The cool thing about batteries is that they are great as an investment. You can charge them when power is cheap and sell back power when you have high demand and market prices for power.
Typically Peaker Plants fill this role but at much higher cost for electricity and emissions. Batteries just make much more sense for this kind of power.
This isn't really how batteries make money in the US right now, as I understand it. ~80% of battery revenue in ERCOT comes from what are called "ancillary services" [0] which is payment from the grid for being able to very quickly increase or decrease the amount of generation to ensure stability.
This revenue will quickly disappear, however, as there is limited need for ancillary services. Lithium batteries served this purpose well in PJM starting long ago (more than a decade?), even with very high battery prices of yesteryear.
New battery additions must be banking on limited ancillary services revenue. Unless Texas investors never bothered to learn the lessons of the storage experience in PJM, which seems unlikely to me.
Those early reg-d PJM batteries also got absolutely physically wrecked, so it wasn’t the best outcome.
ERCOT is quite different from PJM when it comes to AS - the market is very deep and the operational needs are increasing in a way they aren’t in PJM (yet). Couple that with a vastly easier permitting regime and hugely faster interconnection process for a facility (batteries) that require relatively little land compared to conventional generators, and Texas has enabled ERCOT’s queue to become absolutely stuffed full of battery applications.
PJM was ahead of the ball on market design, but that was a (relatively) long time ago. Now they’re in the midst of their massive backlog queue transition and also revamping (for the nth time) facets of their capacity market.
Why did Texas not start building out batteries for ancillary services until recently? Did/do they not need as much ancillary services as PJM? Also -- do you know what happened to ancillary service pricing as batteries became cheaper? Did grids become much more stable in practice?
That is beyond my knowledge; I know that PJM specifically set up a market for ancillary services that allowed battery operators to get paid. I assume ERCOT must have set up some sort of similar market, but I don't know the particulars...
Last time I ran the numbers for this, price arbitrage alone using lithium batteries is not gonna be profitable.
Current lithium batteries are just too expensive, store too little energy and degrade too quickly for true grid-scale storage.
That’s why they typically offer services, other than price arbitrage, that actually makes building them make sense. There’s still no equivalent of a peaker plant using non-hydro storage.
Lots of energy companies across the globe seem to be disagreeing with you and are installing massive amounts of battery storage. Gas peaker plants are getting used a lot less on grids where this happens.
Reason: your numbers and assumptions are probably wrong.
One could have said the same thing 2 or 3 years ago about companies active in the renewable energy space like Orsted. I mean, they were one of the biggest producers of wind-turbines, what was there not to like in this ESG-focused investment environment? Until the numbers suddenly stopped making sense for them a few weeks ago [1].
Which is to say that the investment numbers may look "right" for a good few years until they suddenly don't and the reality catches up with all those involved.
It wasn't a "reality" check from having inaccurate estimates, it was rising interest rates that put a huge damper on the cost of projects where all the expense is front-loaded.
Higher interest rates are part of the game, or of reality, if you want to put it that way. So, yes, it was a reality check and it has proved that that company could only be viable under very particular economic circumstances (i.e. interest rates being close to zero)
Whoa, their viability as a company is not under question.
The only thing under question is whether future long-term agreements will include inflation protection.
When interest rates rise tremendously, long term investment gets pulled way back. That's the entire point of hiking interest rates, to make companies like Orsted slash their growth rates. It does not put Orsted at risk for collapse.
They've had a ~70% share price fall since the height of 2021, 40% lower compared to the summer of last year, of course that their future (at least as an independent company) is under threat, saying otherwise is just wishful thinking.
> That's the entire point of hiking interest rates, to make companies like Orsted slash their growth rates.
I highly doubt that that's the discussion being held at the meetings where the rates are being set, i.e. I've never heard the likes of the US Fed or of the ECB saying "we want to slow our most dynamic sector of the economy by increasing interest rates", but I could be wrong on that.
The question is whether such battery's charge/discharge cycle degrade faster than the return on investment.
For home use, break-even is an acceptable outcome, but not for commercial use like above. Is the price of battery low enough atm to make a return for such an investment?
At this point I think you have to take into account battery recycling.
If you build a big battery storage system now, by the time it's fully degraded, battery recycling will be a massive and streamlined operation. Given the number of energy storage systems built today you'll have massive quantities of similar and easy-to-recycle cells going to these recycling operations.
So if you're a big grid operator you'll probably be looking at making a streamlined and efficient loop out of getting your old cells recycled and making new cells out of that material. The cost for the replacement storage system will be much lower, and given improvements in cell chemistries, the storage capacity will likely be higher.
Then again, it's possible that grid energy operators will transition to low energy density but cheap and durable chemistries, like Ambri's molten metal batteries.. which essentially last forever.
These are all grid investments. About half of the storage is being installed in Texas, which is the closest thing the US has to an open market for investors.
The storage being installed in Texas is all being done purely for profit. Meaning that the investors have run the numbers and find batteries to be the highest return they think they can get for their money.
Storage in other places (specifically California) is being driven both by the profit motive, but also in some cases by legislation that mandates storage (not specifically batteries) be added as part of the grid mix. California has enough solar now that nearly all new installations include storage, in order to profit during the peak evening hours when electricity prices are highest.
It’s currently possible for batteries to be a great investment, but diminishing returns hit hard. The most cost efficient setup is a solar farm where the panels produce DC which directly charges the batteries and the losses from DC>AC conversion only happens once before you send power to the grid. With the added benefit of only paying for a single set of DC>AC equipment.
However, the more such systems come online the less peaking power is worth and batteries aren’t competitive with current ultra low nighttime rates.
Typically Peaker Plants fill this role but at much higher cost for electricity and emissions. Batteries just make much more sense for this kind of power.