New advances in battery technology could benefit manufacturers in both how they use it in their products and how they manage their own utilities.
Battery power is becoming more complex with more capacity, and it also is becoming more affordable. David Frankel, partner at McKinsey, said energy storage is already becoming economical for many commercial customers to reduce their peak consumption level. Combined with solar and wind power, new batteries can offer energy users more options on how to generate and use their own power. “Cheap storage will be even more disruptive because different combinations of storage and solar will likely be able to arbitrage any variable rate design that utilities create,” Frankel said.
Sanjiv Tumkur, head of equity research for Rathbone Investment Management, said that the rapid technological breakthroughs in battery technology not only will impact vehicles and products but also the entire way that companies use electricity. Cheaper, lighter, more powerful and cost-effective batteries are on the verge of giving alternative energy a greater role in the economy, Tumkur said.
This would allow national grids to manage inflows of solar or wind power and continue to provide electricity on demand even as fossil fuel sources are phased out. Manufacturers could benefit with the potential for lower utility rates in some regions, and by attaining the ability to more easily generate and store their own power.
Tesla’s battery technologies are at the forefront of the power revolution and have promise in many sectors. When completed in 2020, Tesla’s Gigafactory in Nevada will more than double the world’s production of lithium-ion batteries. But the real benefit is in being able to make these batteries bigger and more powerful, to serve homes, businesses and the grid. Analysts say such “stationary storage” for buildings and the grid is expected to shift from a $400 million market today to a $2 billion market by 2020.
Tesla’s Powerpack grid-level storage weighs more than 3,500 pounds. The company installed nearly 400 of them at a storage facility in Southern California Edison’s Mia Loma station in Ontario, California and can hold enough energy to power 15,000 homes for four hours.
Another supplier, AES, also has finished installation and is testing a 30 megawatt/120 megawatt hour plant in Escondido, Calif. And the company is working on even larger, long-term projects. However, John Zahurancik, AES president of battery storage, said that the big question is how quickly the technology can be scaled on a broad basis.
Here’s one trend facilitating the tipping point: The prices for lithium-ion batteries have been cut in half since 2014. But while storage is growing bigger and more economical, analysts say it is still not at the price point of large-scale applications.
Government initiatives also are spurring more incentives to develop battery technologies. California regulations mandate that utility companies start testing batteries and add more than 1.3 gigawatts to the state’s energy needs by 2020. A proposal by SuperCharge US is currently being reviewed by the Department of Commerce and aims to build a consortium of manufacturing companies to grow the power industry in vehicles and the grid. “These two economic disruptions will unleash a virtuous spiral of battery research, development, manufacturing and deployment that the U.S. could coordinate and accelerate,” the proposal said.
Analysts expect the energy storage market to expand significantly in the next decade and said that the U.S. government and manufacturing sector will need to make a concerted effort and plan to capitalize on the growth. Former solar executive Julie Blunden said it will represent an opportunity for manufacturers not only to benefit from the industry, but to be a part of it. “Are we going to make the decision to take a significant share of the next wave of manufacturing growth globally? Or are we just going to give it to [Asia],” Blunden questioned.