Enhancing your argumentative skills in Renewable Energy Part 4: Opportunity supporting data

𝘍𝘰𝘳 𝘮𝘺 𝘧𝘳𝘪𝘦𝘯𝘥𝘴 𝘰𝘶𝘵𝘴𝘪𝘥𝘦 𝘵𝘩𝘦 𝘪𝘯𝘥𝘶𝘴𝘵𝘳𝘺 𝘸𝘩𝘰 𝘢𝘳𝘦 𝘬𝘦𝘦𝘯 𝘰𝘯 𝘨𝘢𝘪𝘯𝘪𝘯𝘨 𝘢 𝘥𝘦𝘦𝘱𝘦𝘳 𝘶𝘯𝘥𝘦𝘳𝘴𝘵𝘢𝘯𝘥𝘪𝘯𝘨 𝘰𝘧 𝘨𝘳𝘦𝘦𝘯 𝘦𝘯𝘦𝘳𝘨𝘺.

Recap of the Series:

In Part 1, we introduced Energy Storage Systems (ESS) and examined how they enhance grid resilience and support renewable sources.

In Part 2, we analyzed renewable generation patterns, identifying the most challenging and costly times of the day. Part 2

In Part 3, We identified possible opportunity windows for Energy Storage Systems (ESS)

First, in previous posts, we referred to a color-coded chart from Australia market, where the X-axis represented time and the Y-axis showed generation from different sources: coal (black), solar (yellow), and wind (green). Below this chart, we noted the wholesale electricity prices throughout the day, pinpointing Opportunity 1 (evening/morning peaks) and Opportunity 2 (nighttime).

Secondly, let's make a common sense assumption:

Technologies and products emerge because there is financial backing from banks, private equity, venture capital, or government incentives to foster desired outcomes. In the financial sector, the choice to fund projects is based on returns (the best ROI) and risk diversification. This assumption underpins our understanding that no technology can exist without demand, and for demand to be sustainable, it must offer an economically efficient solution. Primarily, that is true for booming technologies.

 Insights from the Current Data:

1)    Solar & Wind Energy Dominance: The chart illustrates that energy is predominant among renewable sources, with significant contributions from wind farms, especially during the evening. This is mainly because solar technology is among the cheapest to deploy, a trend expected to continue.

Why does this happen? Very clearly, it's the cheapest technology to deploy, and they will be the same in the next 5-10 years (current on-sore wind US installation is considered to be $1500/kW ). Let's look into installation and O&M costs from the table below.

Another factor showing that solar will keep growing is the project queue for subsequent years in Texas:

While solar is economical and practical during daylight hours, it does not generate power at night. Wind energy, while valuable, is less predictable and can experience significant day-to-day fluctuations.

There are events that are sometimes referred to as super ducks when wind and solar generations are very low.

In the picture below, one day, solar and wind provided up to 90% of the demand, while this value decreased to less than 5% for several days.

2)    Insight from daily patterns:

1)    Excessive Generation Phases: There are times when renewable sources generate more power than needed, leading to negative electricity prices. This surplus can ideally be stored in batteries, providing a cost-effective way to manage energy distribution.

We can see it from EU electricity prices on July 2nd 2023:

2)    Peak Demand Times: From our daily routine, we also know that while we do not consume so much electricity during the night, but evenings are the busiest times when people reach home from work, turn on their HVAC, start charging cars, cook food, etc. On the other hand, solar power generation has started to reduce, and there is a gap between generation and demand. This time is usually handled through additional gas/coal generation that might be expensive to run during a short period. As a result, the price of power considerably goes up:

Here, energy storage systems, particularly lithium-ion batteries, can be crucial. These batteries can store energy during low-demand periods and discharge during high-demand times, thus leveling the energy usage and reducing costs. 

Let's zoom in on Australian electricity prices:

During evening peaks, we can see a median price of around 300$/kWh.

As for the cost of storing power in lithium BESS, now many companies are coming to the number 200-250$/kWh, and Tesla's estimated range  2030-2040 is 184-231$/kWh.  

Based on the information we've discussed, we can pinpoint two critical periods that must be addressed to meet our climate goals:

1)    Morning and Evening Peaks: These times are characterized by high electricity prices, and various solutions can be employed to meet this demand, typically lasting up to four hours. Current technologies, particularly lithium-ion batteries, have reached a level of efficiency that makes them attractive to investors and financial institutions.

An interesting aspect is how well Battery Energy Storage Systems (BESS) integrate with solar power. They can store large amounts of electricity generated during the day—when otherwise, it might be sold at negative prices due to the high penetration of renewables—thereby saving money for solar operators. This stored electricity can then be discharged during peak times, providing additional power when electricity prices are at their highest.

This capability has opened up significant opportunities, and in recent years, we've observed many power generation companies significantly expanding their battery storage capacities from 30 minutes to 4 hours. This expansion clearly indicates why grid batteries are experiencing a boom. (link to post) Additionally, adopting energy storage systems to capture free electricity during the day and discharge it when prices are high has become a popular model. This approach also facilitates the construction of standalone storage systems that don't require accompanying renewable farms, simply utilizing power from the grid during periods of negative prices, as seen in Texas (ERCOT) statistics (February 2024).

Install energy storage, take free electricity during the day, and discharge it when high prices become the popular model. This scheme also allows the building of storage as a standalone system, without building renewable farms, just to consume power from the grid at negative prices. And we can see it also from Texas (ERCOT) statistics (Feb 2024):

2)    Nighttime Challenges: During the night, the absence of solar power and the unpredictability of wind generation necessitate a different type of battery technology. Given the lower electricity prices at night, traditional solutions like BESS are less likely to be deployed due to their economic inefficiency for operators. These storage systems need to be capable of long durations and able to handle energy storage for more than 8 hours.

This requirement has spurred the development of alternative solutions and technologies currently competing in the market, such as:

·      Hydrogen storage,

·      Vanadium flow batteries,

·      Iron flow batteries,

·      CO2 capture technologies,

·      Thermal storage systems.

·      Gravity storage systems.

While there is no dominant solution now, but these technologies are likely to offer a different set of characteristics, including:

o   Lower energy density,

o   Reduced efficiency (Round Trip Efficiency),

o   Slower response times (from the command to start to actual discharge),

o   Lower cost per solution (or annualized cost of ownership).

However, they share a significant advantage: lower energy storage costs. This factor could make these technologies viable for nighttime energy storage and management.

In the next part, we will make one market simulation and determine how much solar/battery/wind we need to achieve our ecological needs. You will see how many batteries are required.

Stay tuned.