than 50 people.

Watch this space…

Battery storage around the world

It is clear that interest in battery storage is a worldwide phenomenon. Whereas solar PV scaled sequentially first in Germany, then China and now spreading around the world, interest in batteries for storage or regulation of energy flows is happening everywhere simultaneously. Even places like the UK, whose turn it is to have a Government antagonistic to renewable energy, there are substantial battery projects being explored.

A recent report indicates the potential scale of rooftop solar PV in the US. The report by US Energy Department's NREL indicated that 39% (1118GW capacity, 1432 TWh annual generation) of US electricity could be supplied by rooftop solar PV. Think about the market for residential/rooftop batteries in this context.

So what is happening with Lithium ion batteries?

A lot is happening with Lithium ion batteries.

They have reached the point where a combination of volume scaling and price reductions is leading to rapidly growing markets, while there are steps all along the innovation chain where dramatic improvements are being made. Brian Morin has documented dramatic changes in the small company space.

At the other end of the scale there are well-capitalized companies who have been players in the space for a long time. These include Panasonic (OTCPK:PCRFY) (whose technology sits behind Tesla), LG Chem (OTC:LGCLF), SONY (NYSE:SNE), BYD (OTCPK:BYDDY), Kokam.

Cars & buses as power stations

There is a very polarized argument about the future of EVs, with BP (NYSE:BP) projecting 1.5% penetration even in 2035. Effectively, BP says that EVs are a mirage that isn't going to happen. Exxon Mobil (NYSE:XOM) has a similar view, with fully electric vehicles (XOM includes plug in hybrids) having 10% penetration by 2040, although they allow conventional hybrids (e.g. Prius) to reach 40%.

Both companies cannot envision a world where most cars don't have an internal combustion engine. This needs to be the situation if BP and Exxon Mobil are to continue to be dominated by oil and gas in the long term.

For contrast, Bloomberg New Energy Finance estimates that EVs will comprise 35% of global new car sales by 2040 (41 million EVs, including plug in hybrids, compared with 462,000 in 2015). A recent analysis of the impact of these kinds of figures for EV uptake is chilling for the oil industry.

Indeed looking at the motor industry today gives a Bloomberg rather than a BP/XOM picture of where the EV is heading, and some companies are thinking way beyond the EV as a form of transport.

Nissan (OTCPK:NSANY) has released an ambitious view of how EVs will become a core part of energy management. Combining Nissan's "out there" vision with recent announcements about EV developments suggests that the future is closer than many think. China plans to have 5 million EVs on the road by 2020.

Tesla (NASDAQ:TSLA) took its first 180,000 orders for its $35,000 Model 3 on 31 March, although orders won't be filled until 2017. The young demographic (28-42) must be very encouraging to Tesla. I assume that all 200,000 units receiving a $7,500 tax credit have now been ordered.

After its diesel disaster, Volkswagen (OTCPK:VLKAF) is aggressively positioning itself as being in the race to mass produce an EV.

And don't discount GM (NYSE:GM), which thinks it will be the first to mass produce an affordable EV (at ~$30,000 customer price after $7,500 government incentives).

It seems that several big European/US/Japanese carmakers want to be the leaders in mass produced EVs. And all of these companies accept that they need a mass-produced car that has a range of ~200 miles.

It isn't clear to me whether the Bloomberg estimates include the latest push by GM or Volkswagen and whether it has factored in the Paris climate summit resolution to decarbonize the world's energy by 2050. Something is changing and clearly Tesla doesn't have this space to itself anymore. Not that Elon Musk cares too much as his view is that there is space for a number of big players.

The above is just about personal transport (cars, although of course the EV is going to blend with the driverless car, but that is another story). Buses are not to be ignored as EV adoption takes off. Consider that London is trialing EV buses made by Chinese battery company BYD which have 345kWh batteries (190 miles of urban driving range). See for a summary of a recent report on global electric bus market size.

Standardization of an open charging network in Europe shows that the industry is getting its act together. Prominent bus manufacturers in Europe, including Volvo, Solaris (OTCPK:SPCL), Irizar and VDL are working towards a common charging infrastructure that will be provided by ABB (NYSE:ABB), Heliox and Siemens (OTCPK:SIEGY) by 2019, with international standards to follow in 2020. This will involve a combination of opportunity charging (fast charging at end stops) plus overnight charging.

As a postscript to the EV story, this week there was a report that Norway is considering banning gas and diesel cars, buses and small trucks by 2025. Note that more than 20% of new car sales in Norway are currently EVs.

And India has announced a plan to have 100% EVs by 2030.

Conclusion

This story about battery storage fundamentally changing the power system from a centralized model to a highly distributed one, has implications in several areas of energy supply.

As indicated in this article there is starting to be a wealth of choices about how an investor can participate in investment in batteries and energy management, in both the home storage and EV vehicle industries. Inevitably, these kind of investments relate to distributed energy and decarbonization of energy supplies.

However, the impact will also be seen in the fossil fuel industry, particularly coal, but also gas and, with EV expansion, oil will be affected. Investors in fossil fuels should think carefully about where this is heading.

Disclosure: I am/we are long NASDAQ:ENPH, ASX:RFX.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Those with a literary bent will realise that the Lilliputian image doesn't quite work, but the thought of all of those tiny people tying down the giant works for me.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.