Energy Industry Faces Paradigm Shift
Business Opportunities Reach Beyond Renewable Energies
By Holger Rubel, Choi In-jin
We are witnessing a paradigm change. Historically, electricity generation has been designed to follow demand. Now, we are moving toward a world in which virtually continuous demand is expected to be met, to a large extent, by energy sources ― wind and sun ― that are not ``on,'' or able to generate, much of the time. This challenge makes electricity storage critical, especially on a large-scale.
Large-Scale Electricity Storage
Large-scale electricity storage refers to harnessing excess power generated in times of abundant availability, or low
demand, and releasing it into the grid later when power generation is low, or demand is high. There are five main types of storage and key technologies within those categories.
The first is mechanical storage, including pumped hydroelectric storage, compressed air energy storage (CAES), and flywheel energy storage. The second is thermal storage, including hot-water storage, molten-salt storage, and phase-change material storage.
Thirdly, electrical storage is also a viable option, including super-capacitors and superconducting magnets. The fourth is electrochemical storage, including flow and static batteries. Finally, there is chemical or hydrogen storage.
Among these, the technologies that look most promising today for large-scale deployment are CAES, hydrogen storage, batteries, and pumped hydroelectric storage. All of these are capable of storing significant amounts of energy, which is essential for balancing fluctuating renewable sourcess.
While the business case for investing in storage is currently weak, that situation will change. Today's fluctuations in generation are compensated for relatively easily and cheaply by flexible conventional power plants, but there are limits to how much these plants will be able to provide. Simultaneously, the march toward a fossil-fuel-free energy landscape continues: ambitious targets for the share of electricity to be provided by renewable sources have been formulated and confirmed. Wind and solar photovoltaics are the most competitive and widely available renewable sources and will certainly account for the lion's share of renewable energy produced ― and they require storage to be viable.
To realize fruit from their investments through subsidies in building a renewable generation base, governments will necessarily turn their attention to integration. And compensating for the fluctuations induced by wind and solar power generation, a big piece of the integration challenge, will require massive financing. A tremendously large market will develop around fluctuation management technologies, and large-scale electricity storage will account for a good part of those investments. Indeed, we expect a strongly growing market around electricity storage, with annual revenue well above 10 billion euros by 2020. Already, the beginnings of that market are evident: the first projects are being tendered, research activities are picking up, and venture capital is viewing electricity storage as a key investment topic in clean technology. All participants in the industry value chain would therefore be wise to take the initiative and start positioning themselves for the inevitable. The race for the best technologies, the most advantageous sites, gaining operational experiences, and shaping standards and policies is open, and the commercial payoff for getting into that race early stands to be significant.
Role of Governments
Governments that are committed to fluctuating renewable energy need to be similarly proactive. Given its current economics, storage needs a push to get it off the ground, and governments are uniquely positioned to provide it.
As was the case with renewable electricity generation itself some years ago, the right and timely incentives will spur private capital. That investment, in turn, will ensure that adequate storage capacity exists to allow the realization of gains from the earlier heavy funding in renewable capacity ― and that the vision of a truly sustainable electricity supply can become a reality