Navigant Research Blog

Dreamliner Fires Scorch the Advanced Battery Industry

— January 30, 2013

The investigation surrounding the Boeing Dreamliner battery fires indicates that Boeing, and its ballyhooed but beleaguered new jet, will recover from this incident.  The causes of the fires appear to be isolated to the battery system and not endemic to the overall design of the plane.  But the fires could have very different consequences for the advanced battery industry.  At the core of the Dreamliner fires is a debate that engulfs all technological change – How to balance risk and innovation?

So far in 2013 it seems as though high-profile battery accidents are appearing nearly as frequently as new battery shipments are being made. From Hawaii to Japan, batteries on the grid or in vehicles continue to highlight the technical challenges associated with battery storage. This is bad news for an industry that is already struggling to garner demand for its expensive products.  Lithium ion batteries, which have taken something of a competitive lead in consumer products and electric transportation, are pushing into new applications every day as multiple industries move toward cleaner operations based on electricity rather than liquid fuels.  Early adopters, such as Boeing (the Dreamliner is the first passenger aircraft to have Li-ion batteries approved for on-board operation), always bear more significant risk than those that follow.

While Boeing’s reputation and that of the Dreamliner may emerge intact, the battery industry is left with fundamental issues to address.  For years the great debate in the industry has been about cost, but safety issues could prove a greater drag on the industry’s growth in the near term.  Each incident casts a longer shadow over the future of advanced battery technologies.

Advanced battery makers must publicly address these issues and forthrightly move safety to the center of the discussion.  The Dreamliner fires place the burden of proof squarely on battery makers.  Early adopters must be reassured that safety issues are resolved if they’re going to be persuaded to pursue these innovative technologies.


Advanced Batteries: The Year Ahead

— January 22, 2013

The energy storage team at Pike Research has developed a 2013 research roadmap for storage and battery-related coverage.  Armed with lessons learned in 2012, presented below is a brief summary of what this year might have in store for advanced batteries.

In the United States, independent system operators (ISOs) are making real market changes to implement Order 755, concerning pay for performance, handed down by the Federal Energy Regulatory Committee (FERC) in October 2011.  The ISOs are able to design their own approach to resource participation and compensation, and this move should increase the revenue-generating opportunities for battery-based storage (and storage in all forms).  While the ancillary service segment remains a nascent market, Order 755 could potentially unlock revenue potential bound up in dated regulatory policies.  While the real impacts of these market changes have yet to emerge, look for new projects to join the queue for interconnection in 2013.  These projects will likely focus on capturing revenue from providing frequency regulation to the grid.

Putting Out Fires

Pike Research published the latest version of the Energy Storage Tracker in the fourth quarter of 2012.  From the second quarter to the fourth quarter in 2012, 60 new storage projects came online and 107 new projects were announced.  Pike Research’s analysis reveals quite a bit more technology diversity in projects being deployed across the globe, as well.  Advanced battery technologies, particularly lithium-based chemistries, are capturing significant market share.  The new projects are essential to furthering energy storage players’ understanding of the technical and market issues.  These projects can leapfrog over older projects and demonstrate competency at weak points in the supply chain.  As more projects come online, 2013 will represent another year of maturation for the energy storage industry.

One of the primary issues that developers of large-scale advanced battery projects must pay attention to in 2013 is safety.  Scaling up delicate chemical reactions and interconnecting them with an electric grid is an inherently risky proposition, and already public accidents threaten to derail the market’s development.  In 2012, we saw several critical projects undermined by battery fires, including the Xtreme Power installation in Hawaii.  The lithium ion battery fire onboard the Japan Airlines Boeing Dreamliner showed that 2013 is not exempt from battery safety issues.  As lithium ion batteries reach the mainstream power sector, the discussion of safety needs to become more public.

The current year will also see several new players move toward commercialization of their technology.  This could be the year that the hype cycle dies down and the industry can address market and technical issues in a more sober and clear-eyed way.  Still, the abovementioned issues are just a handful of the challenges that will face both legacy battery players and new entrants.


Batteries Get a Second Chance at Life

— November 30, 2012

Advanced battery manufacturers, both legacy vendors and start-ups alike, have placed nearly all of their attention on emerging cleantech applications, targeting new markets for electrified transportation and renewables integration as the future of their businesses.  However, in 2012 we’ve seen these markets developing slower than anticipated.  The cost of batteries is a primary factor, and advanced batteries are currently struggling under a classic chicken-and-egg dilemma: which comes first?  Sales or cost decreases?

It’s possible that General Motors (GM) and ABB have partially solved this dilemma with a new project being deployed in California using second-life lithium ion batteries from GM’s Volt to provide residential uninterruptible power supply (UPS).  Volt batteries are retired after roughly 30% of their capacity has been diminished, per the vehicle requirements set by auto manufacturers, but the remaining capacity in multiple Volt batteries can be combined to provide quality power supply to the distribution grid or other ancillary services.  GM and ABB are trying to capitalize on that remaining battery capacity to resell battery units and drive the capital cost down, to the benefit of both vehicles and the grid.

While GM and ABB are among the first players to deploy these second-life batteries into a real world, stationary application, the idea of using second-life batteries to lower the total cost of ownership (TCO) has been the subject of research and pilot projects for some time.  How much this approach will reduce the cost of batteries for electric vehicles remains to be seen.  While Volt sales remain low, battery replacements will be necessary in the first generation of vehicles for the next several years.  It’s safe to say, though, that any cost reduction is welcome in the struggling advanced battery industry.


Winter Coming, Europe Looks to Battery Storage

— November 7, 2012

As Europe prepares for the looming winter season of high peak electricity demand, large grid operators and utilities in Europe are increasingly looking to the value of battery storage on the grid.  Several notable projects have emerged this year that highlight a preference for established battery providers and for one battery type: lithium ion.  Each highlights a different potential pathway to market for advanced batteries in Europe.

Italy and Spain, both markets that lie at the edge of the European Union’s emerging Super Grid, are now home to two significant lithium ion battery installations.  In Italy, which imports significant volumes of power, Enel has awarded a contract to NEC for the installation of batteries at a substation in the southern region of Calabria.  While no substantive details about the project have been released, NEC brings nearly a century of experience developing technology and a global presence to the project.  Working directly with the utility Enel highlights one potential pathway through which batteries might populate the grid.

In Spain, renewables developer Acciona has partnered with Saft to pair utility-scale solar with a 560-kilowatt-hour lithium ion battery installation. The falling costs of solar power are driving solar installations globally, but distributed systems pairing solar with batteries have only begun to emerge, thanks to unique financing mechanisms like solar leasing.  What Acciona and Saft are undertaking may highlight what independent power developers can do with bulk solar and utility-scale battery systems, when backed by significant experience and capital.  Acciona’s 2011 revenues exceeded €6 billion.  In this case, the business models for developing merchant power plants that combine renewables and batteries remain unchartered territory.  The coming years will be illustrative to this end.

Providing market experience and technical knowledge, these projects could open the door for battery storage.  With each installation the grid storage industry discovers a new technical or market issue, either resolved or in need of modification.  The pace at which the industry is developing could allow for the emergence of new technologies, ones that may be more cost-effective or technically savvy.

These two projects highlight different approaches to battery storage development, with Enel embodying a growing technical need for storage on the part of utilities.  Conversely, Acciona may offer a glimpse of a merchant developer approach.  Regardless, with these early projects, Saft and NEC are carving out important first-mover positions in the European market, relying on reputations of technical achievement and deep pockets which will help them bridge the gap to the emergence of a commercial market, a market Pike Research believes is still a number of years out.


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