The Energy Storage Conundrum: Why solving it is vital to facilitate a swifter and more secure energy transition?
Avaneesh Misra
Director, Client Services at Infosys | Services, Utilities, Energy and Resources | MBA IIM Bangalore
Co-author: Vikas Makkar (Senior Industry Principal – Infosys Limited)
In 2015, 196 Parties attending the United Nations Climate Change Conference (COP21) in Paris adopted the Paris Agreement. It was crafted to prevent the global temperature rise beyond 2°C above pre-industrial levels, focusing on keeping the increase down to 1.5°C or less.
The International Energy Agency’s (IEA) report “Credible Pathways to 1.5 °C: Four pillars for action in the 2020s” indicates that the energy sector is a major area of focus. Decarbonizing electricity, boosting energy efficiency, and hastening electrification are all identified as key strategies for achieving the 1.5 °C goal. Capacity additions from renewables must be increased three-fold by 2030, bringing it up to 1200 GW per year on average. This would account for 90% of all new power generation capacity annually.
With sources of variable renewable energy (VRE) generation on the rise, finding effective ways to store excess power for when it’s needed most is becoming increasingly important. Energy storage allows businesses to unleash clean energy potential, ensure grid balancing, and optimize renewable power availability.
The big question is, can energy storage fire up the net zero transition?
In this article, we’ll explore the key reasons why an effective solution for energy storage is crucial for facilitating a swifter and more secure transition toward cleaner sources of power.
Introduction to the Energy Storage Conundrum
The current energy transition presents a significant challenge: Higher penetration of variable renewable energy (VRE) sources like solar and wind has led to a greater demand for flexibility in the power system. Stakeholders are turning to emerging grid solutions like energy storage to ensure reliable and cost-effective integration of VRE sources.
There are many different ways to store energy, but each has its own advantages and disadvantages. The most important thing is to find the right solution for each situation. For ex. batteries, they are faster to install and commission but are expensive. Whereas pumped hydro storage which is cost-effective, can store a large amount of electricity but have a long gestation period.
Regardless of the technology, energy storage remains one of the most challenging but pivotal steps in transitioning to a future built on clean energy sources. On the one hand, energy storage is poised to become a major component of the future power system, allowing us to move away from centralized power generation, and on the other hand, achieving cost-effective and reliable energy storage at scale remains a significant challenge.
Energy storage – a must for smart grid
Energy storage is the foundation for a decarbonized, affordable and resilient grid. The increased capacity addition of Variable Renewable Energy (VRE) sources in recent years, including rooftops and electric vehicles, has already emphasized the need for grid flexibility to accommodate its inherent intermittency.
One way to address fluctuations in supply and demand is through flexibility solutions. Energy storage plays a crucial role in this, as it allows for excess electricity to be saved over varying time periods. This not only helps to stabilize prices but also enables consumers to adjust their energy usage based on their needs and pricing fluctuations, ultimately resulting in lower electricity costs during peak periods. Emission reduction is also an important aspect as it is estimated that emission reduction would be in the order of 1 million tons of CO2/year for every 1 GW of total installed systems.
Different types of Energy Storage technologies
Energy storage systems are advanced technologies that can store energy from an external source and then release it at a later time, even after some of the initial energy has dissipated. These systems can be classified into different categories based on the following:
Also, energy storage systems are very different from the demand response initiatives. While energy storage system store energy for later use, demand response initiatives aim to optimize energy consumption by aligning it with the availability of affordable or clean electricity.
Here is a brief overview of some of the popular technologies:
Electrochemical Energy Storage Technologies or Batteries: Electrochemical storage systems use a series of reversible chemical reactions to store electricity in the form of chemical energy. Batteries are the most common form of electrochemical storage and have been deployed in power systems in both front-of-the-meter and behind-the-meter applications, as well as in electronics and transportation applications. Some examples are Lithium-Ion, VanadiumRedox Flow, Lead-Acid, Sodium-Sulfur etc..
Pumped storage hydropower or PSH: PSH is the most developed and widely commercialized energy storage technology for power sector applications globally. The large capacities and extended durations of PSH make it an ideal choice for services including energy arbitrage, charging during times of economical power and meeting demand spikes. Despite its well-developed status, PSH is limited by its geographic requirements and high upfront capital cost, which may be a strong barrier to its continued deployment in certain contexts.
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Compressed air energy storage or CAES: CAES is a type of mechanical energy storage that utilizes electricity to compress and store air from the atmosphere for later use. It is a mature technology. It relies on spinning turbines to generate and store electricity. CAES is characterized by high energy capacity and can have exceedingly long duration times on the scale of several hours to days. CAES has a slower response times than other storage technologies like flywheels or batteries and may be more suitable for applications like providing peak capacity, secondary and tertiary operating reserves, and energy arbitrage.
Flywheel energy storage: Flywheels are an established form of energy storage, widely used for smaller-scale applications compared to other mechanical storage solutions such as pumped-storage hydroelectricity or compressed air energy storage. Essentially, flywheels are machines that can convert electricity into rotational energy and vice versa. They typically require limited upkeep, have a long lifespan, and can quickly store and release power for short amounts of time.
Thermal energy storage or TES: TES is an established technology that relies on storing energy as heat and extracting the heat at a later period, either to meet heating demands directly or to generate electricity. The stored heat energy can be used later in heating/cooling and power generation applications. TES is marked by long durations of several hours and is a good fit for peaking capacity needs. TES is often combined with concentrated solar Power (CSP), which needs high levels of direct solar radiation that can only be found in select geographies.
The solutions presented above are widely accepted methods of storing electricity. Research continues to look for alternative energy storage options. As per the Department of Energy (DOE), USA, till mid2018, almost 177 GW of energy storage systems were installed at grid level and over 95% of it is pumped hydro storage plants. Recently more BESS are getting installed and contracted annually than any other storage technologies.
Geo scenarios: Policies and regulations to facilitate the adoption of Energy Storage solutions
The need for energy storage is widely recognized as a vital part of the solution to our climate and energy security challenges. However, several policy and regulatory barriers must be addressed to fully unlock the potential of energy storage.
One key policy challenge is the lack of a level playing field for energy storage technologies. For example, traditional generation technologies such as coal and natural gas typically benefit from a variety of subsidies and other forms of support, while newer technologies like energy storage often do not. This creates a significant barrier to the adoption of storage technologies.
Policy enablement example - The UK government has recognized the need to increase the adoption of energy storage and has introduced a number of policies and regulations to try and facilitate this. One example is the introduction of the Capacity Market, which pays businesses for energy capacity and provides incentives for energy storage solutions. The government’s guidelines clearly state that electricity storage is a must in delivering energy security and net-zero targets. This supports the Renewables Obligation (RO) policy introduced in 2017, which requires electricity suppliers to source an increasing percentage of their power from renewable sources. RO provided a financial incentive for businesses to invest in renewables, including energy storage.
Another key challenge is the lack of regulations that specifically address energy storage. Most existing regulations are geared towards traditional generation technologies and do not consider the unique characteristics of storage. This can make it difficult or even impossible for some storage technologies to be deployed in certain markets or applications.
Policy enablement example - The US government has acknowledged and addressed this issue by including a provision in the Inflation Reduction Act to incentivize Energy Storage Projects by providing an Investment Tax Credit (ITC) to standalone Energy Storage projects. Previously, storage projects were only eligible for an ITC if paired directly with solar PV and the storage system charged directly from the solar power.
Another challenge facing energy storage is the lack of long-term planning horizons in many jurisdictions. This can make it difficult to justify investments in new storage technologies when their full benefits may not be realized for many years into the future.
Policy enablement example - The Government of India recently announced a plan that aims to provide financial aid of $455.2 million for businesses engaged in establishing battery storage projects with an outcome of 4,000 MWh. This is to promote the development of such projects, an essential aspect of India’s target to increase its renewable energy capacity to 500 GW by 2030 and reduce the cost per unit of battery energy storage from 5.5-6.5 rupees.
Addressing these policy and regulatory challenges is essential to fully unlock the potential of energy storage and facilitate a swifter and more secure transition to a low-carbon economy.
Conclusion: How to facilitate a smoother and more secure Energy Transition
Energy storage will play a vital role in enabling a swifter and more secure energy transition, but identifying economically viable and technologically feasible solutions has been challenging. Moreover, a range of solutions to the storage dilemma can be found, all with their own pros and cons. The key is finding the right approach for the specific application and geographical location.
Major progress must be made for us to move closer toward a secure and sustainable energy system. This includes establishing reliable markets with incentives and effective regulatory frameworks to ensure predictable risks, as well as developing new technologies and improving existing ones to enable grid-scale deployment of renewable energy sources.
With all these pieces in place, we will be better equipped to build more resilient power systems and complete the transition away from fossil fuels much sooner and more smoothly than anticipated. Technology can play a vital role in facilitating a smoother energy transition. E.g. See how Infosys is navigating the energy transition space globally with its advanced digital capabilities. It also proposes an intelligent process flow to streamline the procurement of storage systems and simplify contract management.
BE Civil; PG Diploma in Construction Management. at Delhi Productivity Council,Delhi
1yVery nice Vikas....
Principal (Mining ) at Infosys Ltd
1yGreat insights Thanks for sharing Avaneesh Misra
Business and IT Transformation Advisor | Enterprise Architect | SAP Center of Excellence | Integrate Sustainability into ERP Programs
1yThanks for sharing Avaneesh Misra !
Energy, Utilities & Resources - Digital strategy/ SAP Consulting / Applied AI
1yThanks Vikas and Avaneesh for insights on the energy storage systems