A new working paper by the MIT Energy Initiative warns that the energy storage industry is at risk of settling on a dominant technology prematurely, leaving behind technologies that could be better suited to utility-scale energy storage applications.
“There are risks around technology lock-in,” William Bonvillian, former director of the MIT Washington office and one of the report authors, said last week during an event hosted by the Information Technology and Innovation Foundation to discuss the paper.
Lithium-ion’s dominance could block the entry of longer duration batteries, Bonvillian said. “Technologies that could improve on lithium-ion could be stranded.”
Lock-in occurs when a dominant design drives out alternatives that would perform the same function. That can be beneficial because it accelerates the process of innovation and drives down the cost of the dominant technology, which in turn expands adoption. That is what has happened with lithium-ion batteries.
A recent report from GTM Research put lithium-ion’s share of the U.S. energy storage market at 98.8% in the fourth quarter of 2017, making the technology the market leader for the 13th quarter in a row. In another recent report, GTM predicted storage system prices will decline at an annual rate of 8% through 2022.
On the flip side, technology lock-in can bring a number or risks.
One of the risks is excessive market concentration. An even more “worrisome risk” is that innovations that could improve on the dominant design become stranded and never fully mature, the report says.
The authors say li-ion batteries are well suited to transportation applications, but not necessarily ideal for the grid, and locking in on li-ion batteries is making it difficult for producers of alternative storage technologies to survive, much less continue to innovate and scale up. That could block the entry of more optimal alternative technologies that may be longer lasting and have a longer cycle life.
There are signs both are already happening, David Hart, senior fellow at the Information Technology and Innovation Foundation and one of the report authors, told Utility Dive. “Lithium-ion’s dominance is already making it difficult for alternative technologies to get into [the] implementation stage, and global firms are scaling up li-ion production beyond demand,” Hart said. The report notes that the top five li-ion battery producers plan to triple production by 2020.
A similar pattern played out with solar panels. Chinese manufacturers ramped up production of PV panels and flooded the market, putting pressure on manufacturers of alternative solar technologies and even pushing them out of business.
In April 2017, two solar companies with U.S. manufacturing operations, Suniva and SolarWorld, filed complaints with the U.S. International Trade Commission against China’s trade practices. The ITC in January imposed 30% tariffs on foreign PV panels.
“There are some concerns that is already happening” with storage, Hart said, referring to China’s ramping up of its lithium-ion manufacturing capacity. “Our competitors aren’t playing by the same rules.” Chinese companies get capital support from the government; the U.S. has not done very well on that front, he said. “That puts our companies at a disadvantage.”
In addition, the immense amount of capital being poured into expanding lithium-ion production raises the pressure on other players to compete on price alone. The lithium-ion cost curve is an aggregate of technologies used for a variety of applications, but mostly for electric vehicles and electronics, and thus it does not accurately reflect the costs of li-ion batteries for utility applications, David Bradwell, chief technology officer, co-founder, and senior vice president of commercialization at Ambri, a manufacturer of liquid metal flow batteries, said. The costs of utility scale li-ion batteries have some unique qualities that are not fully reflected in many of the li-ion cost curve projections, Bradwell said during the panel discussion.
Lithium-ion batteries are also vulnerable to commodity risk because they use cobalt, which has doubled in price recently, Bradwell said. Nickel is being used as a replacement, but the trade-off is a loss of cycle life. “That’s okay for electric vehicles, but it doesn’t work for grid applications,” Bradwell said.
Other storage technologies
The MIT paper mentions many types of energy storage technologies – compressed air storage, kinetic storage – but the technology that is most often seen as a competitor to lithium-ion batteries is flow technology.
Flow batteries store and create current through the interchange of electrolytes. Unlike lithium-ion batteries, flow batteries can cycle through almost limitless charge-discharge cycles. Flow batteries can also be scaled to meet demand more easily than lithium-ion batteries by adjusting the size of the reservoirs that hold the electrolytes.
Unlike lithium-ion batteries, however, a variety of flow battery chemistries are still battling for supremacy. Flow batteries also have lower round trip efficiencies than lithium-ion batteries in large part because of the parasitic load of the pumps needed to move the electrolytes between tanks. Flow batteries' main advantage, however, is their ability to handle long durations by scaling up the electrolyte reservoirs. Nonetheless, flow batteries still have trouble finding wide acceptance in the market.
“It’s definitely a tough fight,” Paul Ferrera, business development manager at flow battery company Primus Power, told Utility Dive. Li-ion batteries tap out at four hours, and they are being “force fit into grid scale applications,” he said. For a lot of applications — such as substation replacement or energy shifting from solar peak to evening ramp-up — flow batteries are a more obvious choice, he said.
“Our biggest advantage is our low cost of raw materials,” Ferrera said. He put the cost of Primus’ zinc-bromine chemistry at $50-60/kWh while raw material costs for li-ion batteries are about $125-150/kWh.
Primus’ technology, which Ferrera calls unique because it does not require a membrane and uses a single flow loop for electrolyte interchange, is at price parity with lithium-ion. “We are meeting li-ion pricing right now,” he said.
Ferrera said he is confident that as manufacturing becomes more efficient, flow battery technology will quickly leap frog li-ion on a capital cost basis. Flow batteries do not degrade the way lithium-ion batteries do, he said, and that reduces the need to build in replacement costs or to overbuild a project, which lowers costs of the life of a project.
Ferrera said flow batteries are particularly well suited for projects designed to help address “duck curve” issues by being able to store large amounts of power during the day and discharge it far into evening peak hours. “Our battery is a workhorse,” perfectly suited to meet duck curve issues, he said. “It can do 100% discharge and unlimited cycling.”
But Ferrera admits that lithium-ion technology has some advantages in terms of market position. The technology has a 30 or 40 year history of development, and many of the companies are backed by large balance sheets and can afford to sell at negative margins. “We have nine years,” Ferrera said, referring to Primus’ corporate history.
“We think the market is plenty big enough,” Ferrera said. Li-ion will continue to be a winner for short duration and mobile applications and in applications where space is at a premium and energy density is a concern. But more and more utilities are coming to understand the benefits of flow batteries when it comes to long-duration storage, he said.
Primus Power is now in a transitional period, moving to commercial from demonstration projects, Ferrera said. “We have a number of commercial projects going out the door, five to eight this quarter.”
Primus has also been the recipient of government funding, something the MIT authors would like to see more of to encourage diversity in energy storage technology.
The white paper makes several recommendations for policy makers, such as expanding research and development funding, creating tax credits for energy storage that focus on emerging technologies, and working with international allies to counter unfair trade practices.
The Department of Energy's Advanced Research Projects Agency-Energy program on Wednesday announced a $30 million funding opportunity for long duration energy storage — devices that can provide power from 10 hours to up to about 100 hours.
Hart said creating a niche market can “create a platform for growth.” As an example, he cited the creation of niche markets for solar power.
Not so long ago, wind power was the dominant renewable energy technology. In order to encourage the development of solar power, many states included solar carve-outs, reserving a certain percentage of a solicitation award for solar power projects. In a similar way, states could create a carve-out for maturing energy storage technologies as opposed to mature technologies. “I’m a believer in markets, but sometimes they have to be balanced a little,” Hart said.