Navigant Research Blog

Playing for the Long Game

Brittany Gibson — June 11, 2012

The market for advanced batteries in the utility industry has yet to take off with any vigor.  Truth be told, from high costs to integration hurdles, the industry appears to be ill-primed for this technology advancement, so it may be some years before the utility industry procures or employs large quantities of advanced battery storage.  Even so, while the near-term opportunity remains tepid, the long-term opportunity could open up as long-duration applications multiply and utility relationships are nurtured.

The growth of renewable energy globally is an obvious driver for more grid flexibility, which ultimately means a grid development strategy that may ultimately incorporate many technologies rather than just a single technology solution.  Better inverters, microgrids, demand response, and advanced batteries are all technological solutions proposed for increasing the flexibility of electricity grid infrastructure.  If advanced batteries are to be included in these strategies, the technologies will need to compete on price and services, but also effectively communicate their advantages to the utility industry in the near term.  This would then lay the foundation for the long-term market opportunity of enhancing grid flexibility.

From a technical perspective, advanced batteries represent a unique asset that offers the promise of grid flexibility and generation asset enhancement at rapid speeds and varying levels of scalability.  But these benefits come at an extreme cost, and that cost creates a value proposition that is relatively perplexing in a world of abundant natural gas and smart grid advances.  The long-term play remains up for grabs, but ultimately holds significant value for technology manufacturers and service providers, particularly those that have secured relationships with utilities.  Early successes for sodium sulfur batteries, for example, can be attributed to the strategic partnership between NEC and Tokyo Electric Power (TEPCO).

Future utility partnerships may emerge in other parts of Asia, namely China, where the government is heavily involved in planning and developing the power sector.  Similar strategies are developing in Europe; but utilities and grid operators in that market have relegated advanced batteries to a lower priority than demand-response and pumped hydro storage.  Battery manufacturers and service providers must court long-term relationships with utilities if they are to articulate their value add and develop opportunities to demonstrate those advantages in the real world.

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