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Advanced Batteries + Solar PV + Microgrids = Market Growth

Brittany Gibson — October 8, 2012

Advanced batteries are consistently heralded as a future panacea for cleantech, without which renewables will remain niche applications and a distributed grid architecture will never materialize.  To a large extent, though, advanced batteries remain materials science experiments, more commonly found in labs than on the grid.  Likewise, the pace of innovation seems slow, especially in a world accustomed to advancing at the pace of Moore’s Law.  But if advanced batteries became the focus of consumer demand (from individuals, households, commercial buildings, and utilities), and the process of innovation became a conversation between materials science and real-world needs, we could see a dramatic acceleration of this market.

Consumer electronics brought lithium-ion batteries to the forefront of public awareness, making battery life and replacement a central issue for makers of smartphones and tablet computers.  Users consistently challenge the cycle life and functional limits of their devices, which has begged a targeted response from battery vendors.  The industry’s advances over the last 20 years have been generated through interaction with the physical world and the marketplace.  The challenge with larger format batteries, particularly for grid-scale applications, is how to get early versions of these systems deployed and interacting with the physical world.

Grid-scale demonstrations are costly and can be controversial, depending on the source of the funding.  In the United States, this work has largely been done by the Department of Energy.  Deploying advanced batteries in remote microgrids or in conjunction with distributed solar PV, though, could drive these technologies in the same fashion that consumer electronics drove the evolution of lithium-ion batteries, through smaller deployments visible to consumers.  The industry would benefit from a larger number of deployments, a broader variety of end-use applications displayed, and economies of scale that would begin to bring costs down.

This scenario might not be that far from reality: the competition on cost between diesel fuel and solar PV now makes distributed solar a more attractive investment than diesel generators.  According to McKinsey, the cost of power coming out of diesel generators ranges from $0.30 to $0.65 per kilowatt-hour.  Solar PV can now produce power for about half that cost.  In niche applications such as uninterrupted power supply in emerging economies, rural electrification, and island power, there is a clear economic case for deploying solar PV, which becomes a dispatchable, high-quality resource when paired with battery storage.

These small-scale deployments would provide the industry with another source of product feedback on technical integration with renewables, demonstrate potential revenue models, and ultimately generate larger demand for advanced batteries.  Microgrids are also a popular new technology for U.S. military applications, a historically strong contributor to advanced technology innovation.

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