The ultimate growth driver of the entire smart energy market will be lowering the cost of storage – either at the grid-level or “behind-the-meter” - a term which refers to on-site storage at homes, office buildings, or other retail and industrial facilities.
Many of the current methods of storage are not scalable, such as pumped hydro or flywheel.
Pumped hydro requires large reservoirs at elevation. These are generally available in mountainous areas that are often far from the sources of renewable power as well as the destinations of urban demand.
Flywheel storage is good for supporting grid frequency for a few seconds but are not stable for longer durations.
As a result, battery storage has become an attractive solution because it can provide a high frequency response as well as long duration back-up. Batteries also take up relatively little space, and technological advances continue to boost their energy density. The biggest barrier to deployment has been cost. To date, lithium-ion batteries have largely been deployed behind-the-meter in electric vehicles (EVs) and residential storage systems. However, as the price of Lithium-ion batteries continues to plummet by 8-10% CAGR according to respected forecasts1, Bloomberg expects two-thirds of battery storage to be at the grid level by 2040. In the future, other battery chemistries that rely on magnesium, sodium, or lithium-sulfur are also expected to gain traction since they could challenge Li-ion on energy density and cost. Some have speculated that raw materials supply may inhibit the spread of battery storage, but most estimates forecast the supply of lithium and cobalt comfortably exceeding demand, at least for the coming decade1.
Macro- and micro-scale innovation in the EMS market will also be essential for smart energy adoption. On the macro-scale, a poster child for progress is the EU’s Common Grid Model and Operating Planning Data Environment (CGM-OPDE). This ambitious project aims to build a digital exchange that will enable load sharing across 42 electricity transmission system operators from 35 European countries. The platform would form the backbone for intra-day trading of electricity and real-time market operations.
At a more micro-level, companies like Stem in the U.S. are offering AI-powered energy management systems to grid operators and behind-the-meter customers. Stem’s solution helps to optimize the purchase and storage of energy by analyzing patterns of energy usage and price fluctuation. Many players are also introducing blockchain technology to create highly responsive, permissioned, peer-to-peer energy exchange networks. The ultra-low transaction costs allow companies like Vandebron in the Netherlands to work with owners of EVs to exchange energy from car batteries to balance the grid. The Sonnen Group, a German residential battery provider, is also offering a blockchain-enabled service to exchange energy between residential solar batteries and the grid.