Whilst we are only in the dawning days of 2018 as I write this, many of us still rubbing eyes, stretching blearily and preparing ourselves for the year to come, a largely yet unreported piece of news has highlighted how fast the way we power our world is changing.
I refer to a solicitation for new electricity generation by utility Xcel Energy in Colorado, USA. This quietly reported receiving dozens of bids for building new wind and solar paired with battery energy storage.
The shocking aspect? The median bids for these solutions at $21/MWh and $36/MWh are either on par or cheaper than even the lowest operating costs alone of all the coal power in Colorado, and are almost a quarter of the average residential electricity price in the US (12 c/kWh or $120/MWh).
This solicitation tells us two important things.
First, at the mercy of the pace of innovation, coal’s decline looks terminal. It does not take a huge deal of economic mastery to realise that traditional utilities and IPPs will need to adapt fast to this changing world as even sunk cost traditional assets are quickly being undercut by clean technologies.
Second, whilst the costs of renewable technologies continue to fall precipitously it is the energy storage set-piece that is critical to this transformation.
Storage can both firm the variable nature of renewable generation at source, or indeed provide resilience at homes and businesses for end users, but it also has a vitally important role in the middle - ensuring the network that forms the circulatory system of the grid remains adaptable, flexible and self-healing. Just look at the Dominican Republic, where energy storage protected the grid from collapse during Hurricane Maria and Irma neighbouring Puerto Rico.
Despite the hype, the energy storage industry remains at its infancy. Only two companies, Fluence and Tesla Energy, are in the rarefied ‘100MW club’. The storage market remains fragmented and customers face the challenge of finding a trusted technology partner amidst conflicting technical claims, inexperienced vendors and installers, and new market entrants with limited power sector knowledge. This is stifling progress that is urgently needed to meet global climate targets.
For the WEF, it is important not to forget the importance of bankability for such projects to scale. To date, the number of vetted storage technology platforms remain low and this can mean protracted efforts are needed to get lender sign off for any given project. Innovative financing, with relatively few exceptions, remains a hurdle to the rapid scaling of innovative clean technology such as battery energy storage.
Only a decade ago, it was largely accepted that the cost and variability challenges of renewable energy would limit it ever accounting for more than around 20% of the electricity mix. Both ‘appeal to tradition’ logical fallacies have been turned on their head in a few short years - just look at the annual PV growth rate vs the IEA’s projections since 2002. Renewable energy costs continue to nose dive, whilst the stability and variability challenge traditionally reliant on conventional generation is increasingly being more efficiently solved by storage.
This change is being driven by largely a new generation of engineers, economists and policymakers that realise there is an urgency to the mission of creating a sustainable energy future. An energy system that has barely changed since the days of Nikolai Tesla and Thomas Edison will in another decade will be transformed into one that is more efficient, resilient and accessible all.