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2022-03-01
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Editorial Q&A -  Key Messages for Energy Storage Market

Editorial Q&A -  Key Messages for Energy Storage Market

 

Attributed to ANDY LYCETT, Country Manager, UK & Ireland, Sungrow

 

The world’s leading inverter and energy storage system supplier, Sungrow has already established a leading position in the global battery energy storage system (BESS) market. Andy Lycett is Sungrow’s Country Manager for the UK and Ireland, leading the company’s PV inverter and BESS team.

 

Energy storage has grown hugely as an industry in the past few years and this growth is widely anticipated to accelerate. How is the energy storage market developing and changing as it grows?

Answer:

Up until the last decade, energy storage was mainly employed to provide critical infrastructure support and backup UPS power for businesses and organizations such as hospitals, government hubs, and data centers, etc. It was a niche specialist market that competed with or complemented the diesel genset. That situation continued until around 10 years ago, when National Grid started to undertake studies and provided incentives for grid services. The proliferation of intermittent renewables is the main driver.  

Later, the UK deployed its first large-scale battery storage at Leighton Buzzard, demonstrating the suitability of lithium-ion batteries in this application. The UK then accepted that we could not only use batteries as backup, but more importantly, they could provide value for the national and local distribution networks acting as supply or demand to provide network stability. Additional research and development projects further cemented the position of ESS as a viable technology. Since then, the industry has evolved enormously. 

In Sungrow’s view, the UK ESS industry truly began to accelerate once the National Grid introduced the 200MW EFR scheme a few years later, and it was then realized that there were not only upgrade deferral opportunities, but also an ancillary services opportunity. Battery storage then enabled investors to earn quicker paybacks, typically within a 5-10 year timeframe. More and more businesses started to explore using BESS to fill the gap between long-term storage, diesel and gas, but most large players were still quite hesitant about the technology due to the high CAPEX, perceived risk and a lack of finance to bring projects to fruition. 

Once larger players began to support BESS projects in the UK by putting solid investment behind real projects, it further accelerated change. Increasingly, more investors began evaluating the risk and rewards, as battery prices continued to fall, and the supply chain matured. They were ready to seize the early opportunity to build large-scale battery storage systems-based sound financial models with FFR and TRIADs payment as a base. The utilities soon followed, deploying large BESS on some of their own sites, and from there, the industry was quickly moving forward towards more mature grid incentives. Battery cell prices kept falling and banks, institutional funders, and capital investors became increasingly comfortable with battery energy storage.

So, throughout the past 10 years, the industry has faced a variety of challenges. Early on, it was attempting to find sources of revenue not only from back-up services, but also as a grid service provider, later it was a question of stacked revenue stability and making a solid business case by combining those different ancillary services. Most recently, the challenge has been using the right route to market service via providers and aggregators to demonstrate to investors that BESS technology is indeed bankable for the long term. This has been assisted by specialist battery optimizers who use their expertise in markets and modelling to predict the correct revenue strategies for owners and operators. 

Nowadays, there is further focus on reliability and risk elements of the sector, so is about using the latest iteration of products to satisfy insurers needs for safe system operation. The industry is also going through completely new challenges in the form of supply chain disruption, mainly due to Covid induced volatility, resulting in higher prices, longer lead times, and less security of supply. Although this situation won’t continue forever, it is causing and will continue to inflict short-term discomfort, most likely until the end of 2022. However, Sungrow believes, that as the supply chain becomes increasingly mature, competition will consolidate, and the main focus for product manufacturers will be continuous system improvements, for example to become increasingly reliable, safe and more economical. 

 

What are some of the challenges that the industry must overcome to become and remain a key part of the global transition to low carbon energy sources?

Answer:

Sungrow believes that all parts of the sector will need to be involved and in order to become and remain a key pillar of the energy transition. However, the market participants are mostly businesses and grid operators, and ultimately investors, which are market-driven. So as part of the path to global decarbonization, government regulations across this world will play an important role. This will be one of the key challenges, encouraging regulators to implement a policy where previously there was none, in an effort to drive and stimulate the market in the right direction. This will then create a solid foundation for the industry to flourish, as we saw with PV. For example, National Grid introduced a variety of different ancillary services for battery such as EFR FFR TRIADS Balancing Mechanism, etc., and the UK regulator removed barriers such as the 50MW cap for national planning, the double charging and levies as embedded generators, etc.

For Sungrow, as an equipment manufacturer and energy storage system supplier, the focus is on the development of more efficient PCS, Control, and BMS for even more robust and efficient technical solutions, which are scalable to enable quick deployment, whilst also being more competitive than the previous generation.

For the EPC partners, their challenge is to understand the forthcoming products to the market, and how to make the best use of them within the constraints of planning, grid, cost of construction, etc.  They will also be looking to the manufacturers for increased cost-efficiency. EPC and developer partners also have to make the right choice when selecting a manufacturer to work with. They need to find a reliable partner that can offer a long-term relationship. Sungrow has a 25-yeartrack record of providing systems and service, and has been operating in the UK since 2014, and work with leading blue-chip developers and EPCs delivering some record-breaking systems, such as the high profile 100MW/100MWh ESS at Minety in Wiltshire.

Obviously, other organizations in the sector will have their own challenges too, such as utility and electricity generation companies. Their main challenge will be, how to balance their business interests with customers and the grid. Aggregators will have to utilize increasingly complex algorithms to optimize revenue streams. Control system providers will have to minimize delay and increase reliability of solutions. Insurers, solicitors, and financiers will have to adapt projects and contracts to an ever-increasing risk profile, to match the improving flexibilities of the cells. As for battery cell suppliers, their challenge is to develop more innovative battery cells to adapt to increasingly demanding grid services and arbitrage performance requirements.

As more Energy Storage Systems are deployed, recycling services will eventually become a key part of the system life cycle. In short, more recycling facilities will be needed by the industry. The current recycling capacity is woefully inadequate for what will come, so this is another hurdle the industry faces. However, this is not an insurmountable issue, and over time, the capacity will be put in place as the market grows. We are still in the early stages. By 2025-2027 the early battery storage sites will reach their 10 years end of lifetime, the industry needs to ensure that there are adequate facilities by then. This is not only for regulation and environment purposes, but also in order to reuse secondary batteries, especially LFP as these have almost 20-25 years of lifetime, as well as precious minerals and materials contained within cells, ready to be reused again.

It is clear that there are challenges across every sector of the industry, but with some clear regulation and policy from the government, we should have sold the foundation to operate. The PV sector has shown how resilient the renewables industry can be, and how even when there are huge challenges we find a way to navigate through or around them. By all the stakeholders working together, we can make the ESS industry a thriving success for many years to come, and help to facilitate a quick and smooth transition to a low carbon future.

 

What are some of the key technology trends that you think will shape energy storage deployment a) during 2022 & b) between now and 2030?

Answer:

During 2022

The term Energy Storage covers a range of technologies including mechanical Storage, electro- chemical storage and so on.  Our focus is on the key technologies impacting electro-chemical storage which is pertinent to the battery chemistries that are being deployed commercially in 2022.

  • Thermal Management of battery cells is of vital importance to the performance and longevity of any ESS system. With the exception of the number of duty cycles, and the age of the batteries, it has the greatest impact on performance.

    The lifetime of batteries is greatly affected by thermal management. The better the thermal management, the longer the lifetime combined with higher resultant usable capacity. There are two main approaches to cooling technology: air-cooling and liquid cooling, Sungrow believes that liquid cooled battery energy storage will start to dominate the market in 2022. This is because liquid cooling enables cells to have a more uniform temperature throughout the system whilst using less input energy, stopping overheating, maintaining safety, minimizing degradation and enabling higher performance.

    A Power Conversion System (PCS) That Meets The Needs of A Dynamic Market.  The PCS is the key piece of equipment that connects the battery with the grid, converting DC stored energy into AC transmissible energy. Its capability to provide different grid services in addition to this function will affect deployment. Because of the rapid development of renewable energy, grid operators are exploring the potential capability of BESS to support with power system stability, and are rolling out a variety of grid services. For example, Dynamic Containment (DC) was launched in 2020 and its success has paved the way for Dynamic Regulation (DR)/Dynamic Moderation (DM) in early 2022. Apart from these frequency services, National Grid also rolled out the stability pathfinder phase 1/2/3 to assess the inertia and Short-Circuit contribution of grid-forming based inverters. These services can not only help to build up a robust network, but also provide significant revenue for customers. So the functionality of the PCS to provide different services will affect the choice of BESS system.

  • DC-Coupled PV+ESS will start to play a more important role as existing generation assets look to optimize performance.  PV and BESS are playing important role in the progress to net-zero. The combination of these two technologies has been explored and applied in lots of projects. But most of them are AC-coupled. The DC-coupled system can save the CAPEX of primary equipment (inverter system/Transformer, etc), reduce the physical footprint, improve conversion efficiency and decrease PV production curtailment in the scenario of high DC/AC ratios which can be of commercial benefit. These hybrid systems will make PV output more controllable and dispatchable which will increase the value of the generated electricity. What’s more, the ESS system will be able to absorb energy at cheap times when the connection would otherwise be redundant, thus sweating the grid connection asset.

  • Longer duration energy storage systems will also start to proliferate in 2022. 2021 was certainly the year of the emergence of utility-scale PV in the UK. The scenarios that suit long-duration energy storage include peak shaving, capacity market; improvement of the grid utilization ratio to reduce transmission costs; easing peak load demands to reduce capacity upgrade investment, and ultimately reducing electricity costs and carbon intensity. The market is calling for long term energy storage. We believe that 2022 will kick off the era of such technology.

  • Hybrid Residential BESS will play an important role in the green energy production/consumption revolution at the household level. Cost-effective, safe, Hybrid residential BESS which combines the roof’s PV, battery and a bi-directional plug-and-play inverter to achieve a home micro-grid. With the rise in energy costs biting and technology ready to help make the change, we expect rapid take-up in this area.

 

Between now and 2030

There are several factors that will affect energy storage system deployment between 2022 to 2030.

  • The development of new battery cell technologies that can be put into commercial applications will further push forward the rollout of energy storage systems. In the last few months, we have seen a huge jump in the raw material costs of Lithium which leads to a price increase of energy storage systems. This may not be economically sustainable. We expect that in the next decade, there will be lots of innovation in flow battery and liquid-state to solid-state battery field developments. Which technologies become viable will depend on the cost of raw materials and how quickly new concepts can be brought to market.

  • With the increased speed of deployment of battery energy storage systems since 2020, battery recycling has to be taken into consideration in the next few years when achieving the ‘End-of-Life’. This is very important to maintain a sustainable environment.  There are already many research institutions working on the battery recycling research. They are focusing on themes such as   ‘Cascade utilization’ and ‘Direct dismantling’. The energy storage system should be designed to allow ease of recycling.

  • The grid network structure will also affect the deployment of energy storage systems. At the end of the 1880s, there was a battle for dominance of the electricity network between AC systems and DC systems. We now know that the AC system won, and is now the foundation of electricity grid, even in the 21st century. However, this situation is changing, with the high penetration of power electronic systems since the last decade. We can see the quick development of DC power systems from high-voltage (320kV, 500kV, 800kV, 1100kV) to DC Distribution Systems. Battery energy storage may follow this change of network in the next decade or so.

  • Hydrogen. This is a very hot topic regarding the development of future energy storage systems. There is no doubt that Hydrogen will play an important role in the energy storage domain. But during the journey of hydrogen development, existing renewable technologies will also contribute massively. There are already some experimental projects using PV +ESS to provide power to Electrolysis for Hydrogen production. ESS will guarantee a green/uninterrupted power supply during the production process which is the real ‘Clean power for all’.

 

Where can the industry and its customers find the biggest opportunities to lower costs and maximise value from energy storage solutions and services?

Answer:

Install longer duration systems

The only certainty of future revenue streams derived from ESS systems is that they are uncertain! Energy Storage Systems must be designed to be future-proofed to adapt to the changing needs of an increasingly decarbonized and volatile grid and the market mechanisms that support the delivery of power to end-users. What is true during the pandemic is that unexpected opportunities for the profitable operation of systems have emerged as volatility in power pricing has been impacted not only by demand destruction but also by the supply constraints driven by gas shortages caused by geopolitical events and unseasonal weather patterns. Consequently, there is renewed interest in longer duration systems with more revenue derived from energy capacity.

Use future-proofed technology for an uncertain future

At the heart of the value of Energy Storage is its worth as a balancing technology. An ESS system can earn revenue for both charging and discharging. Looking to the future, can we expect a similar pattern of events that have made ESS so attractive in recent years? The answer is a resounding yes. Every new grid-scale deployment of a renewable technology creates additional supply volatility both locally and nationally. Added to this, demand destruction could happen again unexpectedly as a rapid global response in the form of an economic shutdown during an emerging pandemic is now a reality. As fossil fuels e.g. natural gas become more scarce, their cost as a balancing fuel will only increase and so using ESS to balance the electricity system will become comparatively more attractive. Additionally, the unpredictable nature of new demand patterns caused by the electrification of transport and heat, driven by legislation and the carbon reduction agenda, will create unexpected opportunities for ESS. Change could be rapid and systems may need to be repurposed to take advantage of new value streams. 

Reduce running costs through improving system heating, cooling and power conversion technology

As a manufacturer, Sungrow has thought about future-proofing in a considered way. Our new liquid cooled system means the battery cells within the system operate at a uniform and optimal temperature, increasing their performance and longevity. Their State of Health is improved for longer (when compared with previous generation air cooled systems) and the system Round Trip Efficiency is improved by using less energy to keep warm or cool. This reduces costs during the system’s life and in turn this increases profitability, day in day out. Furthermore, the inclusion of DC:DC converters/optimizers within the system infrastructure means that new battery modules can be incorporated into the system without being impacted by the performance of older modules. In essence this means that the system’s energy can be ‘topped-up’ during the system life without replacing the whole battery container to meet contractual obligations or emerging market opportunities. Similarly, if market opportunities or grid services favour longer durations, additional battery containers can be connected to existing bi-directional inverters to increase the system’s overall energy capacity.

Maximise the value of a land constrained grid connection

ESS Sites with sizable grid connections are often constrained by limited land availability. As trading revenues have increased and longer duration systems become more popular, more energy is required in a footprint originally purposed for a smaller system. Sungrow has responded by increasing the energy density of its systems without compromising on safety. By using liquid cooling technology with water-based fire suppression systems we can increase the energy density of the system by up to 30%, decreasing the space needed to stop the contagion of fire risk. As the liquid cooled systems are also integrated in our factory, we have the added advantage of decreasing installation time, which reduces risk and labour costs for the developer and avoids potential weather related delays.

Consider whole system approach to design

Sungrow focuses on procuring the most efficient and safe cost-effective battery cells from a range of partners and manufacturers its own battery modules, which means it can increase the efficiency of the system by thinking of the system as a whole rather than as individual components. It also uses successfully-patented tried and tested heating and cooling technology developed for wind converters to enhance the system’s performance. The focus on whole system round trip efficiency results in lower operating costs for the system owner.

New applications such as buffering

The EV charging revolution is upon us and there is a land grab for locations that are well located on road networks or customer premises but also have sufficient grid capacity for the increased power demands of rapid charging. Network upgrade costs could be extremely prohibitive but using an ESS system to buffer the grid demand could be an effective way of avoiding the need for reinforcement.

As the need for managing peak demand is sporadic the ESS system could be made available for trading or grid services at other times of the day or night. So not only could there be lower costs of installing charging infrastructure but also the payback on the capital expenditure could be much faster due to other stacked revenues. Sungrow has already deployed systems to customers taking this approach.

 

What are the most important things to think about, when it comes to making an investment in energy storage equipment or projects?

Answer:

Choosing the right supplier: Experience is vital

There are many new inexperienced entrants providing equipment to the Energy Storage Market. Customers need to have the reassurance that they are contracting with a bankable provider that has experience in overcoming the complex challenges that an ESS project brings. An experienced provider like Sungrow with multi-gigawatt hour global deployments of ESS can advise the customer at the design phase about potential pitfalls that have been encountered before and how to avoid them. Costly mistakes, like underspecifying the heating and cooling capabilities of ESS,  can therefore be avoided. Sungrow is constantly improving the operability and efficiency of its systems by feeding in knowledge from previous projects into the R&D process.

Ease of installation

There are many external factors that can impact the profitability of an ESS project during the build phase. As batteries are perishable goods and can be affected by weather and shipping delays, a project’s risk profile and quality management can be enhanced by using a system that is fully integrated off-site such as the Sungrow Liquid Cooled ESS. This means that time from the arrival of the system to site acceptance test, grid approval and commercial operation can be shortened and other factors have less of an opportunity to delay the programme. This also reduces the cost of financing projects as timescales are vastly improved.

Local Service capability

One of the challenges of ESS has been supporting the systems beyond the initial installation phase. As systems have moving parts that can wear out, customers need to look for providers who have experienced teams who can respond quickly but also have the knowledge and expertise to problem solve and reduce system downtime. Increased availability means increased revenues, so local support is an absolute must. Sungrow has recruited a dedicated team with hybrid skills who not only understand the technicalities of the batteries themselves but also can service and resolve issues with the power conversion systems that are at the workhorse of ESS. Our local in-country service team is supported by a warehouse of spare parts meaning that warranty claims can be dealt with swiftly.

System Running Costs

Efficiency is the name of the game. Any commercial analysis that focuses on up-front costs only using a simple £/MWh calculation will overlook the fact that an efficient, safe, reliable system will be more profitable in the longer term. Sungrow has worked on the efficiency of their systems by considering the system as a whole and not in a piecemeal fashion.

One-stop shop

It is tempting for developers to mix and match different elements of the system and procure different system components from different manufacturers for a short term cost advantage. However, by doing this they lose the benefits of having one integrated multi-skilled team to solve the problems, one warranty to cover the whole system and one responsible counterparty. Sungrow supports customers throughout the whole design, delivery, deployment and operation process. Sungrow acts as a long term partner looking to repeat success rather than just fit and forget.

18MW PV Plant in Dubai
Developer: Recurrent Energy
Owner: empra
EPC:Signal Energy
Capacity:205MWac
Model:SG2500U
Location:Fresno, CA
Commissioned in Q4 2017
Developer: Recurrent Energy
Owner: empra
EPC:Signal Energy
Capacity:205MWac
Model:SG2500U
Location:Fresno, CA
Commissioned in Q4 2017