August 14 2017 brussels

August 14, 2017

With Brexit in full swing, the UK has unveiled a big support package for energy storage. EU countries like Germany are also active in storage, but in some technologies Europe is lagging behind the U.S., Australia, and China. Should the EU follow the UK’s lead and back batteries and other storage technologies in a bigger way? ? Jason Deign,  editor and publisher of Energy Storage Report, takes stock of where the EU stands on storage and suggests it may be time to start talking about EU storage targets. (Our EU correspondent Sonja van Renssen is on maternity leave, but Brussels Insider will continue.)

Britain’s Brexit-happy government seems set on showing it can set big energy policy goals without Europe’s help.

On 24 July the UK’s Business and Energy Secretary, Greg Clark, unveiled a £246 million funding package for battery research and development, along with plans to bring more smart energy technology to homes and businesses.

“The innovative plan will transform how homes and businesses store and use energy,” announced the UK Department for Business, Energy & Industrial Strategy (BEIS) in a press release.  “It will deliver a smarter, more flexible energy system by removing barriers to smart and battery technology, reducing costs for consumers.”

The move is partly about improving the flexibility and resilience of the UK’s energy system: over a quarter of the UK’s electricity is being generated through renewables such as wind and solar, BEIS says.

But it is also partly about trying to gain a lead in a sector that policymakers see as having potentially strategic industrial importance. “These changes provide an opportunity to create new businesses and jobs in the UK,” BEIS noted.

Both are important objectives for the country as it cuts ties with the EU. Should the EU be ramping up support for energy storage too? After all, energy flexibility and industrial leadership are key challenges for the Union, with or without Britain.

Most advanced market

Currently, it is fair to say the EU is not doing too badly in deploying energy storage technology. Germany is the world’s most advanced market for residential battery storage, with more than 60,000 systems in operation in homes up and down the country.

The country has achieved this above all thanks to a generous support scheme administered by the government-owned KfW development bank.

KfW’s loan scheme not only helps people install batteries to go with rooftop solar, but also craftily helps the government keep tabs on the number of installations and encourage users to buy battery systems that are best suited for the grid.

More recently, Germany has also been making strides with larger-scale storage. Perhaps its most ambitious project to date is a plan announced in July by Oldenburg-based company EWE Gasspeicher to store enough energy to feed a city the size of Berlin for an hour, using a novel brine-based flow battery technology.

Real leader

Elsewhere, France is aiming to kick-start a residential energy storage market with a new solar self-consumption law. Italy is dabbling with large-scale storage on the grid and as an adjunct to solar farms. Ireland has some interesting projects. And so on.

But aside from Germany (and, until its exit, the UK), no European nation could be considered a real leader in a sector which is increasingly being touted as critical for the transition to a decarbonised energy future.

The American Energy Storage Association in June revealed the US had installed 234 megawatt-hours of electrical storage in the first quarter of 2017, 50 times the level for the same period in 2016.

States such as California and New York are encouraging energy storage across the board, leading to a thriving start-up scene where companies such as Eos Energy Storage and Energy Storage Systems are creating batteries with ultra-low-cost components.

Australia, too, is emerging as an early energy storage leader due to its rapid progress in the deployment of distributed solar generation and urgent need for grid reinforcements. Despite its limited industrial capacity, the market is pursuing development of several interesting energy storage technologies.

The one to watch

Japan and South Korea are among other countries looking to build significant energy storage industries not just for their own markets but also for exports. But the one to really watch is China.

Amid a general buildout of all types of power generation, over the next 20 years BP estimates that China will add more renewable energy to its mix than the EU and US combined.

That is reason enough for the country to focus on energy storage, but the narrative that seems to be emerging from China has an added twist.

The nation’s status as a global economic heavyweight is largely based on its manufacturing might, but Chinese manufacturers have struggled to move up the value chain. Even today, brands such as Huawei or Lenovo face fierce competition from global rivals.

Perhaps nowhere is this more evident than in the automotive sector. While China boasts dozens of car manufacturers, to date the only way the country’s auto sector has been able to break into foreign markets is through acquisitions such as Geely’s purchase of Volvo.

Now China’s aggressive vehicle electrification targets, ostensibly aimed at cutting pollution, have led some observers to question whether the country is seeking global dominance in a growing auto sector where there are still no clear winners.

This is important for energy storage because the evolution of the battery market is inextricably linked to electric vehicle penetration.

EV costs

In a nutshell, the market that can produce the highest volume of batteries can also produce them most cheaply, and thus cut electric vehicle costs most aggressively.

The American firm Tesla understood this long ago and now there are signs that European concerns are also taking note.

Recent months have seen a slew of European gigafactory announcements, including news of a lithium-ion facility for Daimler subsidiary Accumotive and factories for BMZ, LG Chem and Samsung SDI, among others, aimed at satisfying growing auto industry demand.

If there is an assumption that electric vehicles will be the transportation mode of the future, then the EU might want to give these efforts all the support it can.

There is perhaps still time to head off likely competition from China, but the window of opportunity is closing; Chinese manufacturing interests are not a force to be trifled with.

At the same time, it is important to bear in mind that this is not just about the automotive industry. Research published this month by the analyst firm IHS Markit shows lithium-ion, the battery chemistry of choice for electric vehicles, is strengthening its stranglehold on the electrical energy storage market.

This is despite new energy storage applications calling for longer-duration discharge times, which traditionally have been deemed beyond the range of lithium-ion. As IHS Markit analyst Julian Jansen noted this month: “You would think this move to longer durations would open up opportunities for new technologies, but because lithium-ion costs have come down so fast, even at four hours most [projects] are lithium ion.”

Currently Europe has no native, major lithium-ion battery makers, and it is doubtful whether a European start-up could ever compete with established cell manufacturers such as Panasonic or LG Chem.

Further up the value chain, though, Tesla has shown what can be achieved though intelligent packaging and product design. There is no reason why any number of European companies could not do the same.

Beyond battery storage

That’s not all: as renewables penetration increases, a growing number of experts are calling out the need for ways to deal with weekly or monthly variations in output.

For all of lithium-ion’s versatility, these durations are most likely beyond the scope of battery storage.

Instead, as well as using established resources such as hydro, the answer to long-term weather variation is likely to involve new ways of storing energy at gigawatt-hour scale.

Many potential technologies are being investigated by research teams and start-ups around the world, but Europe could be uniquely placed to take the lead in this area.

For one, European businesses, perhaps prescient of the need to prepare for a full energy transition, have been buying up much of the intellectual property in energy storage developed in the US.

In January, for example, Italian utility Enel picked up US project developer Demand Energy. Previously, DK Energy bought Groom Energy Solutions and Engie acquired Green Charge Networks.

Furthermore, Europe remains tentatively at the forefront of the search for gigawatt-scale energy storage.

Germany’s city-scale flow battery experiment is one example, but elsewhere teams are looking at a range of options, from compressed air energy storage to molten salt for use with concentrated solar power plants.

When it comes to leading the development of these technologies, Europe has already set a precedent. European researchers and companies have almost single-handedly developed an offshore wind industry that is now being exported around the world.

With luck, a burgeoning tidal stream industry might not be far behind.

These sectors showcase Europe’s industrial prowess at its best, with research teams and corporate concerns working together across borders to solve complex industrial challenges and deliver market leading results.

But a key ingredient has been the presence of support schemes tightly tied to long-term national and European targets. These do not currently exist for storage. Perhaps it is time to start thinking about them.

Editor’s Note

Jason Deign is editor and publisher of Energy Storage Report, a weekly intelligence brief, website and Twitter feed that scrutinises the energy storage industry. He is standing in for our EU correspondent Sonja van Renssen this week.