Navigant Research is Bullish on Utility-Scale Storage Market

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Over the last seven years, the utility-scale storage market has gotten revved up. That’s because the technology risks and the cost associated with those devices have fallen dramatically, all compounded by an increasing number of developers that are participating in the market.

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The end result is that solar-plus-storage is competing head on with conventional forms of electric generation.

That’s according to Navigant Research’s new report titled “How Utilities Can Look Beyond Natural Gas with Cost-Effective Solar Plus Storage Strategies.”

The report says the biggest breakthroughs are with Lithium ion batteries, which account for 29.4 percent of the non-pumped storage capacity installed and 70 percent of the advanced battery capacity deployed since 2011. Those batteries are dense and compact, allowing them to store more energy.

“We are seeing low prices today and prices have come down significantly,” says Anissa Dehamna, associate director for Navigant’s energy section, in an interview with Microgrid Knowledge. “More developers have entered the space and that means more competition at better prices.” She is specifically referring to storage devices that can keep the lights on for three or four hours at a time as opposed to devices that can smooth out voltage to prevent the lights from flickering.

The report’s reference case forecasts the 2021 levelized cost of energy for a new combined cycle gas plant to be $41/MWh-$47/MWh (2018 dollars). In contrast, power purchase agreements for solar-plus-storage plants issued in 2018 for plants commissioned in 2021 range between $30/MWh and $41/MWh including capacity payments.  (Note: BloombergNEF recently also found solar plus storage becoming cost competitive with fossil fuels.)

In the past 7 years, 8,934.7 MW of non-pumped hydro storage projects (such as advanced batteries, flywheels, and compressed air energy storage) have come online, she says.

Three steps to commercialization

Commercialization is a three-step process: conceptualization, technology development, and creating business plans and markets. Storage may work conceptually. But there can be a disconnect between something being conceptual and something being real. Technology is the link, Dehamna says.

We are well into the first two phases, although the making a business case remains a “limitation.”  There are exceptions. For example, Arizona Public Service was able to show that solar-plus-storage was cost effective and that power companies could avoid installing thermal generation.

Utilities, in fact, are warming to solar-plus-storage, especially in the resource solicitation stages. The bidding process includes this asset, with the implicit understanding that power companies have an obligation to reliably serve their customers at the best possible prices.

The southwestern United States does have an advantage because its “solar irradiance” is high. But other regions in the country will also benefit in time. That’s because the price of the hardware — solar panels and battery devices — will come down. But for now, the Southwest has more advantages than the Northeast. 

Solar-plus-storage will displace thermal

“The lesson from the southwestern U.S. is that solar-plus-storage can compete and that it is cost effective,” says Dehamna. “Solar-plus-storage will continue to grow and to displace thermal generation. The primary driver is economics and at the next level, it is water scarcity — that neither storage nor wind and solar plants require water for cooling. The next level is build time: there is less permitting and less engineering involved.”

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As renewable energy penetration increases and distributed energy resources (DERs) and electric vehicles (EVs) are integrated into the grid, utilities must make fundamental changes to their grid operations.
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The bottom line from Navigant is that solar-plus-storage for the utility-scale market is viable today and its stock is only rising. The goal now is to educate market participants, including regulators.

The report is available for a fee with a free executive summary here.

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