What’s in a label? When it comes to energy storage, clear-cut definitions are still a work in progress.
Thanks to rapidly advancing technology, volume-driven cost reductions, and the exponential growth of renewable generation, energy storage is now firmly entrenched in the electricity market. As commercial deployments extend across the world, a wide variety of use cases are appearing – necessitating a more granular look at how to classify different market segments.
When energy storage is viewed in an applications context, people have a tendency to look at it as an “either/or” situation. It’s either ancillary services or bulk shifting or resiliency or firming, but rarely a combination. Some of this is likely driven by the technical limitations of historically available technologies; if all you had were lithium-ion batteries, you worked to find applications that could make sense given the relatively limited durations supported, such as frequency response. But recent technological advancements have changed the narrative, as long-duration batteries can now also support the incumbent short-duration use cases. So the new economic model is really a value stacking opportunity driven by a combination of applications from a single asset.
In terms of segmentation, we see three distinct demarcations: short-term energy storage, long-duration energy storage (LDES), and what we might define as ultra-long-duration energy storage. This categorization is a useful way to view the many roles energy storage can play in creating a greener, more stable energy system.
There has been a historic market for short-term energy storage, which is used primarily to smooth out grid imbalances and provide ancillary services, often with durations as low as one or two hours, but limited to around four hours of capacity. Then there is LDES, which has historically been viewed as up to 14 or 16 hours of capacity. Our view is that 16 hours is too low a bar. Instead, LDES could reasonably be defined as 4-to-24-hour capacity, serving a variety of needs within a day. Beyond that are the ultra-long-duration seasonal energy storage systems, for weeks or even months of capacity. This is a largely developmental category of solutions, but one that could perform an important role on the path to decarbonization.
The key differentiation in this taxonomy is that any application that requires a charge-discharge cycle of less than a day would arguably be used on a more frequent basis: daily, perhaps multiple times a week, but with regularity. As soon as you get into ultra-LDES, that could be thought of as a type of “insurance policy.” The use cases are likely to be scenarios like “what happens when the sun doesn’t shine for three days?” or “what if there’s no wind for a week?”. These ultra-LDES resources might not be cost-effective on a daily basis, but their value proposition looks a lot better when there’s no alternative. Additionally, many of the solutions being introduced in this space have significant technical limitations, such as very low round-trip efficiencies, taking three to four times the useful discharge period to recharge.
Although deployments of lithium-ion solutions have been rising, the reality is short-duration energy storage delivers almost nothing incremental to create a 24/7 decarbonized electricity system given the availability of longer-duration solutions. ESS’s iron flow battery technology, for example, provides both short-duration capabilities for ancillary services and long-duration use cases, 4 to 12 hours of capacity, all with lower levelized cost of storage (LCOS) than lithium-ion. That creates compelling option-value for the operator – delivering short-duration ancillary services, daily bulk shifting of renewably generated electricity and providing surety in times of supply disruption.
One long-duration application ESS sees most commonly, particularly in California because of its high renewable penetration, is ramp support for the “Nessie” curve, a demand profile that looks more like a two-humped animal (not a duck), with an afternoon ramp that can reach 12-13 GW on the extreme end, lasting up to six hours. To address that, bulk energy storage needs to come online for ramp support and energy shifting, carrying that into the evening when solar drops off, but demand is peaking. Related to that is the morning peak, where there is another ramp issue. That’s one example of what ESS considers a classic use case for front-of-meter long-duration energy storage.
We’ve also identified resilience as a key LDES application. With bulk LDES, grid operators have the ability to ride through extreme weather events while making changes to the system in case of major grid outages. Short-duration batteries may be able to do part of that, but if you have whole swaths of the system that need significant capacity, that’s not going to cut it. So there are clear dividing lines between how a short-term storage system can serve the market and where long-duration storage slots in.
As we see it, there is enormous potential across the utility and C&I sectors for a long-life, 4-to-16-hour solution, even up to 24 hours – especially one like our iron flow battery with its 25-year operating life and blue ribbon safety and sustainability attributes. Indeed, forecasts from NREL, Guidehouse, and the California Energy Storage Alliance all point to a future of exponential growth for long-duration energy storage.