When is a battery cheaper than a power plant?

[SunEagle]

Each study was looking specifically at the local market conditions, but they were also answering slightly different questions.

The California study was trying to answer the question, "how cheap do batteries have to be before they're cheaper than a power plant?" and came up with a bunch of different answers for different scenarios. The $1,500/kWh was the answer for the particular scenario where the batteries are placed at power substations.

The Texas study was trying to answer the question, "If batteries cost $350/kWh, how much would it make sense to install in Texas?" and came up with 15 GWh (which is a monstrous quantity, something like half the annual production of lithium batteries worldwide). I think they chose the $350 number because they thought it's likely batteries will hit that price within five years.

With the cost of electricity so high in Hawaii and the high percentage of solar pv installations I wonder if the battery "break even" cost is higher than the $15000/kWh for the CA study which would make it easier to justify with local energy storage systems.

[pleppik]

Interesting studies. Something to keep our eye on.

I would presume each Utility has it's own calculation as to when a local energy storage system is worth the cost since one is at $1500/kWh and the other is @ $350/kWh.

Each study was looking specifically at the local market conditions, but they were also answering slightly different questions.

The California study was trying to answer the question, "how cheap do batteries have to be before they're cheaper than a power plant?" and came up with a bunch of different answers for different scenarios. The $1,500/kWh was the answer for the particular scenario where the batteries are placed at power substations.

The Texas study was trying to answer the question, "If batteries cost $350/kWh, how much would it make sense to install in Texas?" and came up with 15 GWh (which is a monstrous quantity, something like half the annual production of lithium batteries worldwide). I think they chose the $350 number because they thought it's likely batteries will hit that price within five years.

[SunEagle]

Interesting studies. Something to keep our eye on.

I would presume each Utility has it's own calculation as to when a local energy storage system is worth the cost since one is at $1500/kWh and the other is @ $350/kWh.

[pleppik]

I stumbled across a couple of interesting technical analyses today comparing the cost of building giant battery banks instead of new power plants.

The first study was performed by the Electric Power Research Institute in 2013 and commissioned by the California Public Utility Commission. This study looked at a whole bunch of different scenarios, but the one which jumped out at me was the case where battery banks would be installed at distribution substations in California. They concluded that in this case, a large Lithium-Ion battery would pay for itself if the battery costs less than about $1,500/kWh.

The second study was done in 2014 by The Brattle Group on behalf of Oncor, a big grid operator in Texas. This study found that in Texas, if Li-Ion batteries cost $350/kWh, it would be cost-effective to install up to 15,000MWh of batteries across the Texas grid.

It seems that nobody other than Elon Musk himself knows how much a big lithium-ion battery really costs these days (and he's not telling), but some Googling reveals estimates ranging from $200 to $500 or so. Nissan charges $270/kWh for a replacement Leaf battery, but they require you to turn in the old one so some people think there's a subsidy built into that number. Some analysts are forecasting battery prices as low as $160/kWh within five years, and of course Tesla has some mysterious announcement in a couple weeks which a lot of people think will be a cheap battery pack.

But whatever the exact number for the cost of batteries, these studies both basically conclude that grid-tied batteries are going to be cheap enough to pay for themselves within a few years (if they aren't there already).

I was really surprised to read this, especially coming from two different studies by two different firms looking at two very different markets. I'm used to thinking of batteries as crazy-expensive compared to grid power. So what's going on?

While batteries are still crazy-expensive compared to the retail price of electricity, and crazy-expensive compared to the average cost for a utility to generate or buy power, they're cheaper than the cost of generating power from a peaker plant, which is even crazier-expensive. So building giant batteries and charging them from base power generation to handle peak loads is a financial win.

Plus the base power generation also tends to be more fuel efficient, so it's an environmental win as well.

And as a bonus, batteries can be located at the distribution end of the grid, saving the cost of upgrading or maintaining the transmission lines from a new power plant. It turns out this is a substantial cost savings as well. Engineering the transmission lines to handle the peak load means there's a lot of unused capacity most of the time.

Even though these analyses weren't looking specifically at solar/wind power, it's also worth noting that building a lot of battery storage into the grid also happens to make it easier to use larger amounts of those intermittent power sources. So in this case, the power companies could do well by doing good.