By Besith Pineda, MBA ’24
This article was written in response to a seminar given by Adrienne Lalle, Senior Director of Energy Storage at Cypress Creek Renewables, in an EDGE Seminar at Duke University’s Fuqua School of Business in Fall 2023. This article voices one student’s perspective and does not necessarily represent the views of either Duke University or the seminar speaker.
In our recent EDGE Seminar class, Adrienne Lalle, Senior Director Energy Storage at Cypress Creek Renewables, shed light on the opportunities and challenges associated with deploying energy storage projects. Her presentation underscored the critical role of energy storage in providing firm capacity during periods when renewable energy resources aren’t generating electricity. A significant challenge, however, is that batteries experience lower marginal capacity as penetration increases, due to their finite duration. Addressing this concern, Ms. Lalle stressed the imperative for deploying long-duration energy storage as early as 2030 to sustain both capacity and economic value.
The dilemma
While it is clear that the global energy transition requires energy storage, investing now involves making decisions that rely on imperfect information to determine capacity and duration requirements. Two prevailing narratives complicate these decisions: the historical emphasis on 4-hour durations and the dominance of lithium-ion batteries. To truly reimagine long-duration energy storage solutions, we must explore alternative use cases and leverage the opportunities presented by non-lithium-ion technologies. Merging these perspectives can transform energy storage from a complementary technology to renewable energy assets to a vital component of the energy transition with strong investment potential.
The current state of energy storage
Currently, the utility-scale energy storage market is largely dominated by 4-hour lithium-ion batteries, which constitute for 90% of the estimated 9 GW utility-scale battery capacity in the United States by the end of 2022 (not including pumped storage hydropower). Of these installations, 99% are Li-ion batteries.1 These 4-hour storage systems have been largely used to provide firm capacity during summer peaks, leading to the adoption of the “4-hour capacity rule” in several wholesale regions, which allows these systems to receive full resource adequacy credits. This means that a battery system with a power capacity greater than 4 hours does not derive a greater economic benefit. Beyond ensuring resource adequacy, 4-hour durations are well-suited to capitalize on energy arbitrage opportunities. In the Texas market, 2-hour durations are used to provide critical ancillary services such as frequency regulation and frequency response.2 In a September 2023 report, the National Renewable Energy Laboratory states that these conditions have created a “disincentive for durations beyond 4 hours.”3
Rethinking energy storage use cases
While 4-hour energy storage systems have played a critical role in kickstarting the market, changing grid conditions necessitate longer durations. As Ms. Lalle explained during her presentation, a shift towards winter peaks (as heat is electrified) is a driving factor that will require longer durations to manage because winter peaks tend to be longer than summer peaks. Deferring transmission upgrades is another potential use case for longer duration systems, helping to alleviate transmission congestion on both the generation and supply side of the grid. Although this need could be met by 4-hour batteries, long duration energy storage systems are better positioned for this solution due to the increased flexibility they provide. For overall grid reliability, perhaps one of the most convincing arguments for long duration is its potential to make the grid resilient against unplanned system disruptions such as outages. Energy security in the U.S. is such a pressing issue that the Biden-Harris administration recently announced $325 million in investments for long duration energy storage projects with a focus on grid resiliency.4
The future of energy storage will require systems that handle much more complex tasks than 4-hour batteries have accomplished thus far. To rethink energy storage is to think beyond the accepted use cases to applications that handle shifting demand peaks, solve for transmission challenges, and create a resilient grid.
Rethinking batteries
To address emerging challenges, we must also consider battery technologies beyond lithium-ion. Within the electrochemical storage category, emerging technologies with alternative chemistries that do not rely on lithium-ion are promising. These include long-duration energy systems such as Form Energy’s iron-air battery, Ambri’s calcium battery, and Enervenue’s nickel-hydrogen battery. These technologies are specifically designed for long duration applications, utilize low-cost materials readily found in the U.S., exhibit high round-trip efficiency, and are often safer than lithium-ion technologies due to a lower change of thermal runaway.5
The Next Generation Energy Storage System
Embracing the next generation of energy storage demands a paradigm shift – a departure from a narrow reliance on lithium-ion technology and move towards a comprehensive “value stacking” approach that harnesses various uses beyond storing renewable energy. When considering Ms. Lalle presentation, this broader approach allows us to make the argument for energy storage despite the challenging economics of these projects. The potential of energy storage is further broadened by integrating long-duration energy solutions, and the deployment of these solutions can be more effective by considering alternative chemistries that can solve problems where lithium-ion falls short. Ultimately, the value proposition of energy storage projects should be decoupled from renewable energy deployment and considered holistically as a necessary component of the energy transition.
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Footnotes:
- Denholm, P., Cole, W., & Blair, N. (2023). Moving Beyond 4-Hour Li-Ion Batteries: Challenges and Opportunities for Long(er)-Duration Energy Storage. National Renewable Energy Laboratory. ↩︎
- Hering, Garrett. (2023). “Lots more coming”: Texas grid operator braces for battery boom. S&P Global Market Intelligence. Apr. 5. ↩︎
- Denholm, P., Cole, W., & Blair, N. (2023). Moving Beyond 4-Hour Li-Ion Batteries: Challenges and Opportunities for Long(er)-Duration Energy Storage. National Renewable Energy Laboratory. ↩︎
- Energy.gov. (2023). Biden-Harris Administration Announces $325 Million For Long-Duration Energy Storage Projects to Increase Grid Resilience and Protect America’s Communities. Sept. 22. ↩︎
- Staff, S. B. (2022). Why non-lithium batteries are key to stationary energy storage in years ahead. Solar Builder Magazine. March 29. ↩︎
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