The latest News

Stay up-to-date with our latest news,
insights, events and press.

Between five and more than 1,000 hours of energy discharge – that’s what the term “long-duration energy storage” encompasses in the industry today. It’s a pretty broad definition that covers a wide array of storage technologies, use cases and companies involved.

Despite this wide range, the vast majority of economically viable opportunities for long-duration energy storage that is realized today focuses on the lower end, i.e., delivering energy at full power capacity for five to eight hours.

It seems that the longer the aspired discharge duration, the more challenging the economic viability of storage gets. Why is that? Let’s have a look at both the revenue and cost side of “longer-duration storage”, defined here as systems aiming for a discharge over multiple days to months.

Revenue potential is there…

The primary use case for a longer-duration storage system is always a form of “energy supply shift”. The motivation can be to sell more renewable energy by avoiding grid congestion and being able to also serve demand when the sun is not shining brightly or the wind is not blowing. Another common intention (also in combination with the previous) is to charge when the energy is cheap and discharge when it’s more costly, either to save money or to make profits.

Energy supply shift can be stacked with other services such as peak shaving or balancing services, but the primary use case always needs to be applicable – otherwise, longer-duration storage does not make sense. In other words, you always need longer periods of no wind or sun and/or high power prices to benefit from longer discharge durations.

Living in Germany, I can confirm that there are elevated periods of very limited sunshine in the winter. If at the same time there is low wind as well, variable renewable energy is not available to satisfy demand. There is even a term for this: “Dunkelflaute”or “dark doldrums”, which can last for various days and usually results in higher wholesale power prices.

In other geographies, there are seasonal power prices, e.g., in Saudi Arabia where consumers often pay increased prices in summer (June to September) when an even higher than usual need for air conditioning makes power demand surge. Hence, in theory, electricity generated in winter could be sold at a higher price in summer.

A certain revenue potential for longer-duration storage therefore exists, with the specific attractiveness depending on the individual setting. But what about the cost of storage for seizing this opportunity?

…but cost competitiveness is an intrinsic challenge for longer-duration storage

Now we are getting to the intrinsic challenge of longer-duration storage that is often overlooked.

The economics of an energy storage system in general depends a lot on the number of full charging/discharging cycles over the lifetime of that system. This is because you usually get remunerated for each kWh of electricity stored and discharged. Simply said, the higher the total number of full cycles, the higher the usable energy over the lifetime, the higher the return on investment for your energy storage system.

If this is too abstract, think about the following example: Let’s say you build a warehouse to temporarily store coffee mugs you buy at a cheap price and want to sell later at a profit. The only time you make money is when you take a unit out of your warehouse and sell it.

If you choose to empty (“discharge”) and restock (“charge”) your warehouse daily, you repeatedly make money and the accumulated profits will probably provide a good return on your warehouse investment.

If you only empty and restock the warehouse once a year, you better have a very large warehouse (and get a very high price at the time of selling), as this one “discharge” of stored coffee mugs is all the money you will earn in that year. Plus, you need to be able to build this giant warehouse at a very low cost.

Energy storage systems that target longer discharge durations such as weeks or months have limited annual cycles per definition. Take seasonal storage: In the example above you transfer electricity generated by PV in winter to satisfy higher demand in the hot summer and only cycle once per year: the battery discharges during the summer months and will only recharge when it’s winter again. The same logic applies to the other aforementioned example as well, as “dark doldrums” typically occur in Germany only two times per year max.

Returning to our analogy earlier, you need a cheap, giant warehouse if you have a small number of cycles. This translates to a longer-duration energy storage technology that can scale up energy capacity at very low cost independent of the power rating.

In fact, this is reflected by the long-duration solutions applied in real life today: The electrolyte tanks of a flow battery, the weights of a gravity storage plant or the cryogenic tanks of a liquid air energy storage system all present opportunities for increasing energy capacity at relatively little marginal cost.

How long and when do you need it?

At the end of the day, whether long- (or longer-)duration is the “holy grail of energy storage” as it is repeatedly claimed by the media depends on your definition of “long” and the timeframe you are looking at. Are we speaking about hours, days, weeks or months of discharge duration? Are we looking at today’s applications or use cases in five or ten years from now?

For the upcoming “decade of energy storage”, I see the biggest opportunity for long-duration storage that can shift PV and wind power within the course of a day to offer a fully dispatchable clean energy asset competitive to fossil fuel-based alternatives. Increasing shares of renewables in the generation mix will cause sufficient price spreads, e.g., due to cannibalization of prices at times of plentiful sun and wind. Depending on the demand profile when it’s dark, five to eight hours of discharge (at full power capacity) should do the trick. Next to other storage solutions, flow and sodium sulfur batteries are proven technologies that can be competitively applied in an increasing number of settings.

In the longer term, when all of the lower hanging fruit for decarbonization has been harvested, the urgency for longer discharge duration storage will increase and will likely be priced accordingly. By that time, costs for suitable solutions that can easily scale up energy capacity to discharge for weeks and months, such as green hydrogen, will have come down substantially due to technological advances and economies of scale.

Regardless of where we are on the global path towards decarbonization, I am convinced energy storage will offer a suitable solution.

For questions or comments, please contact Apricum Partner Florian Mayr.

Author:

Florian Mayr

Partner

Florian Mayr is an expert for strategy, business development and transaction advisory in the global renewable energy markets, including energy storage. Florian leads Apricum’s energy storage practice and is responsible for the company’s international activities in this field.

Learn more