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When we talk about storage we definitely have to discuss technology, costs, disruption and business models. But we also have to discuss core beliefs. Billions are invested and often lost because of wrong core beliefs which ignore reality.
Ten years ago, the core belief of German utilities on solar was that it was of no interest to us because it’s far too expensive and the sun does not shine at night. We can learn many things. Yes the sun does not shine at night, and PV was extremely very expensive, but it is not expensive now and the result is that utilities have billions of euros of stranded assets, and we have the extreme situation that the two biggest German utilities E.ON and RWE are splitting their businesses into separate parts.
What we can learn from this is that core beliefs can be totally irrelevant, even when the basic assumptions are accurate.
When we talk about storage, we can observe two main core beliefs in the current German energy discussion:
1) “Renewables cannot replace fossil power stations without storage”
2) “We do not need storage until the share of renewables reaches 70% in the electricity sector – until then there are enough other flexible mechanisms.” This even results in a further question: “when do we need storage?”
We could discuss each of these two core beliefs in more detail and there are many points which support or oppose them, especially the fact that both points contradict each other. But I do not want to waste time discussing that now. The real point is that these two beliefs about storage are irrelevant as storage (especially batteries) is coming whether we like it or not! If a technology is coming anyway the question, then “when do we need storage” is an irrelevant question.
The costs of storage and in particular batteries is falling at an astonishing rate – very similar to the learning curve we have seen with solar. The difference is that there are two markets (automobiles and stationary power) which are driving demand, scale and technological development. Batteries in the energy sector will, at the latest, become sufficiently cheap when the automobile and wider transport sector produces enough surplus batteries for the use of second life batteries in the stationary power sector. And already we are seeing BMW and Daimler planning to use second life batteries for stationary applications such as the primary reserve market.
The big consumer markets will also develop in the coming years. In Germany, we have more than 1.4 million PV systems installed. And the numbers are huge. The capacity of one only million electrical cars with a battery capacity of say a Tesla is by rule of thumb just as big as the peak load of Germany. There are around 50 million cars in Germany and the EV target of the German Government is one million by 2020. Nobody believes this target will be reached by 2020, but it doesn’t matter, momentum is gaining in this and other markets.
The result is that we will have a huge amount of cheap short term storage in the next decade on the grid, long before some academics and researchers think storage will be necessary. The batteries will be sufficient to store a huge amount of surplus wind and solar energy during sunny days or when storm fronts come across Germany. Moreover, these batteries will be able to cover peak demand even in winter evenings when there is no sun and sometimes hardly any wind.
But – and this is the usual reply: They are not sufficient to supply power during long periods of low wind combined with little sun, which can last for days.
Well this is true again, but also misleading. Why? In 2016, there is a huge power overcapacity, despite the nuclear phaseout. Even with a coal phaseout in the next decades, which is highly topical these days in Germany, we will still have significant power station capacity. But the gap will widen and will only partly be filled by batteries. So, do we need new power stations to fill the gap? And this point is mainly raised by people who are used to think in power stations for years or decades. The answer is simply, no. There are some technologies like co-generation units and mainly gas turbines which can produce electricity during the dark, windless times. In addition, gas turbines are really cheap, and flexible and their capital costs are very low at 400 € per kilowatt.
As long as the 100 per cent renewables target is not reached, any gaps can be filed by natural gas in combination with biogas. At some later point, additional gas can be produced with surplus wind and solar energy. Additionally, surplus renewable electricity will replace natural gas in the heating sector. The interesting thing is we do not need a technological breakthrough for the backup of renewables. The needed technologies are already there or in the case of cheap batteries are just over the horizon. If you dig you cannot see them. But if you take a small chair and step on to it the view will melt all irrelevant core beliefs.
Carsten Pfeiffer is the Head of Strategy and Politics, German Renewable Energy Federation; Twitter: @PfeifferCarsten)