Navigant Research Blog

Overcoming Hurdles to Monetizing Value Streams from Energy Storage Systems

— August 19, 2016

GeneratorFederal Energy Regulatory Commission (FERC) Order 755 requiring regional transmission organizations (RTOs) and independent system operators (ISOs) to implement a pay-for-performance structure for frequency regulation service has been instrumental in demonstrating the benefits that fast-responding resources like battery energy storage systems (BESSs) can provide to the grid. For example, since Order 755’s implementation, PJM experienced a 30% reduction in overall regulation reserve requirements as more fast-responding resources have cleared the market. However, despite the early regulation successes in PJM, storage directly connected to a distribution system (known as front-of-meter, or FTM) continues to faces uncertainty and barriers in the United States associated with rate treatment.

On another front, energy storage stakeholders now recognize that BESSs connected to the distribution system from behind the meter at a residential and/or commercial & industrial customer’s property can deliver benefits to the host, RTOs/ISOs, and utility distribution system operators. This evolution is driving the development of software and hardware platforms that can analyze, control, and optimize not only a single BESS, but also aggregated BESSs. These advances are now giving rise to energy storage assets that can recognize multiple value streams by stacking grid benefits in virtual power plants (VPPs).

Regulations and Requirements

However, regulatory eligibility and performance requirements for aggregated behind-the-meter battery energy storage assets have not caught up with these technological advances. To date, there has been limited participation by energy storage in demand response markets, and several instances demonstrate how wholesale market rules are missing opportunities for these assets to provide multiple grid benefits. For example, the CAISO Proxy Demand Resource (PDR) prohibits a VPP from providing frequency regulation, even though the systems would be technically capable of doing so. And in ISO-NE and NYISO, Northeast Power Coordinating Council rules prohibit behind-the-meter energy storage from providing spinning/synchronized reserves.

At the Energy Storage North America (ESNA) expo in October, a panel discussion will feature case studies from across the country on the challenges, feasibility, and economics of how single BESSs and VPPs can stack energy storage value streams. Don’t miss out on the conversation—register for ESNA today.


Beyond Li-Ion, Next-Generation Battery Chemistries Will Face Hurdles

— June 7, 2016

Batteries 2There is much hope that the e-mobility and grid-tied stationary energy sectors will soon be transformed by new advanced battery chemistries that are not yet commercialized. The reality, however, is that new battery chemistries in these sectors face significant hurdles on their path to commercialization. Navigant Research’s upcoming Next-Generation Advanced Batteries report will examine these issues and more for pre-commercial advanced battery technologies like lithium sulfur, lithium solid state electrolyte, and next-generation flow batteries.

Commitment to Li-Ion

At the top of this list of hurdles for pre-commercial battery technologies will be the long-term commitment to improved commercially available lithium ion (Li-ion) batteries by well-funded and stable battery manufacturers like Samsung SDI, LG Chem, Johnson Controls, Panasonic, and BYD. In addition, as highlighted in a recent Forbes article, one should never underestimate the added value of a proven, commercialized technology like Li-ion that is capitalizing on the benefits of a learning curve during a rapid growth period.

As highlighted in the Forbes article, the Argonne National Laboratory-led Joint Center for Energy Storage Research (JCESR) is one of the key organizations leading the charge to identify next-generation batteries beyond advanced Li-ion chemistries that can lead to a transformational commercial battery. JCSER defines a transformational battery as one with 5 times the energy density at one-fifth the cost for the vehicle electrification and grid-tied energy storage sectors. As part of its efforts, the JCSER team developed Argonne’s open-source Battery Performance and Cost Model (BatPaC), which is useful tool for the evaluation supply chain, raw material, and manufacturing costs of commercial Li-ion and next-generation batteries. Late last year, leading into the fourth year of its 5-year effort, JCSER narrowed its beyond-Li-ion focus to four chemistry scenarios.

Navigant Research is watching the JCSER efforts closely given its unique focus and expertise. We continue to believe that manufacturing scale and expertise along with maturing supply chains for Li-ion will produce improved battery performance and lower costs over the next several years. There is great promise and potential advantage in several next-generation beyond Li-ion advanced battery technologies. However, these technologies will face strong challenges from incumbent Li-ion manufacturers. Navigant Research recommends that battery sector stakeholders watch closely for the emergence of strategic partnerships between pre-commercial battery chemistries and Li-ion incumbents as a key indicator of likelihood of success.


Advantages Abound for Lockheed Martin’s New Energy Storage Effort

— May 13, 2016

Lithium BatteriesNavigant Research recently attended the Energy Storage Association’s 26th Annual Conference in Charlotte, North Carolina. The conference has grown between 2010 and 2016 from approximately 300 attendees to over 1,600. This increase highlights not only the ramping interest in energy storage, but also the growth of the sector and supply chains as a whole.

One new exhibitor this year was Lockheed Martin’s new energy line of business. Lockheed Martin has consolidated energy-related technologies, products, and services from separate business lines into a new, integrated offering, which includes an energy storage segment. The company’s energy storage segment includes a turnkey lithium ion (Li-ion) battery energy storage system (BESS) module as well as a pre-commercial flow battery.

Targeting Commercialization

Lockheed Martin’s BESS uses Li-ion cells from unnamed leading battery manufacturers that have been integrated into a flexible and scalable integrated module along with power conversion technology, thermal management, and software and controls. The company’s pre-commercial flow battery technology is based on technology acquired from Sun Catalytix in 2014. Lockheed Martin is currently targeting a 2018 commercialization date for its flow battery technology.

Lockheed Martin is currently targeting both larger utility-scale applications and the commercial and industrial behind-the-customer meter segment. Having a short-duration, power-focused solution and a long-duration, energy-focused BESS solution will be key for the company. Navigant Research has focused on the landscape for these two sectors in detail in two recently published reports: Market Data: Commercial & Industrial Energy Storage and Market Data: Advanced Batteries for Utility-Scale Energy Storage. Lockheed’s new flow battery (along with other flow batteries and beyond Li-ion pre-commercial battery chemistries like lithium sulfur and lithium solid state) will be the focus of Navigant Research’s Next-Generation Advanced Batteries report scheduled for release later in 2016.

Key Advantages

Navigant Research sees the following criteria as key go-to-market advantages for companies focused on both the behind-the-meter and utility-scale energy storage sectors:

  • Access to an existing global customer base across the commercial, industrial, utility, and government sectors
  • Strong experience in commercializing new technology into new markets
  • A history of integrating new technology offerings into existing product lines and sales channels
  • Strong systems engineering expertise with complex technologies and products
  • Both short-term, power-focused and long-term, energy-focused BESS solutions

Many of the pre-commercial battery technologies currently under development look to well-funded strategic partners for additional investment and future product go-to-market capabilities. For Lockheed Martin, with the acquisition of the Sun Catalytix technology, the company is in essence its own strategic partner. Navigant Research will be watching Lockheed Martin’s energy storage strategies closely, as the company appears well-positioned to join others like GE Current, Johnson Controls, AES Energy Storage, RES Americas, and NEC Energy Solutions in the energy storage space.


China’s EV and EV Batteries Policy: An Update

— April 25, 2016

BatteriesWith some of the worst air pollution on the planet, China has been aggressively pushing for emissions reductions and sustainable development since the launch of its 12th Five-Year Plan. In March 2016, the 13th Five-Year Plan covering 2016 to 2020 was released. Some of the key goals include a 15% energy intensity reduction and an 18% carbon intensity reduction compared to 2015 levels. With air quality in the country being at such poor levels, the government is highly interested in new energy vehicles (NEVs)—referring to battery electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs)—to curb emissions.

Backed by government support, the Chinese EV market has made headlines in recent years. The country is on track to achieve its goal of putting 5 million electric passenger vehicles and buses on the road by 2020. Over 300,000 NEVs were sold in 2015, amounting to approximately 500,000 in cumulative deployment by the end of 2015. Plus, the government plans to increase the share of NEVs in government fleets from 30% to 50% in 2016.

New Stance on Subsidies

Although the Chinese EV market has made significant progress thanks to generous subsidies, the handouts have encouraged subsidy frauds as well. Finance Minister Lou Jiwei expressed concerns over the NEV industry’s heavy reliance on subsidies in January 2016. NEV development appears to be driven by policy incentives more than technological breakthroughs, to the extent that there has been a spate of media coverage about subsidy frauds in China in the last few months. For example, a company might assemble substandard NEVs and sell them to its own car rental company with the intent of receiving subsidies. The deficient NEVs are then left in parking lots and not put into actual use. Another common scheme is to sell license plates on the black market.

Consequently, the central government launched a fraud investigation and vowed to severely punish those involved in fraudulent schemes. Additionally, the government plans to end NEV subsidies after 2020 to encourage technological innovation. China plans to cut subsidies by 20% between 2017 and 2018 from 2016 levels and by 40% between 2019 and 2020, eventually leading to a phaseout after 2020.

Battery Technology Strategy

Chinese leaders are aware of the need to improve the country’s EV battery technology in order to stay competitive in the global NEV market. Therefore, the government’s decision to suspend subsidies for electric buses using nickel manganese cobalt (NMC) batteries is rather surprising. While most Chinese companies manufacture lithium iron phosphate (LFP) batteries, the global market prefers NMC or lithium manganese oxide (LMO) batteries for their superior performance and efficiency. Some Chinese manufacturers are making NMC batteries but have not yet mastered the technology yet—there were six reported cases of EVs with NMC batteries catching on fire last year.

This policy change is expected to affect NCM battery manufactures in China since subsidies can account for nearly 40% of the price of an NEV, and buses represent nearly half of the NEV market. In particular, South Korean battery manufacturers made major investments in new NMC battery production facilities in China. LG Chem formed a joint venture with two state-owned enterprises in August 2014 with plans to generate $1 billion in revenue by 2020. Samsung also formed a joint venture with Anqing Ring New Group and real estate investor Xian with plans to invest $600 million by 2020. Since subsidies will continue to be given for less-advanced LFP batteries, many Chinese battery manufactures will enjoy government support in the short run. However, China’s long-term battery technology strategy remains uncertain.


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