Energy storage is one of the most essential technologies in the energy industry. It enables the capture and storage of electricity to lower energy costs, improves grid reliability, and solves the intermittency of renewables. However, some challenges still prevent the mass adoption of energy storage. One of them is cost -- today, energy storage is too expensive to be economically viable without government subsidies or other incentives. There are ways to lower energy storage costs like repurposing EV batteries in stationary energy storage applications and addressing the soft costs.
Unlike fossil fuels, renewable energy is intermittent. For example, solar panels only produce power when the sun shines, and wind turbines only generate power when the wind blows. What happens when the sun is gone, or the wind is not blowing? Depending on your system, you may need to draw energy from the grid or a diesel generator!
With energy storage, you can solve the intermittency of renewables. Battery technology has progressed so much that it can power industrial facilities. The process of energy storage begins with energy generation. Usually, renewable energy generation fluctuates, and in peak hours for energy generation, a lot of power can be produced that may not be used immediately. So, what happens to that excess energy? Energy storage systems can store the extra energy and deploy it at a later point in time. The benefits and applications this flexibility provides businesses make adopting an ESS a compelling argument. To learn more about the different applications of ESSs, check out our previous blog here.
The cost of energy storage will continue to decrease as battery technology improves. Furthermore, there will come the point where our reliance on fossil fuels will need to decrease dramatically (or eventually disappear). When clean energy powers most of our businesses, energy storage will be necessary to leverage these highly variable renewable sources.
Definitions of cost components are fundamental to effectively breaking down the ESS costs consistently. The list below describes each of the cost items that appear in our cost breakdown below. There are three main cost groups, capital expenditures (CAPEX), operating expenditure (OPEX), and decommissioning costs. The following definitions are derived from the 2020 Grid Energy Storage Technology Cost and Performance Assessment by the U.S. Department of Energy.
Battery Pack ($/kilowatt-hour [kWh]): Modules, racks, and battery management system (BMS).
Storage - Balance of System (SBOS) ($/kWh): supporting cost components for the battery pack with container, cabling, switchgear, flow battery pumps, and heating, ventilation, and air conditioning (HVAC).
Integrated Battery Storage System ($/kWh): This cost is the sum of the battery pack and the SBOS costs.
Power Equipment ($/kilowatt[kW]): Bidirectional inverter, alternating current (AC) breakers, communication interface, DC/DC converter, isolation protection, and software.
Controls & Communication (C&C) ($/kW): Energy management system (EMS) for the ESS and ensure the correct operation of the ESS.
System Integration ($/kWh): These are costs related to the integration of components of an ESS into a functional system. This component may include the procurement and transportation to the facility of battery modules, and the integration of:
Engineering, Procurement, and Construction (EPC) ($/kWh): General and detailed engineering, construction equipment, electrical works, commissioning, and tests.
Project Development ($/kW): Project agreements relevant to the installation of the ESS, site management, and financing.
Grid Integration ($/kW): Costs associated with connecting the ESS to the grid, such as:
Fixed Operations & Maintenance (O&M)($/kW-year): These are all costs necessary to keep the storage system operational throughout the duration of the project that does not fluctuate based on energy throughput.
Basic Variable O&M ($/mgawatt-hour): These are the costs that vary based on the usage of the ESS throughout the project’s life. These costs do not include fuel consumables.
Warranty ($/kWh): Fees to ensure the appropriate performance and assurance of functionality throughout the project lifespan.
Insurance ($/kWh): A policy that protects the customer from unknown or unexpected issues that compromise the ESS functionality.
Disconnection ($/kW): The removal of the ESS from the site and the grid
Disassembly & Removal ($/kW): The costs associated with the dismantling of the ESS components for disposal and recycling.
Recycle & Disposal($/kW): The costs associated with the proper disposal of the components and the subcomponents of the ESS. These costs can involve the sorting of materials, transportation to the plant, and processing of the material in the plan.
The biggest contributor to the cost of energy storage is the integrated battery storage system package. This package contributes approximately 55% of the total ESS cost. In the pie chart below, the decommissioning costs are not expressed as there is little documentation on them in the current literature. Generally, the cost breakdown of an ESS would be the following:
The LCOS is a good indicator of the viability of an energy storage project. You can calculate the LCOS by dividing the total cost of the storage system by its cumulative output over its lifetime.
The most important thing to remember when calculating LCOS is that it reflects all costs incurred during a project's lifetime, including installation and maintenance costs and any additional expenses associated with running it.
One way to reduce the cost of energy storage is by minimizing the associated soft costs. Soft costs are those not directly related to materials or production, such as accounting and administration expenses, research and development spending, maintenance, marketing and sales efforts. Soft costs have grown over time due in part to the overall increase in complexity within businesses; however, you can reduce them through better allocation of resources through strategic planning processes such as lean manufacturing.
Second-life energy storage systems are end-of-life EV batteries repurposed for stationary applications. Since second-life systems can be more cost-effective than new lithium batteries, this makes them an essential part of addressing the cost challenges of energy storage systems.
When you think about it, this makes sense; most of the costs related to the production of the battery module itself such as the mining, manufacturing, the encasing of the module were incurred in the first life of the battery packs, leaving you with only the costs of repurposing the battery for its second-life.
Energy storage is the key to a sustainable future. There are still plenty of opportunities for innovation and improvement in the technology, particularly around costs. Creating a circular economy for retired EV batteries by repurposing them as stationary energy storage allows for considerable cost reduction while providing a comparable lifespan to first-life energy storage systems and offering market-leading discharge capabilities.
Haram, M. H. S. M., Lee, J. W., Ramasamy, G., Ngu, E. E., Thiagarajah, S. P., & Lee, Y. H. (2021, March 31). Feasibility of utilising second life EV batteries: Applications, lifespan, economics, environmental impact, assessment, and challenges. Alexandria Engineering Journal. Retrieved August 11, 2022, from https://www.sciencedirect.com/science/article/pii/S1110016821001757#f0045
Mongird, K., Viswanathan, V., Alam, J., Vartanian, C., Sprenkle, V., Pacific Northwest National Laboratory, Baxter, R., & Mustang Prairie Energy. (n.d.). (rep.). 2020 Grid Energy Storage Technology Cost and Performance Assessment (pp. 3–15). United States Department of Energy.
At Moment Energy, we provide clean, affordable, and reliable energy. We have developed an energy storage system that can integrate with various power sources such as the grid, hydrokinetic turbines, solar and wind power generators.
In providing a second life to EV batteries, we can offer our energy storage units at two-thirds the price of other lithium-ion batteries. In addition, our batteries provide scaling flexibility as they stack with 60 kWh building blocks to accommodate your project’s size requirements.
Do you want to learn more about what we can do? Click here or fill out the form below to book a consultation with our team.
Miguel is the Marketing Manager at Moment Energy. He brings a comprehensive knowledge in advertising and marketing in a B2B setting. He has worked in several small and medium sized companies worldwide.
Marketing Manager, Moment Energy