Energy Storage Monitor Latest Trends in Energy Storage

Energy Storage Monitor Latest trends in energy storage | 2019

ENERGY STORAGE MONIT OR (ESM)

ABOUT THE FUTURE ENERGY LEADERS -FEL- ABOUT THE ENERGY STORAGE MONITOR 100 Energy storage will be instrumental in the grand energy The World Energy Council’s Future Energy Leaders’ transition. This paper is designed to give an overview of Programme – the FEL-100 – is a global and diverse the current uptake of storage technologies and future network of young energy professionals. The programme opportunities and challenges. serves as a platform for engaging a limited number of ambitious young professionals in national, regional and ABOUT THE WORLD ENERGY COUNCIL international activities and events. Its objective is to inspire participants to become the next generation of The World Energy Council is the principal impartial energy leaders capable of solving the world’s most network of energy leaders and practitioners promoting pressing challenges regarding energy and sustainability. an affordable, stable and environmentally sensitive Through the programme, Future Energy Leaders can energy system for the greatest benefit of all. further their experience, knowledge and skills in an energy-focused environment and contribute to the Formed in 1923, the Council is the UN-accredited global Council’s global dialogue. FEL-100 participants are energy body, representing the entire energy spectrum, provided with the unique opportunity to create their own with over 3,000 member organisations in over 90 personal networks of like-minded, equally motivated countries, drawn from governments, private and state personalities today, and together become the energy corporations, academia, NGOs and energy leaders of tomorrow. stakeholders. We inform global, regional and national Further details at https://www.worldenergy.org/impact- energy strategies by hosting high-level events including communities/future-energy-leaders the World Energy Congress and publishing authoritative studies, and work through our extensive member network to facilitate the world’s energy policy dialogue. Copyright © 2019 Future Energy Leaders- Market of Ideas- Environmental Issues- All rights reserved. All or part of this publication may be used or reproduced as Further details at www.worldenergy.org long as the following citation is included on each copy or and @WECouncil, @WECFELs transmission: ‘Used by permission of Future Energy Leaders- Market of Ideas-Energy Storage Monitor Team’. Front cover image: Moixa

1 FEL-100 | 2019

TABLE OF CONTENTS

Executive Summary 3 Key Findings 4

CHAPTER 1: 5

THE ROLE OF STORAGE IN ENERGY TRANSITION 5 1. Role of storage in energy transition 6 2. Market Overview 6

CHAPTER 2: 8

ENERGY STORAGE TECHNOLOGIES: CHARACTERISTICS 8

AND APPLICATIONS 8 1. Range of services 9 2. Comparison of Selected Technical and Operational Parameters 10

CHAPTER 3: 12

ECONOMIC ANALYSIS OF ENERGY STORAGE SYSTEMS 12 1. Cost Trends 13 2. Cost Comparison and Forecast 13 3. Available financial tools 14

CHAPTER 4: 15

REGULATORY FRAMEWORK 15 1. Key enablers for energy storage 16 2. Regulatory and policy considerations 16 3. Financing mechanisms 19

CONCLUSIONS 22 Findings and Recommendations 23 List of Tables and Figures 24 References 25 Acknolegments 28 World Energy Council Conctributors 28 Project Team 29

ENERGY STORAGE MONIT OR (ESM)

EXECUTIVE SUMMARY

The Energy Storage Monitor (ESM) is a project launched under the Market of Ideas (MoI) initiative within the Future Energy Leaders programme. The programme had the following objectives: 1. Help policy makers and market participants to have the tools to track and understand this rapidly changing capability; 2. Identify the range of storage types and applications that are evolving in the market place; 3. Provide insights into global trends through reviewing financial tools and gaining opinions from experts and case studies; 4. Present a comprehensive overview of the latest energy storage market trends, services, technical and financial characteristics of technologies, and existing enabling policies; 5. Provide an overview of the latest innovative financing models deployed worldwide supporting the deployment of energy storage projects.

The role of energy storage in energy transition is instrumental and it informs policies and regulatory reform processes in supporting large scale deployments.

3 FEL-100 | 2019

KEY FINDINGS

Role of Storage

 Energy storage provides valuable services to all stakeholders across the value chain;  Energy storage is key for unlocking intermittency of renewables and enabling the grand transition;  Energy storage needs to be considered as part of energy flexibility in general and planned as part of distributed energy resources (DER). Even if energy storage will always be the more expensive option, it is important to consider energy storage holistically alongside energy flexibility options in general;  Flexibility: With an increasing thrust towards renewable integration across the globe, energy storage has the potential to manage demand and supply dynamics;  Efficiency: Pairing energy storage with the right assets can significantly reduce delivery losses. For instance, combined heat and power (CHP) systems can increase system efficiency by nearly 50% by including energy storage and allowing the system to run at optimal capacity to charge the battery;  Resilience: Energy storage applications like black start facilities enable the maintenance of critical functions leading to quick recovery.

Important Market Trends

 Energy storage is growing rapidly globally. Falling costs and new deployment incentives are fuelling record investments in energy storage. Depending on the application, there is a 74% decline in costs since 2013 and these are projected to continue to decline at a steady 8% per year through the mid-2020s (Ken Silverstein, 2019);  Energy storage ownership is an important option for electric companies. The adoption of short-term energy storage technologies is mainly increasing in developed countries.

Market Enablers

 Costs and multiple applications/capabilities – High costs of electricity, decreasing costs of storage systems and multiple possible uses of cases and applications;  Regulatory frameworks and incentives are key to stimulating and enabling storage to manifest – especially when looking to unlock potential in multiple markets;  Learning by doing – deployment of storage creates opportunity for learning and helps in providing diverse solutions (Janice Lin, Founder and Chief Executive Officer of Strategen & Co-founder, Global Energy Storage Alliance (GESA));  Objectivity – an objective analysis and study of the value and benefits of energy storage application is imperative to cut through barriers;  Stakeholder value – creating goals for all stakeholders across the value chains;  Energy management – awareness of new technology and aligning procurement accordingly.

Challenges and Barriers

Prominent barriers to storage deployment can be traced to the speed in which the market for storage technologies and their applications are evolving and to the multiplicity and flexibility of storage. Some of the key challenges that need to be addressed are:  Perception on performance and safety: Grid operators have to be confident that energy storage systems will perform as intended within the larger network. Advanced modelling and simulation tools can facilitate acceptance — particularly if they are compatible with utility software;  Cost-Effectiveness: Actual energy storage technology contributes around 30%- 40% to the total system cost; the remainder is attributed to auxiliary technologies, engineering, integration, and other services;  Regulatory and market guidelines: It is critical to remove the rules that are distorting the market and/or crippling investment. Energy storage systems provide different functions to their owners and the grid at large, often leading to uncertainty as to the applicable regulations for a given project. Regulatory uncertainty poses an investment risk and dissuades adoption;  Co-operation from multiple stakeholders: Energy storage investments require broad cooperation among electric utilities, facility and technology owners, investors, project developers, and insurers. Each stakeholder offers a different perspective with distinct concerns.

ENERGY STORAGE MONIT OR (ESM)

Chapter 1: The Role of Storage in Energy Transition

5 FEL-100 | 2019

1. ROLE OF STORAGE IN ENERGY TRANSITION

The 2015 United Nations Climate Change Conference in Paris set the framework for a rapid global shift to a sustainable energy system in order to avoid the risk of catastrophic climate change. The challenge for governments has shifted from discussing what might be achieved to determining how to meet collective goals for a sustainable energy system. Given the sharp and often rapid decline of renewable power generation technologies costs in recent years, the electricity sector has made concrete progress on decarbonisation (IRENA, 2017). Energy storage has been a key component to enabling the grand transition and continues to gain momentum globally (World Energy Council, 2016). The transformation of power networks, pushed by the electrification of energy systems, requires additional energy storage capacity to address new flexibility needs of electric grids (A.T. Kearney, 2018).

As energy systems transition to rely more on renewables and less on fossil fuels, we will also need to increase the capacity of energy storage. This is because most renewable energy resources provide an intermittent supply which can be at odds with demand. As a result, renewable installations paired with energy storage are expected to continue to well into the future (Wilson, 2018; IRENA, 2017).

For renewable integration and energy storage to succeed, energy markets need to shift their strategies. The flexibility that storage provides to energy networks and service providers will drastically change the ways in which energy is provided in the future. For example, customers will become less reliant on stable and secure electricity supply if they are able to store backup energy in their homes. As energy generation and storage solutions become more easily accessible to customers, so will the opportunities to participate and shape the wider energy system. To meet global decarbonisation targets, energy storage needs to be included as part of the wider energy system. As the rapid uptake of renewable energy drives down costs through scale and innovation, so must the energy storage (World Energy Council, 2016)

2. MARKET OVERVIEW

Installed capacity of energy storage is continuing to increase globally at an exponential rate. Global capacity doubled between 2017 and 2018 to 8 GWh (IEA, 2018). Pumped hydro storage still makes up for the bulk of energy storage capacity accounting for 96.2% of the worldwide storage capacity. The electro-chemical storage (batteries) follows with the most potential. Massive potential also exists for electro-mechanical storage such as flywheels. However, it needs to be developed further (TAWAKI, 2018).

Figure 1 Global installed energy storage capacity behind and

In-front-of-the-meter by country (IEA, 2019)

ENERGY STORAGE MONIT OR (ESM)

Last year, South Korea’s installed energy storage capacity grew to be the largest of any single nation (excluding those with pumped hydro) (IEA, 2019). The large regulatory reform and incentives both in front and behind the meter have been cited as being a large driver for the uptake in energy storage in this area (Byuk-Keun Jo, 2019). However, the rapid uptake has not developed without some issues, with a number of storage related fires occurring, potentially due to hasty installations and relaxed oversight (IEA, 2019) .

The World Energy Council projected that there could be as much as 250 GW of energy storage installed by 2030 (World Energy Council, 2016). Indeed, the market for energy storage is growing at a rapid rate, driven by declining prices and supportive government policies (Eric Hittinger and Eric Williams, 2018). Furthermore, by 2030, the installed costs of battery storage systems could fall by 50-66% (IRENA, 2017). In fact, a Greentech Media (GTM) Research report suggested that the cost of energy storage systems will reduce by an annual rate of 8% until 2022 (EESI, 2019).

Behind-the-meter energy storage has now taken over the installed capacity of utility scale storage with the largest growth seen in Korea, Australia, Japan, and Germany (IEA, 2019). It is expected that 70% of all renewable generation installed behind-the-meter will be paired with some level of energy storage over the next decade (Wilson, 2018). Energy storage is improving the ability for customers to consume more of the energy they are producing from distributed generation which in turn is improving the return on investment (Deloitte, 2015). As incumbent distributers move towards more cost-reflective pricing and potential feed-in tariffs, this may further improve the business case for pairing energy storage with behind-the-meter generation (Wilson, 2018).

Figure 2 Technology Mix in Storage Installations, excluding Pumped Hydro (IEA, 2019)

In terms of technology mix in energy storage installations, IEA shows in its 2019 publication that lithium-ion batteries dominate among all storage technologies excluding pumped hydro through the year 2016 (see Figure 2). This was paired with a sharp decline in the number of flywheel installations after having a share of around 25% in 2012. The prevailing lead-based batteries have also decreased dramatically in market share from 40% in 2011 to 5% in 2018.

Despite rapidly falling costs, energy storage systems remain expensive and the significant upfront investment required is difficult to overcome without governmental support and/or facilitated financing schemes (ESMAP, 2017). Ultimately, the future is bright for both renewables and energy storage. Together, the two are proving to be a powerful combination in the global energy market. Industry growth, access to new markets, and continued regulatory reform will help to make stored power highly competitive (IRENA, 2017).

7 FEL-100 | 2019

Chapter 2: Energy Storage Technologies: Characteristics and Applications

ENERGY STORAGE MONIT OR (ESM)

1. RANGE OF SERVICES

Whilst the specific drivers that develop energy storage markets vary by region and market, the overarching goal of energy storage has been to make the electricity grid more efficient, resilient, secure, cost-effective, and sustainable. Table 1 below represents the main energy storage market segments, while Table 2 represents the common services within each segment.

Table 1 Energy Storage Market Segments (ESMAP, 2017)

Segment Description In-front-of-the-meter or Refers to systems installed on transmission or distribution networks providing Utility-scale services to grid operators or microgrids. Behind-the-meter or Refers to systems installed on the customer side of a utility meter and primarily help End-user scale reduce costs and improve resiliency for commercial and industrial, or residential customers.

Table 2 Energy Storage Services per Segment (FEL 100 - Energy Storage Monitor Team, 2018)

Segment Services Use Case/Application Bulk Energy Services Arbitrage

Electric supply capacity Peak shaving Ancillary Services Frequency regulation Voltage support Black start Spinning reserves Non-spinning reserves

meter (Utility Scale)meter (Utility - Load following, load balancing

the

- Grid Support (T&D) Transmission services (upgrade deferral and congestion relief)

of - Distribution services (upgrade deferral and voltage support) Peaker replacement

front - Renewable Energy Renewable energy time shift

In Integration Renewable capacity firming Renewable energy grid integration

Customer Energy Power quality and reliability Management Services Bill Management

meter

- Demand shift

the - Peak shaving

user Scale)

- Increased PV self-consumption

(End

Behind Stand-alone systems

Utility scale installations have generally focused on reducing network congestion during peak demands, which has helped extend the life of assets and improve the systems’ resilience. As renewables become more prevalent on distributed networks and production more localised, smarter controlling and market mechanisms are evolving to enable energy storage to offer ancillary services which improve reliability of supply (Deloitte, 2015).

FEL-100 | 2019

Figure 3 Growth in Energy Storage Applications by Use Case (IRENA, 2017)

Figure 3 above shows the projected growth in energy storage applications by use case to 2030. IRENA also projects that end users could become the largest users of energy storage, with much of the value and investment occurring behind-the-meter.

2. COMPARISON OF SELECTED TECHNICAL AND OPERATIONAL PARAMETERS

Energy storage systems provide a wide array of technological approaches for managing power supply in order to create a more resilient energy infrastructure and bring cost savings to utilities and consumers. The energy storage systems are classified into mechanical, electrochemical, chemical, electrical, and thermal (IEC, 2011)

Figure 4 Categorisation of Electricity Storage Systems (World Energy Council, 2016)

ENERGY STORAGE MONIT OR (ESM)

Some of the main energy storage technologies currently being deployed around the world are (Energy Storage Association, 2019):  Solid State Batteries - a range of electrochemical storage solutions, including advanced chemistry batteries and capacitors;  Flow Batteries - batteries where the energy is stored directly in the electrolyte solution for longer cycle life, and quick response times;  Flywheels - mechanical devices that harness rotational energy to deliver instantaneous electricity;  Compressed Air Energy Storage - utilising compressed air to create a potent energy reserve;  Thermal - capturing heat and cold to create energy on demand;  Pumped Hydro-Power - creating large-scale reservoirs of energy with water.

Table 3 below describes the major characteristics and operational parameters of the available energy storage technologies around the world. As for Figure 6, it shows the energy storage technologies by needed discharge duration and maps the technologies available energy storage segments and services.

Table 3 Major Energy Storage Characteristics by Technology (Deloitte, 2015)

Figure 5 Mapping Electricity Storage Technologies to Storage Services According to the Discharge Duration (World Energy Council, 2016)

FEL-100 | 2019

Chapter 3: Economic Analysis of Energy Storage Systems

ENERGY STORAGE MONIT OR (ESM)

1. COST TRENDS

Low-cost energy storage is the missing link in the transition to a 100% renewable national electricity market (World Energy Council, 2016). One approach to this has been to stimulate the development of energy storage markets through regulatory reforms and to subsequently reduce costs through efficiencies of scale and increased competition. During the past five years, several factors have caused the costs of energy storage systems to drop across the board. Global demand for consumer electronics and electric vehicles spurred investments in battery- pack manufacturing (McKinsey & Company, 2019).

Meanwhile, other hardware such as inverters, containers, and climate-control equipment also became cheaper. In addition, “soft” costs (customer acquisition, permitting, and interconnection, among others), as well as engineering, procurement, and construction (EPC) declined as companies gained experience and streamlined their processes. The cost of a utility-scale system has been declining by more than 20% per year, mostly due to falling balance of systes components’ (BOS) costs. The component-by-component analysis of further cost-improvement opportunities suggests that the costs of energy storage systems will continue their rapid decline, with some variations by type of system (McKinsey & Company, 2018).

The long-term cost of supplying grid electricity from today’s lithium-ion batteries is falling even faster than expected, making them an increasingly cost-competitive alternative to natural-gas-fired power plants across several key energy markets (BNEF, 2019) . Annual revenue from energy storage tied to utility-scale wind and solar is expected to reach $9.6 billion by 2026. However, revenue for behind-the-meter installations, is expected to surpass $13 billion in the same timeframe (Wilson, 2018). Despite these rapidly falling costs, energy storage systems still remain expensive and the significant upfront investment required is difficult to overcome without government support and/or low-cost financing (ESMAP, 2017).

2. COST COMPARISON AND FORECAST

It is important to consider both the Table 4 Energy Installation Cost (USD/kWh) per Storage Type, installed cost and full life cycle p (IRENA, 2017) otential of energy storage over its lifespan. Table 4 shows the installation cost of a number of energy storage types and highlights the low cost of pumped storage (21 USD/kWh), followed by CAES systems (53 USD/kWh). Electro- chemical storage like Lithium-Ion is still more expensive to install but it is more efficient at storing and releasing energy, opening it up to a wider range of potential applications. The cost of Lithium-Ion has also been decreasing at the fastest rate. Lazards (2018) analysis suggests that energy storage solutions which have a broader range of potential services will become the most prevalent in the future. Under similar assumptions, IRENA (2017) anticipates that advanced forms of Li-ion like LTO could see the greatest reduction in cost with alongside potential for cycle life (Figure 8).

FEL-100 | 2019

Figure 6 Energy Installation Cost (USD/kWh) per Storage Type, (IRENA, 2017) 3. AVAILABLE FINANCIAL TOOLS

The levelised cost of energy storage is a methodology which considers the full amount of energy a storage solution can hold and discharge over its lifespan (LCOS). The way in which this is calculated can differ depending of the type of service the energy storage solution is providing. To help practitioners and policy makers navigate this complexity, a number of tools have been developed by various organisations and are presented in Table 5.

Table 5 A selection of Available Energy Storage Financial Tools

Name Description BLAST “Behind-the-Meter Applications Lite Tool developed by NREL provides a quick, user- friendly tool to size behind-the-meter energy storage devices used on site by utility customers for facility demand charge management. The tool employs simplified battery performance models for computational efficiency, and it includes a built-in algorithm to identify cost-optimal energy storage configurations” (NREL, 2019). ESCT “The Energy Storage Computational Tool (ESCT): this tool is used for identifying, quantifying, and monetising the benefits of grid-connected energy storage projects to calculate the net present value over the system lifetime” (Energy, 2019). ES-Select™ “ES-Select™ Tool: the ES-Select™ Tool aims to improve the understanding of Tool different electrical energy storage technologies and their feasibility for intended applications in a simple, visually comparative form. It treats the uncertainties in technical and financial parameters as statistical distributions” (ES-Select™ Tool, 2019). StorageVET® “EPRI’s Storage Value Estimation Tool, or StorageVET®. This new web-based software models the value of services that storage projects can provide to the grid and utility customers. Services include infrastructure investment deferral, peak system load management, frequency regulation, energy price arbitrage, customer demand-charge management, backup power, and many others. The tool can be applied internationally” (Cassandra Sweet, 2018).

ENERGY STORAGE MONIT OR (ESM)

Chapter 4: Regulatory Framework

FEL-100 | 2019

1. KEY ENABLERS FOR ENERGY STORAGE

It is widely recognised that energy storage projects have unique risks in terms of regulatory barriers, unprepared market structures, liability exposure and non-traceability of performance. Energy storage will be needed for a host of services including ancillary services, Demand Response, battery storage, efficient management of the grid, along with others, which are necessary for the stabilisation of the grid as renewable energy integration increases. Figure 9 shows the potential areas that may provide a balance between requisite improvements and viable investments whilst at the same time securing integration of energy storage in real-time grid operation and load/demand planning criteria.

Innovation in preparation Indigenous manufacturing and dissemination of data Business models to phase for increased for enhanced transparency out capital investments competitiveness and participation

Figure 7 Enabling factors for increased deployment of storage

2. REGULATORY AND POLICY CONSIDERATIONS

Regulators are critical to the advancement of markets and the facilitation of advanced energy systems adoption. To facilitate collaborative and feasible stakeholder interactions across the value chain, we propose the following deliberations.

Figure 8 Requirement for reforms in regulations and policy framework

With the continued integration of variable generation, transmission enhancements, changes to load behaviour, increase in reserve requirement in the future and uncertainty on responsiveness of supply resources, there is a clear requirement for increasing reserves.

Addressing adequacy of resources (access to enough power to be able to meet the highest expected level of demand) and system quality (right mix of resource (consumers and generators) capabilities deployed to ensure that demand and supply are always balanced), is essential to maintaining reliability of power at least-cost while the power sector shifts from being dominated by conventional power to renewables.

ENERGY STORAGE MONIT OR (ESM)

Some of the key benefits of utilising flexible resources

 Technical benefits – better response speed and ramp up time;  Financial benefits – behind-the-meter or customer-focused solutions, including approaches to achieve and monetise benefits across the electricity supply chain from new business models to technologies such as energy storage, inverter controls or load control.

Introduction of new energy storage services will generate additional services along with incentivising participants can introduce value-additions such as:  Demand Response;  Energy Storage as a service – revenue stacking;  Ancillary Services;  Vehicle to Grid.

Examples from across the globe

European Union (EU) – EU Legislation in Progress

The Council of European Energy Regulators (CEER) has removed barriers to markets that provide network flexibility, including energy storage (CEER, 2019). The EU Commission also proposed a revised Electricity market directive tackling the EU energy market design and opening up to energy storage recently. It brings stricter rules in line with the EU objectives of security of supply and emission reduction (European Commission, 2019). The proposed EU directive introduces an obligation for Member States to lay out provisions on electro-mobility and energy storage. The new market design should provide technical and market conditions for energy storage, including the introduction of smart grids and smart meters. Furthermore, when planning for network development, transmission system operators (TSOs) must consider energy storage as an alternative to the expansion of the network (Erbach, 2019).

India

The India Energy Storage Alliance (IESA) estimates that the market for energy storage will grow to over 300 GWh in 2025 and will need an investment of $3 billion (Rs.22,000 crore). At present, over 1 GWh of annual assembling capacity is being set up for converting imported Li-ion cells into battery modules by various Indian companies. The Central Electricity Regulatory Commission (CERC), the key regulator of power in India’s report on spinning reserve, estimate that the need for primary ancillary services will be around 4000 MW (Commission, Central Electricity Regulatory, 2015) in the next 5 years, most of which could come from battery storage. This will result in a demand of batteries of 300 GWh (Energy Storage News, 2019). Recent amendments brought about by CERC in the ‘Connectivity Regulations’ and the inauguration of the first grid-connected 10MW Battery energy storage project in New Delhi, have drawn the attention of industries to energy storage systems in India and their imperative role in the Indian context. Additionally, India aims to electrify 30% of its total vehicle fleet by 2030. The development of less costly, durable EV traction batteries, with improved energy storage, power performance and charging capabilities, is essential for the successful transition towards e-mobility. The development of batteries for stationary applications can benefit from automotive sector achievements. With the assumption that the average battery storage in EVs is 17 kWh at present, rising to 30 kWh for cars, 2 kWh for two wheelers, 10 kWh for three wheelers and 100 kWh for buses, the expected demand for batteries will be 200 GWh.

FEL-100 | 2019

India is taking a big leap by creating opportunities for energy storage sector especially in terms of manufacturing, assembling, energy storage project developments, equipment supply, R&D of technology enhancement, among others. Some of the important initiatives are:  Phased Manufacturing Programme (PMP): Investments in all 3 sectors could come with a condition for PMP with a mandate that domestic content will increase over time to provide incentive to manufacture batteries in India;  Preferential Market Access (PMA): Ministry of Information Technology has issued guidelines for PMA of up to 50% for domestically manufacturing electronic wafer and cells for all public procurement. A similar guideline could be issued for all battery procurements. This would also encourage domestic manufacturing of batteries in India.

United States of America (USA)

The Federal Energy Regulatory Commission's (FERC’s) Order 841 directs all Regional Transmission Organisations (RTO) and Independent System Operators (ISO) (RTO/ISO markets) to implement rules enabling energy storage participation across:  Wholesale energy markets;  Capacity markets;  Ancillary services markets.

Order 845 revises large generator interconnection process to include energy storage and encourage hybridisation (Utility Dive, 2018):  Allows interconnection service capacity to be less than the generating facility capacity;  Enables surplus interconnection service to be used at existing points of interconnection.

United Kingdom (UK)

The Office of Gas and Electricity Market (Ofgem), the electricity regulator in UK, published the “Smart Systems and Flexibility Plan” in 2017 and a recent update in October 2018 provides inputs on removing barriers for smart technologies such as energy storage and creating a market for flexible resources. Some of the steps undertaken as part of the intervention as listed below:  Includes a definition of energy storage as a subset of the generation asset class;  Adoption of single cash-outs for all imbalances in individual settlement periods. In contrast to the ongoing dual-price method, this reform could increase cash-out prices and incentives for flexible capacity investments, and hence potentially reward energy storage technologies;  Modification of license changes ownership agreement to provide incentives and make energy storage viable;  National Grid’s Enhanced Frequency Response (EFR) tender and the move to incorporate firm frequency response needs of the system (Energy Storage News, 2018) - proper adaptation of product characteristics, prequalification requirements and implementation of adaptive demand calculation for balancing energy (tendering the balance energy demand) has created a market for providers whose services may be otherwise not accessible.

ENERGY STORAGE MONIT OR (ESM)

3. FINANCING MECHANISMS

Green energy finance allows for an increase in the adoption of green solutions and enhances technological innovation. On top of that, it has grown at a rapid pace in recent years. Long-term investments in renewable energy might require the involvement of governments in setting policies and regulatory frameworks, which would ensure abiding to a durable sustainability environment. Governments play one of the most pivotal roles in steering the transition to clean energy solutions, either by establishing the policy framework and necessary market regulations, providing fiscal and financial incentives for private sector actors, or by directly investing governmental money into clean energy projects.

The role of international agencies and donors remains pivotal when making the shift to an economy becoming less and less reliant on fossil fuels. Their work has already started to target renewable energy investment in the previous decade. Now that technical advancement in energy storage technologies is rapidly increasing, international actors are working on adapting the scope of their initiative to support energy storage as a standalone technology or combined with renewable energy generation.

The number of funding bodies available for energy storage projects supports the importance of storage development in the energy sector. This section presents a collection of financing mechanisms designed or adapted to serve energy storage projects. The schemes shown in Figure 11, were selected based on their innovativeness, repeatability or their impact on facilitating the spread of energy storage projects, based on capacity installed, or the number of projects implemented. For each type of financing models, one or two examples are selected. More information about each financing scheme will follow.

Figure 9 A Selection of Financing Schemes Supporting the Development of Energy Storage

Loan Programs Office - USA

“The Department of Energy’s Loan Programs Office (LPO) finances large-scale, all-of-the-above energy infrastructure projects in the United States” (DOE, 2019). In August 2010, the Stephentown Spindle project benefitted from a US$43 million loan guarantee under this scheme, restructured to US$25 million in 2012. The Stephentown Spindle is a flywheel energy storage project in Stephentown, New York, consisting of 200 flywheels used for grid stability improvement. The total capacity of the plant is 20 MW and it can support the frequency regulation of the grid with immediate response (DOE, 2015).

Climate Bonds - Australia

Australia’s Clean Energy Finance Corporation (CEFC), which has been instrumental in helping deliver various clean energy and environmental initiatives, decided to invest AU$10 million in a green bond issuance from financing company FlexiGroup Limited, from a total of AU$90 million. This bond will be dedicated to support small-scale energy storage projects, as well as rooftop solar projects, and is expected to boost the residential energy storage market in the country (Colthorpe, Andy, 2019).

FEL-100 | 2019

Private Assessed Clean Energy (PACE) Financing - USA

“Property Assessed Clean Energy financing, or PACE financing, is private capital available to building projects at a low-cost using utility, water, or operations energy efficiencies” (PACE Equity, 2019). This scheme allows for financing projects through a tax assessment lasting 20 to 25 years to repay the private capital used to fund the projects. PACE can be used to finance energy storage projects; however, it cannot guarantee the profitability of the project, beyond qualifying the contractor or EPC as being credible and compliant, leaving the risk resting on the property owner (Hartley, 2018).

Scaling solar – World Bank Group (WBG)

The initiative started by focusing on solar power production, but in November 2018, “The World Bank Group committed US$1 billion for a new global program to accelerate investments in battery storage for energy systems in developing and middle-income countries” (World Bank Group, 2018). This initiative is expected to mobilise another US$4 billion in concessional climate financing and public and private investments. The program targets to finance 17.5 gigawatt hours (GWh) of battery storage by 2025.

InnovFin – European Investment Bank Group

This initiative covers “a wide range of loans, guarantees and equity-type funding” (EIB, 2019). As part of this initiative, the “InnovFin Energy Demonstration Projects provides loans, loan guarantees or equity-type financing typically between € 7.5 million and € 75 million” to innovation projects such as those in energy storage. The financing mechanism mainly targets demonstration projects with the aim to help bridge the gap from demonstration to commercialisation (EIB, 2019).

Gore Street Energy Storage Fund

Established in 2018, the Gore Street Energy Storage Fund was the first fund of its nature to be listed on the London Stock Exchange. It aims “to provide investors with a sustainable and attractive dividend over the long term by investing in a diversified portfolio of utility scale energy storage projects primarily located in the UK, although the Company will also consider projects in North America and Western Europe.” (Gore Street Energy Storage Fund prospectus, 2018). The fund has already invested in the following two operational projects, with many other in the pipeline:  The Boubly project, in Cleveland (England, UK), with a total capacity of 6.0MW (100% owned by the fund)  The Cenin project, in Bridgend (Wales, UK), with a total capacity of 4.0 MW (49% owned by the fund) (Gore Street Energy Storage Fund, 2019).

Gresham House Energy Storage Fund

The second energy storage fund listed on the London Stock Exchange, the Gresham House Energy Storage Fund, launched in the beginning of October 2018 and raised £100 million to be traded on the London Stock Exchange, as of November 2018 (Energy Storage News, 2018).

The fund has already invested in five operational projects ranging between 7 and 20 MW, with a total capacity of 70 MW, and has a pipeline of another 132 MW to be acquired with exclusive assets, with individual capacities ranging between 5 and 50 MW, to be commissioned in 2019 (Gresham House Energy Storage Fund, 2019).

SUSI Energy Storage Fund

SUSI partners, a Swiss-based investment management company specialising in sustainable investments, is seen as a pioneer of energy storage funds after establishing the world’s first dedicated energy storage fund in 2017 (SUSI Energy Storage Fund, 2019). The fund received “capital commitments of € 252 million from institutional investors in Germany, the Netherlands, Austria, Sweden and Switzerland at the end of May 2018” (Smart Energy International, 2018).

ENERGY STORAGE MONIT OR (ESM)

Electric & Gas Industries Association (EGIA)

An example of this kind of cooperation initiatives come from the partnership between the EGIA and Adar Power, a manufacturer of energy storage solutions for residential and commercial applications. The EGIA outlines five “EGIA- furnished financing plans” (EGIA, 2019):  The Renewable Express Loan Program is an unsecured financing program ideal for contractors who are new to financing for amounts less than US$64,000 and a loan duration up to 12 years;  PACE Financing can be used to finance Adara Residential Energy Storage systems as well and pays the entire amount which can be returned over a period of 20 years or less;  Benji Unsecured Financing can be used to finance loans up to US$50,000 and loan duration up to 10 years;  Energy Wise Lease Program offers “commercial businesses leases for facility upgrades on terms of 7 years or less, with amounts ranging from US$20,000 to US$99,999.99 and competitive interest rates” (EGIA, 2019);  Commercial Financing Program can be used for commercial businesses to finance the Adara Commercial Energy Storage System with loans amounts up to US$5,000,000 and a loan duration of up to 10 years.

RateSetter

Although the application is still not widespread, peer-to-peer lending is making its way to energy storage projects, with the RateSetter platform agreeing to finance the sum of AU$100 million, “as part of the South Australian government Home Battery Scheme, which has committed to granting 40,000 households in the state up to AU$6,000 each in subsidies towards the purchase of batteries for use in home solar-plus-storage solutions” (Colthorpe, Andy, 2018).

FEL-100 | 2019

Conclusions

ENERGY STORAGE MONIT OR (ESM)

FINDINGS AND RECOMMENDATIONS

The global power sector is undergoing a major transformation and it necessitates energy storage as a pivotal player to create a resilient and stable grid. Driving a partnership model to advocate conversations around energy storage will provide the requisite thrust to come out with implementable and ground-breaking solutions. It is also critical to note that this market is at the cusp of a lot of institutional deals. For energy storage to provide more bankability and gain stronger amounts of financing, there is a need for projects to get financed by structural finance like debt and equity rather than acquisitions by a financial equity along with exploring the potential of scalable and replicable business models. Some key lessons and take away from the ongoing projects across the globe as listed below:  Direct support of energy storage through solid mandates policies and subsidies;  Set clear regulations;  Make energy storage part of ancillary services to reduce regulatory barriers;  Account for energy storage as a key component for grid expansions (as per World Energy Council);  Expand the energy storage market beyond governmental initiatives;  Explore the best long-term energy storage technologies and further develop electro-mechanical storage and batteries other than lithium-ion to compete in costs.

Modular smaller scale energy storage solutions are growing at a faster pace than utility scale. This may indicate that mass market adoption of energy storage may be an area to consider more frequently.The capabilities of energy storage are evolving rapidly and as this continues, the results for how we generate and distribute energy will be significant. It is therefore paramount that energy storage is carefully monitored and considered as part of the entire energy system and continuously adapted to evolving capabilities and pressures. Tools like the Global Energy Storage Database show real promise in helping practitioners understand the changing capabilities across our global energy system. However, some of these resources have not received enough ongoing maintenance to be considered as useful as they should be. The IEA has taken a useful approach to monitoring energy storage amongst energy flexibility, however the scale and complexity of energy storage in how it changes the capabilities of the energy system are still lacking in many aspects.

The inherent value of creative disruption should not be undermined. By acknowledging the reality of ground level implementation of energy storage projects along with transparency in adapting with the change in physical structures all players will be encouraged to accelerate the deployment of energy storage whilst truly enabling less with more energy.

FEL-100 | 2019

LIST OF TABLES AND FIGURES

Figures Figure 1 Global installed energy storage capacity behind and ...... 6 Figure 2 Technology Mix in Storage Installations, excluding Pumped Hydro (IEA, 2019) ...... 7 Figure 3 Growth in Energy Storage Applications by Use Case (IRENA, 2017) ...... 10 Figure 4 Categorisation of Electricity Storage Systems (World Energy Council, 2016) ...... 10 Figure 5 Map Electricity Storage Technologies to Storage Services According ...... 11 Figure 6 Energy Installation Cost (USD/kWh) per Storage Type, (IRENA, 2017) ...... 14 Figure 7 Enabling factors for increased deployment of storage ...... 16 Figure 8 Requirement for reforms in regulations and policy framework ...... 16 Figure 9 A Selection of Financing Schemes Supporting the Development of Energy Storage ...... 19

Tables Table 1 Energy Storage Market Segments (ESMAP, 2017) ...... 9 Table 2 Energy Storage Services per Segment (FEL 100 - Energy Storage Monitor Team, 2018) ...... 9 Table 3 Major Energy Storage Characteristics by Technology (Deloitte, 2015) ...... 11 Table 4 Energy Installation Cost (USD/kWh) per Storage Type, (IRENA, 2017) ...... 13 Table 5 A selection of Available Energy Storage Financial Tools ...... 14

ENERGY STORAGE MONIT OR (ESM)

REFERENCES

A.T. Kearney. (2018). A.T. Kearney Energy Transition Institute - Insights - Energy Storage. Retrieved from http://www.energy-transition-institute.com: http://www.energy-transition- institute.com/Insights/ElectricityStorage.html

BNEF. (2019, March 26). Battery Power’s Latest Plunge in Costs Threatens Coal, Gas. Retrieved from Bloomberg Energy Finance: https://about.bnef.com/blog/battery-powers-latest-plunge-costs- threatens-coal-gas/

Byuk-Keun Jo, S. J. (2019). Feasibility Analysis of Behind-the-Meter Energy Storage System According to Public Policy on an Electricity Charge Discount Program. Sustainability.

Cassandra Sweet. (2018, September 26). Journal Archive. Retrieved from Journal: http://eprijournal.com/new-epri-tool-demystifies-the-value-of-energy-storage/

CEER. (2019). CEER Consultation on Dynamic Regulation to Enable Digitalization of the Energy System. Brussels.

Colthorpe, Andy. (2018). Energy Storage News. Retrieved from https://www.energy- storage.news/news/peer-to-peer-lending-group-puts-in-au100m-funding-for-south-australia-home

Colthorpe, Andy. (2019). Energy Storage News. Retrieved from https://www.energy- storage.news/news/important-market-development-energy-storage-included-in-australian-climate

Commission, Central Electricity Regulatory. (2015). Report of the Committee of Spinning Reserve. New Delhi.

Deloitte. (2015). Energy storage: Tracking the technologies that will transform the power sector.

DOE. (2015). Stephentown Spindle. Retrieved from https://www.energy.gov/lpo/stephentown-spindle

DOE. (2019). Loan Programs Office. Retrieved from https://www.energy.gov/lpo/about-us-home

EESI. (2019, February 22). Fact Sheet: Energy Storage (2019). Retrieved from https://www.eesi.org: https://www.eesi.org/papers/view/energy-storage-2019

EGIA. (2019). Retrieved from https://egia.org/adara-power-energy-storage-financing-now-available-through- egia/

EIB. (2019). InnovFin. Retrieved from https://www.eib.org/en/products/blending/innovfin/index.htm

Energy Storage Association. (2019). Energy Storage Technologies. Retrieved from www.energystorage.org: http://energystorage.org/energy-storage/energy-storage-technologies

Energy Storage News. (2018). Retrieved from https://www.energy-storage.news/news/uk-energy-storage- fund-prepares-to-hit-london-stock-exchange-with-us130m-ra

Energy Storage News. (2018, January 8). 50MW of Enhanced Frequency Response batteries go online in Britain from VLC Energy. Retrieved from www.energy-storage.news: https://www.energy- storage.news/news/50mw-of-enhanced-frequency-response-batteries-go-online-in-britain-from-vlc

Energy Storage News. (2019, January 15). Energy storage in India: A ‘year of action’ lies ahead of us. Retrieved from www.energy-storage.news: https://www.energy-storage.news/blogs/energy-storage- in-india-a-year-of-action-lies-ahead-of-us

FEL-100 | 2019

Energy, U. D. (2019). Energy Storage Computational Tool. Retrieved from www.smartgrid.gov: https://www.smartgrid.gov/recovery_act/analytical_approach/energy_storage_computational_tool.h tml

Erbach, G. (2019). Common rules for the internal electricity market. European Parliamentary Research Service (EPRS).

Eric Hittinger and Eric Williams. (2018, March 22). www.theconversation.com. Retrieved from http://theconversation.com/how-energy-storage-is-starting-to-rewire-the-electricity-industry-93259

ESMAP, I. a. (2017). Energy Storage Trends and Opportunities. CONFERENCE EDITION.

ES-Select™ Tool. (2019). Retrieved from www.sandia.gov: https://www.sandia.gov/ess-ssl/tools/es-select- tool/

European Commission. (2019, March 26). Clean Energy for All Europeans. Retrieved from www.europa.eu: http://europa.eu/rapid/press-release_IP-19-1836_en.htm

FEL 100 - Energy Storage Monitor Team. (2018).

Gauntlett, D. (2017). Energy Storage Trends and Opportunities in Emerging Market. IFC.

Gore Street Energy Storage Fund. (2019). Retrieved from http://www.gsenergystoragefund.com/content/about/portfolio.aspx

(2018). Gore Street Energy Storage Fund prospectus. Retrieved from http://gsenergystoragefund.com/archive/GSESF-Prospectus.pdf

Gresham House Energy Storage Fund. (2019). Retrieved from https://newenergy.greshamhouse.com/funds/esf/#portfolio-and-pipeline

Hartley, P. (2018). Solar Power World. Retrieved from https://www.solarpowerworldonline.com/2018/07/financing-commercial-energy-storage-wall- streets-not-biting-yet/

IEA. (2019, May 27). Energy Storage, Tracking Clean Energy Progress. Retrieved from https://www.iea.org: https://www.iea.org/tcep/energyintegration/energystorage/

IEC, I. E. (2011). Electrical Energy Storage. Geneva.

IRENA. (2017). Electricity Storage and Renewables: Costs and Markets to 2030. Abu Dhabi: International Renewable Energy Agency.

Ken Silverstein. (2019, April 25). Reverse Auctions May Become the Key to Energy Storage Rollout, EDF says. Retrieved from www.microgridknowledge.com: https://microgridknowledge.com/energy- storage-reverse-auctions/

Lazard. (2018). Lazard's Levelized Cost of Storage Analysis - Version 4.0.

McKinsey & Company. (2018, June). The new rules of competition in energy storage. Retrieved from www.mckinsey.com: https://www.mckinsey.com/industries/electric-power-and-natural-gas/our- insights/the-new-rules-of-competition-in-energy-storage

McKinsey & Company. (2019, April 19). The shortlist. Retrieved from www.mckinsey.com/~/: https://www.mckinsey.com/~/media/McKinsey/Email/Shortlist/39/2019-04-19.ashx

ENERGY STORAGE MONIT OR (ESM)

NREL. (2019). BLAST for Behind-the-Meter Applications Lite Tool. Retrieved from www.nrel.gov: https://www.nrel.gov/transportation/blast-btm-lite.html

PACE Equity. (2019). Retrieved from https://www.pace-equity.com/how-pace-financing-works

Reverse Auctions May Become the Key to Energy Storage Rollout, EDF says. (2019, April 25). Retrieved from www.microgridknowledge.com: https://microgridknowledge.com/energy-storage-reverse- auctions/

Smart Energy International. (2018). Retrieved from https://www.smart-energy.com/news/energy-storage- fund-susi/

SUSI Energy Storage Fund. (2019). Retrieved from https://susi-partners.com/en/sustainable- investments/energy-storage-and-grid/

TAWAKI. (2018, September 6). What are the most important technologies for energy storage. Retrieved from http://www.tawaki-battery.com/: http://www.tawaki-battery.com/technologies-for-energy-storage/

Utility Dive. (2018, December 11). As grid operators file FERC Order 841 plans, storage floodgates open slowly. Retrieved from www.utilitydive.com: https://www.utilitydive.com/news/as-grid-operators-file- ferc-order-841-plans-storage-floodgates-open-slowly/543977/

Wilson, A. (2018, January 5). Expect strong growth this year for commercial energy storage. Retrieved from www.greenbiz.com: https://www.greenbiz.com/article/expect-strong-growth-year-commercial- energy-storage

World Bank Group. (2018). Retrieved from https://www.worldbank.org/en/news/press- release/2018/09/26/world-bank-group-commits-1-billion-for-battery-storage-to-ramp-up-renewable- energy-globally

World Energy Council. (2016). E-Storage: Shifting from cost to value Wind and Solar applications. London EC3V 3NH: World Energy Council.

FEL-100 | 2019

ACKNOWLEDGMENTS

ENERGY STORAGE EXPERTS

Ricky Buch, Founder at Lotricity James Carton, FEL-100 and Assitant Professor at Dublin City University Yazan Harasis, Co-founder at Power Edison Lahiri Sudipta, Senior Consultant at DNV GL - Energy Mathew Zedler, Head, Product & Application Engineering at Lockheed Martin Advanced Energy Storage LLC Janice Lin, Founder and CEO of Strategen & Co-founder of Global Energy Storage Alliance (GESA)

WORLD ENERGY COUNCIL CONCTRIBUTORS

Michelle Arellano (Manager, Member Services), Sarah Van Loo (Coordniator, Member Services), and Emily- Jayne Godfrey (Coordinator, Operations Team)

FEL-100 STUDIES COMMITTEE

Sultan Al Shaaibi, Andrei Covatariu, and Andreas Formosa

ENERGY STORAGE MONIT OR (ESM)

PROJECT TEAM Reem Irany, Lebanon

Reem Irany, Lebanon

Reem holds a bachelor’s degree in Electrical and Computer Engineering and she currently works at LCEC, the national energy agency for Lebanon. LCEC provides her with a great deal of experience in the development of national strategies and implementation of action plans. She contributed in the preparation of the National Energy Efficiency Action Plan for Lebanon and the Energy Sector Response Plan. Furthermore, she was part of the technical support unit to the Central Bank of Lebanon in charge of the technical evaluation of green projects under NEEREA national financing mechanism. She is currently taking part in the implementation of solar PV projects around Lebanon with local and international partners. Reem joined the Future Energy Leader Programme in 2018 and is now taking part in shaping the local FEL programme of Lebanon.

Aanchal Kumar, India

Aanchal is an officer at Energy Efficiency Services Limited (EESL) and a Future Energy Leader at the Word Energy Council. She has over 8 years of experience in the field of sustainability and energy efficiency. She has been a pivotal member in the implementation of the the globally-lauded Unnat Jyoti by Affordable LEDs for All (UJALA) programme. She has also worked on research studies in the field of clean energy in collaboration with the World Resource Institute (WRI), UNFCCC, World Bank, Lawrence Berkeley National Laboratory (LBNL) and AEEE. As part of her international experience, she has worked on due diligence studies across energy storage and charging infrastructure for e-mobility. She is currently working on setting up Public Electric charging infrastructure across India in collaboration with various ministries and stakeholders across the government, for setting guidelines for operationalising public charging facilities by developing scalable and impactful business models.

FEL-100 | 2019

Daniel Gnoth, New Zealand

Dr Gnoth is a senior data scientist with Powerco, an electricity and gas distributor in the north island. With a background in consumer behaviour, his work focuses on the changing drivers of energy demand and the relationships between people and technology. Current initiatives include modelling the potential uptake and impact of electric vehicles and solar penetration on urban and rural networks, smart houses, tariff design and trialling a new national energy trillema index. Daniel is a board member of the Young Energy Professionals Network and member of Future Energy Leaders (FEL100). He also works closely with academic institutions through steering comittees and research collaborations and supervision. Earlier work included coordinating the Otago Energy Research Centre and collaborating on the Energy Cultures Project – an interdisciplinary research initiative. He has been a member of the IEA Task 24 ‘behaviour changers’ and completed a PhD on the potential for changing energy related behaviour during household mobility.

Arwa Guesmi, Tunisia

Arwa Works as a Senior Consultant at Deloitte Afrique and advises on public sector reform and energy projects, she is currently working as the Public lighting technical specialist for a 50M$ USAID project on decentralization and improving municipal services in 33 Tunisian municipalities. before joining Deloitte, Arwa worked for the fastest growing energy tech company in North America where she led the efforts of the innovation labs designing low cost, smart energy solutions for their product launches, she also conducted market research on clean energy emerging technologies notably lithium ion batteries, blockchain, electric vehicles and energy infrastructure fleets. She developed technical proposals for US government energy agencies like NYSERDA and DOE. Prior to joining the Clean energy sector, Arwa worked for the Oil and Gas industry for 5 years developing detailed engineering studies for onshore and offshore platforms and advising on use of technologies. Arwa has a Bsc in Electrical Engineering and a track record of engaging in though leadership forums and international network of social change makers.