May 22, 2016    5 minute read

The Potential of the Energy Storage Market

   May 22, 2016    5 minute read

The Potential of the Energy Storage Market

Crude hovers below $50, but for how long? Ultimately, the world will have to find a new source of energy when the former depletes. Previous energy transitions were driven by opportunity, not policy, and were usually additive, with new energy resources giving additional support to the traditional fuel type.

According to the International Energy Agency (IEA), the world’s total energy demand will increase by 50% in 2030. The situation is made more severe by the foreseeable increase in population and urbanisation with the addition of poverty alleviation and climate change.

There has been a rapid growing requirement for energy. If the world’s transition to renewable energy is successful, the savings achieved from the ongoing energy expenditures can contribute further to future economic production. However, we are currently faced with multiple constraints from development as attention is deviated to the concerns of economic growth, land use and sustainability. Despite the rapid catching up of renewables such as, solar and wind power, coal and petroleum are still the main sources of our current energy.

Global energy is used as a function of population and economy. Despite energy/GDP($) is decreasing due to significant improvements in efficiency, GDP rise reflects the people’s demand for better quality of life such as travelling which involves the use of energy. To satisfy the increasing demands, finding the next sustainable energy source is key. Regarding sustainability, it must: 1) be renewables where the resource does not get depleted; 2) minimal environmental impact, and 3) socially just.

It has been well-established wind and solar power will be the “next big thing.” However, the daily peaks and troughs of renewable energy has led to criticism that renewables will only have a niche role in supplying power to major economies. Another problem is grid capacity – the ability to store energy.

On 8th May, Germany achieved a new record in renewable energy generation. A combination of a sunny and windy day, the nation’s solar, wind, hydro and biomass plants were supplying 87% (55 GW) of the 63 GW being consumed. At one point, charts (Figure 1) have recorded negative pricing from over generation – paid to consume electricity.

Power Prices, Generation and Consumption

Figure 1: Overpower generation led to the temporary negative power price, paying consumers to consume electricity. 

ARES

Advanced Rail Energy Storage (ARES) is a new tech start-up in Santa Barbara aimed to improve storing energy, which vital for more wind and solar power to remain on the grid. There are two main parts of how it works: 1) train carries big concrete slabs uphill – consumes electricity; and 2) train carries big concrete slabs downhill – generating electricity.

When during times of excess energy production, ARES can utilise the trains to convert excess energy to potential energy. The electro-mechanical principle of the ARES system is similar to the regenerative braking power in electric vehicles like a Tesla.

In April, ARES received approval from the Bureau of Land Management for its first commercial-scale project, where it will consist of a 5.5mile track on an 8-degree slope, spanning 106 acres in Nevada. It is projected to produce 12.5MWh of energy and a power capacity of 50MW.

The current system is still too rigid for power suppliers and consumers to respond swiftly to price signals. Gas power plants may be spontaneously taken offline, but nuclear and coal plants are unable to be immediately shut down. Ancillary services are one of three projects ARES will dominate the new market, where its systems can smooth out fluctuations in power supply on the grid.

Worth Investing

Being the first company to use a well-established rail system, tasked to store energy, substantially reduces investment risks. ARES is innovating new designs and software to allow a rail storage system to operate on slopes much steeper and with shorter distances. The act would allow the technology to be easily located near more densely populated regions in the world.

Furthermore, ARES plans to transit to large grid scales ranging from 200MW to 3GW, where the company will be able to provide 4-16 hours of power at full output, and becoming a totally new type of power plant capable of backing up enormous quantities of renewable energy.

The cost of lithium-ion batteries storage project is priced $6,600/kW, whereas the ARES system is considered to cost less at $1,600/kW. Despite ARES systems may have a 10 seconds delay to conventional batteries, their capital costs – under $55 million are far lower, as rail cars and concrete are much unlikely to degrade over time. As all it requires is a piece of land, ARES system may replace hydroelectric dams where environmental impacts are more severe and is more versatile. Due to the fast pace developments in the energy markets, it is improbable to state the success of the ARES system. Though the ability to use relatively low-tech methods to combat high-tech storage problems have significantly lowered the risk of failure and may interest investors shortly.

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