The first energy revolution came with the invention of the steam engine in the 18th century. This marked the beginning of the industrial revolution and the mining and consumption of coal as a key energy resource. The second energy revolution came in the 1960s as petroleum replaced coal as the most consumed energy. Fossil fuels have since dominated the energy landscape to the present day. We are now on the cusp of the third energy revolution – the renewable era. The dramatic fall in battery prices over the last five years make them a feasible alternative to fossil fuel generation when, to quote that hackneyed phrase, the sun doesn’t shine or the wind doesn’t blow, and the key to achieving a renewable electricity system.
Batteries allow the grid to deal with the mismatch between generation and demand at any time of the day. They can charge when electricity generation is plentiful and cheap (including being paid to charge) and are able to provide access to power during times of peak demand (when prices are high). They are also have lightning fast response times and can switch between charging and discharging faster than any existing form of generation allowing it to provide lucrative grid stabilisation services (aka the frequency control and ancillary services (FCAS) markets).
In the pre-renewable energy age electricity demand was effectively fixed and the grid was geared to flex generation up and down to match demand with supply. The choice of supply was between coal versus gas, which was really a trade-off between the cost of fuel and flexibility. Historically we had coal plants that provided the bulk of energy (base load) because coal was cheap. Gas was expensive and, was thus, used to fill the gaps that was not provided by coal.
Fast forward to today and we have variable renewable energy forcing its way into the grid as the lowest cost energy supplier. Power generation is now determined by the time of day and weather. Inherent with renewables is the mismatch between the average time of peak generation (middle of the day) and the average time of peak consumption (the early evening). Renewables are forcing coal out of the system as coal plant are slow and inflexible and are being forced into earning below market returns during the day in the hope of earning higher prices during peak demand and non-renewable generation periods.
The role of batteries is to “be like water” (as the great Bruce Lee once said) and to fill the gaps. The grid requires a large number of batteries, at least equal to the current capacity coal generation in the NEM, to fill the daily demand and supply mismatch. There will be an even larger amount of storage (perhaps pump hydro, perhaps batteries) required to fill the seasonal gaps - such as in winter when solar generation is low or during spring when wind and solar generation is high but demand is low. Storage or dispatchable generation is required to fill this gap. However, the economics are very different between daily versus seasonal storage – perhaps a future newsletter article!
The current wave of batteries uses lithium ion cells. This technology is proven and is used in all manner of electronic devices as well as in electric vehicles. Over time we expect new alternative technology will also gain a larger share (e.g. flow batteries). The key issues for batteries are cost and cycle life. Battery costs have spiked up over the last six months as a result of impact of the Russia/Ukraine conflict. This is due to the spike in key commodity inputs (nickel in particular) as well as due to the general supply chain crunch with the incredible ramp up of EV production. However, just as was the case for wind and solar, we expect technology to improve and costs to come down over the medium to long term (as they have done compared to battery costs two to three years ago).
Batteries will be a big part of the energy transition as we move into the third energy age where renewables supply the majority of our energy needs. Energy security in the renewable era will be very different to that of the fossil fuel era. Batteries are the key to achieving this!