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Adoption of renewables is changing the energy market

The mitigation of anthropogenic climate change is without a doubt one of the biggest challenges facing humanity . The effects of global warming are already perceptible, e.g. the global increase in extreme weather events . Climate change will not only cause irreversible damage to our environment, but will also have a big financial impact on the world’s economy. Thus, global warming of 1.5 degrees centigrade is expected to cause cumulative damages of 72 trillion U.S. dollars by 2060. This leads to growing environmental awareness and puts pressure on political and economic leaders all over the world to increase their efforts for a sustainable energy system, because power generation contributes one third of global emissions, due to burning coal, oil and gas . In order to decarbonise, fossil fuels have to be replaced. This emerges in a huge opportunity for innovative, green technologies, such as the phelas’ liquid air energy storage, which is explained thoroughly in the following.

Global movement towards renewables

Figure 1: Levelised cost of electricity generation for renewable energy technologies as well as fossil fuels from 2010 to 2030 (IRENA 2020, Fraunhofer ISE 2020)

Renewable energies grow rapidly with solar and wind power at the centre of electricity generation technologies. Supporting policies and maturing technologies are enabling very cheap access to capital in leading markets. With sharp cost reductions over the past decade, solar PV is consistently cheaper than new coal- or gas-fired power plants in most countries, and solar projects now offer some of the lowest cost electricity ever seen (refer Figure 1). Renewables meet 80% of the growth in global electricity demand to 2030. Hydropower remains the largest renewable source of electricity, but solar is the main driver of growth as it sets new records for deployment each year, followed by onshore and offshore wind. The pace of change in the electricity sector puts an additional premium on robust grids and other sources of flexibility.

Rising Energy and electricity demand

Despite the goal to increase energy efficiency, e.g. in industry processes, and decouple GDP from the energy demand, the electricity demand is expected to at least double until 2050 (Bloomberg NEF). This rise in electricity demand is due to the sector coupling, which refers to the electrification of end-use sectors like heating (power-to-heat) and

transport (power-to-vehicle or vehicle-to-grid) as well as power and gas sectors (power-to-hydrogen and power-to-gas) with the aim of increasing the share of renewable energy in these sectors. This puts the power grid in the centre of the future energy system and results in an even larger necessary deployment of renewable power sources, in order to meet the new demands.

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Renewable adoption results in new challenges

Emerging flexibility gap: Renewable energy sources, namely solar PV and wind power, continuously push out fossil-based generation due to low marginal costs. However, they face two major challenges when integrating into the power grid, which are not priced into the premium per kilowatt-hour (kWh): Firstly, they are naturally fluctuating, due to varying sun and wind conditions, and introduce uncontrollable intermittency in the power grid. Secondly, both technologies have comparably low capacity factors of around 20 to 30 percent. In comparison, coal and nuclear power plants can reach up to 90 percent. This increases the necessary installed power to meet the same electricity output and amplifies the power fluctuation . In the past, changes in the electrical load were matched by controlling the power generation of conventional power plants. Currently, due to the intermittent and hardly controllable nature of renewable energy sources, this control mechanism no longer provides a sufficient option anymore. This trend is described as the “flexibility gap”. Commonly, four options are available to reintroduce the necessary flexibility into the system and maintain high security of supply:

Energy storage as best scalable solution for grid flexibility

Flexibility through installing even more renewable energy sources (1) and transmission lines (2) come, despite being technological feasible, with disproportionate social acceptance costs. This prevents it from becoming a widespread solution. Demand response (3) solutions on the other hand, such as controlling large amount of electrical devices to mitigate fluctuations, are on the rise. However, we see large reservations on the side of industries as well as residential customers, who do not like changing their behaviour to match wind and/or solar production. This prevents it from being an easily scalable solution, thus, preserving an inelastic demand curve of electricity. Last but not least, the remaining option is electric energy storage (4). It is expected to provide energy flexibility services in an affordable and easily scalable manner, and will therefore play a crucial role in enabling the next phase of the energy transition worldwide (IRENA, BloombergNEF, Mc Kinsey & Company).

Market growth and cap for Utility Scale Energy Storage

Policy makers, e.g. European Commission, utilities and transmission operators worldwide starting to commission new projects (DOE Energy Storage Database). In 2017, the global market for stationary energy storage systems amounted to approx. 1.6 GW, which corresponds to market volume of approx. 1.16 billion € (Bloomberg NEF).

Figure 2: Expected growth potential for energy storage divided into commercial, residential and utility-scale application. Source: Bloomberg NEF

Latest reports by Bloomberg NEF, IEA and Fraunhofer ISE confirm a rising market demand for the next 30 years. Bloomberg NEF maps a total utility scale storage demand of 200 GWh by 2025, 500 GWh by 2030, 1600 GWh by 2040 and 3400 GWh by 2050 (refer Figure 2). It is likely, that this projections represents the minimum of storage needed. IRENA estimates a up to 9000 GWh for stationary storage until 2050 in order to reach deep decarbonisation goals.

The demand for energy storage will more or less distribute evenly all over the world, due to the common goal of mitigating carbon emissions and the favourable economics of renewable energy. This market pull for grid flexibility needs to be satisfied by a large amount of energy storage. Needless to say, this demands a sustainable, scalable and resource-efficient technology, in order to make the shift to 100% renewable energy a sustainable one. To better understand which technologies are best suited for this need, a closer examination of the current storage technology landscape and concomitant trends is needed.

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