Navigant Research Blog

Recognizing the True Value of Storage and Facing Cybersecurity Threats

— October 28, 2016

AnalyticsEnergy storage has historically been too expensive to integrate with distributed energy resources (DER), but prices have fallen significantly across several portions of the value chain in the past few years. To continue to improve the economics of the technology, it’s important for new and existing energy storage systems (ESSs) to provide multiple services to customers. This will open up a larger market for aggregated systems that can help realize the true value of storage. Software platforms that can analyze, operate, and optimize battery energy storage-enabled virtual power plants (VPPs) will be critical to capitalize on value stacking.

Aggregated Energy Storage Systems


(Source: PowerShift Atlantic)

For instance, energy storage service provider Greensmith Energy was chosen to provide its software and integration services for several recent projects. In September, investor-owned utility American Electric Power (AEP) chose Greensmith’s GEMS platform to manage its 2 MW/14M MWh ESS in West Virginia. AEP plans to leverage the software’s functionality to expand the use of the system into a revenue-generating asset rather than solely a backup system for its distribution network. Several other companies like Sunverge, Demand Energy, and Green Charge Networks have also recently partnered with utilities where smart software will be used for flexible ESSs.

Energy storage software is increasingly becoming a vital part of determining the bankability of a project. Software modules optimized for different grid-level or customer-level applications create value for both utility-scale and behind-the-meter (BTM) users. Particularly for residential and/or commercial customers, the software module can create viable revenue streams by:

  • Optimizing self-consumption in real-time across multiple variables (e.g., demand charges, utility tariff data, etc.)
  • Participating in utility-sponsored demand response and resource adequacy programs
  • Providing long-duration backup power and islanding capabilities

A noteworthy development in the residential ESS software market is a recent partnership announced by energy Internet provider AutoGrid and distributed ESS manufacturer sonnen. The two companies partnered to fully integrate AutoGrid’s flexibility management suite with sonnen’s residential and commercial battery solutions. AutoGrid and sonnen will help energy project developers, utilities, and other energy service providers better manage, optimize, and aggregate sonnen ESS systems and other DER. Both companies believe that the partnership will help maximize project return on investment (ROI), reduce project delivery times, and unlock new revenue streams for several value chain players.

Need for Cybersecurity

With the increased automation of energy storage and DER in general, it will be important to consider the cybersecurity threats that could occur. These attacks can disrupt general system functionality or cause targeted damage to intellectual property, critical infrastructure, and physical assets. Incidents of cybercrime and associated costs can be substantial; companies must prepare for the worst-case scenario. This is not only important to protect against threats, but also to aid in how businesses continue to operate during an attack, as well as how they adapt and recover after. So what does this mean for DER businesses and stakeholders?

  • Utilities have the ability to drive the storage market forward, enabling ESSs to achieve profitability under several business cases like VPPs.
  • DER software companies should focus on developing controls that can optimize multiple use cases to maximize the value of projects.
  • ESS and other DER software developers must ensure they are adequately protected from cyber threats, including developing strong compliance programs, having advanced functionality to mitigate against vulnerabilities, and ensuring systems are in place to immediately alert stakeholders of breaches.

Is Consolidation Good for the Energy Storage Industry?

— August 5, 2016

Batteries 2New deployments of energy storage in 2015 broke records with more than 1,653.5 MW of new storage capacity announced. 2016 appears to be shaping up to be another big year. The past several months have seen several multi-billion dollar acquisitions of energy storage providers by large energy companies. Three of these mergers that made headlines were Total Energy’s acquisition of industrial battery manufacturer Saft, Engie’s purchase of Green Charge Networks, and Doosan’s agreement with software provider 1Energy Systems. Under synergistic circumstances, mergers can certainly jumpstart long-term growth for an enterprise, but the failure rate of mergers and acquisitions is between 70%-90%. This begs the question: will increased consolidation of the energy storage industry help or hinder the widespread adoption of new energy technologies?

To help illuminate the issue, it is important to understand why these energy giants are interested in energy storage. Daniel Halyk, CEO of Total Energy, stated that the ultimate goal of the company is to “accelerate its development in the fields of renewable energy and electricity, initiated in 2011 with the acquisition of (solar panel manufacturer) SunPower.” Total Energy is undergoing internal structural changes, and renewables are a key focus of its vision going forward. With the addition of a new fourth business, the company plans to capture several portions of the electricity value chain by expanding into downstream gas, renewables, and energy efficiency. Total Energy believes Saft is an ideal partner due to the company’s product portfolio, positioning in niche markets, international presence, and strong technical knowledge.

There exist several reasons why enterprises would choose to acquire companies: to increase profits of existing business segments (or decrease costs along the value chain), to fundamentally shift the core competencies of the company to another business segment, or some combination of the two. Creating shareholder value is important to secure longevity in any market; investor expectations help incent company innovation. Key motivations behind these acquisitions appear to be project financing and accessibility to behind-the-meter customers. Having more financial resources bolsters a storage company’s influence when bidding for larger grid storage contracts.

The Industry Looking Forward

Recent innovation in the storage industry has occurred with storage enabling technologies like software and controls and technical services components of the value chain, as several companies have emerged with primary expertise in technologies other than physical hardware. Investors recognize the value that these companies add to the profitability of a project and are making funds available to these integrators (e.g., GE Ventures’ $50 million investment in Sonnen and Macquarie’s $200 million investment in Advanced Microgrid Solutions). There could be other major mergers on the horizon in 2016, one of the largest being Tesla’s interest in purchasing Solar City. As the proposal builds upon a partnership that currently exists, some investors fear that anything beyond a partnership could lead to the demise of both companies. Tesla CEO Elon Musk states that if Tesla and Solar City truly want to scale up, the deal must happen.

While specific dynamics and patterns in energy storage markets vary considerably worldwide, energy storage systems can be invaluable assets that can provide flexible solutions for power providers and customers. Energy storage is increasingly becoming a cost-effective tool for grid operators to maximize the efficiency of existing power resources and infrastructure while helping to minimize costs passed on to ratepayers. All things considered, this is an exciting time for the energy storage industry, and we can expect many more changes to occur throughout the course of the next few years.


Dyson and Sakti3 Move Toward Solid-State Deployments

— May 13, 2016

BatteriesAs power and energy requirements are proving to be increasingly sophisticated for large-scale grid energy storage and automotive applications, many companies and research institutions across the globe are looking for alternatives to the lithium ion (Li-ion) battery. U.K. company Dyson acquired the rights to battery startup Sakti3 last December for $90 million and announced that it will invest an additional $1.44 billion to develop new battery technologies over the next 5 years. A portion of the investment will go toward building a new battery factory and R&D center.

Sakti3 is a pre-commercial battery technology firm based in Ann Arbor, Michigan, specializing in lithium solid-state battery chemistries. The company was founded with a goal of bringing next-generation battery technology to electric vehicles (EVs) and consumer electronics, stating that it intends to double the energy density at lower costs than current commercially available Li-ion batteries. Historically, solid-state batteries have been plagued by the solid-solid interface’s high resistance to ion intercalation (resulting in low power density) and performance scalability; Sakti3 believes that it has reduced design cycles and is on track to find the critical mass to take its technology to market.

Solid-State Battery

Ian Blog Image

 (Source: Dyson)

A Start in Consumer Electronics

Li-ion batteries started in early consumer electronic markets in 1991 when they were first discovered and now are being deployed in complex applications globally. Navigant Research expects 93.1 GWh of Li-ion capacity will be deployed globally for EVs in 2025 alone, along with an additional 59.1 GWh deployed for grid storage. Dyson has been developing an in-house battery technology for its cordless appliances for the past several years and now plans on utilizing Sakti3’s prototype technology in existing and future products. The biggest questions to be answered will be how this acquisition affects Sakti3’s process of innovation—and what it could mean for battery industry stakeholders.

The complementary nature of the acquisition could help Dyson develop competency in cutting-edge aspects of solid-state batteries and commit to the reutilization of the technology as a whole. Starting in smaller consumer electronic markets and growing toward others could put Dyson in direct competition with battery giants Panasonic, LG Chem, and Samsung SDI. The company has not ruled out the option of licensing out Sakti3’s technology to other companies, further expanding its market reach. Dyson’s CEO says it is transitioning to become more of a technology company as opposed to a home appliance vendor and plans to develop a more sophisticated product catalog in the coming years.

Supporting the Investment

One challenge the company may face is how its R&D expertise and support teams support this investment. To push the technology forward, it is imperative that Dyson thoroughly understands how integrating Sakti3’s battery affects its existing product catalog. As a home appliance company, teaming with a battery company could make sense in the long run and translate to developing robust synergies down the supply chain. Focusing on niche applications, making deployment a priority over research, and rushing the development of R&D projects could potentially lead to failure. One of the biggest risks after mergers and acquisitions is the threat of organizational upheavals. Hiring and maintaining key employees that drive research forward will be important. Sakti3 founder Ann Marie Sastry will continue to lead the development of the technology as an executive for Dyson.

Can large battery companies and automotive OEMs learn something from this acquisition? Only time will tell. Dyson plans to get Sakti3’s technology to market within the next 2 years; it will be fascinating to see how it plans to overcome engineering issues faced by other companies that have attempted to bring solid-state batteries to market. How well-equipped is a home appliance company to accomplish such a feat? History says to remain skeptical while the technology says to remain optimistic.


Clean Cars, but Dirty Batteries?

— April 11, 2016

moving white carThe raw materials used to fabricate advanced batteries are becoming increasingly important when predicting future market trends. In Navigant Research’s Five Trends for Energy Storage in 2016 and Beyond white paper, improving battery power and energy densities of advanced batteries will come in part by a shift to increased modularity of manufacturing concepts. Not only does this modularity need to occur in energy storage project design, but also in raw material synthesis of battery components. Designing a better battery—especially the (good, yet imperfect) lithium-ion (Li-ion) battery that can address short-term power applications and longer duration energy applications—will be critical for the market to continue to develop.

Increased interest has grown around materials used in advanced battery anodes, and graphite, an allotrope of carbon, is currently one of the leading options due to its abundance in nature, large surface area, and high specific capacity. Current methods of processing natural graphite into coated spherical purified graphite (CSPG), the final product used in battery anodes, can be expensive and harmful to the environment. A consortium of six mining and manufacturing companies are looking to address these issues by jointly acquiring a micronizing and spheronizing mill to produce CSPG. These types of partnerships could push the advanced battery industry forward in developing high-performance electrode materials for next-generation battery technologies.

Improved Performance

Utilizing CSPG in battery anodes leads to improved charge/discharge cycle performance attributed to lower resistance at the anode/electrolyte interface. All companies involved in the partnership have agreed to share their proprietary spheronizing knowledge with each other going forward, with the end goal of meeting cost and capacity targets for Li-ion batteries developed for transportation. Being able to process CSPG locally and efficiently decreases purification times, dramatically improves costs, and significantly reduces environmental impact.

Currently, around 70%-80% of naturally occurring graphite used in batteries is mined and processed in China. It is purified using hydrofluoric acid, a toxic substance that is highly corrosive, dissolving glass and metal surfaces upon contact. Unsustainable methods in place to fabricate batteries and their materials bring rise to questions of whether they are truly a clean alternative and if electric vehicles (EVs) are end-to-end better for the environment. As much as 25 kg of high-purity CSPG is needed to fabricate the anode for one Li-ion EV battery, so ensuring that purification process is as inexpensive and pollution free as possible will be important as demand for these batteries increases.

A Growing Market

The advanced battery market is putting pressure on graphite demand, and improved graphite manufacturing methods means better forecasts for EVs in the future. Navigant Research estimates that light duty plug-in EVs in use will reach over 13.9 million vehicles by 2024 and that Li-ion battery prices will for EVs will drop by over 50% over the same timeframe. Technological improvements of advanced batteries can exceed expectations by better, leaner manufacturing methodologies; more strategic partnerships that further develop the battery’s shortcomings could help foster these improvements while decreasing the environmental footprint.


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