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01

Sep 2014

How The Growth of Solar Power & Wind Power Makes Energy Storage More Competitive

01 September 2014 | Posted by Zachary

Energy storage has long been called the “holy grail” of the energy world. Nonetheless, a miniscule amount of grid storage is in place compared to the amount of power capacity and generation we have. Costs are coming down and storage is growing, but one of the big factors that will drive much faster growth doesn’t concern energy storage technologies at all.

solar panel wind turbine

Solar power and wind power are growing very fast. As I’ve explained before, high solar power capacity and generation in the middle of the day has driven down electricity prices at times that used to see some of the highest electricity prices. A similar story occurs with wind in the middle of the night.

What’s this got to do with energy storage? A lot!

If electricity generation is occurring at a time when the price paid for that electricity is low, or when it’s not needed at all and has to be “dumped” for nothing, energy storage can be useful for storing that electricity and then selling it later when electricity demand relative to supply is higher and more money can be obtained for that electricity.

Of course, the cost of the energy storage has to be lower than the difference between those lower prices and higher prices for this to make sense, but the more that high penetrations of solar and wind power drive down electricity costs, the faster energy storage becomes competitive. Or, put another way, the more that solar and wind power grow, the higher the price of energy storage can be to be "cost-competitive."

Let’s use some example numbers to further clarify these abstract statements. Imagine that this is the current situation:

* Solar power has driven wholesale electricity prices down to an average of $0.04 per kWh in the middle of the day.

* Later in the evening, the average wholesale electricity price is $0.08 per kWh.

* The cost of energy storage is sitting at about $0.05 per kWh.

* It doesn’t make sense to store electricity produced by solar power in the middle of the day and sell it later in the day when the price for that electricity would be $0.08 per kWh because the extra money the solar power plant owner could make is just $0.04 per kWh, while the cost of storing the electricity is $0.05 per kWh.

However, if the situation changes to the following, a profit can be made from storing some of the electricity you generate and selling it later:

* Solar power has driven wholesale electricity prices down to an average of $0.02 per kWh in the middle of the day.

* Later in the evening, the average wholesale electricity price is $0.08 per kWh.

* The cost of energy storage is sitting at about $0.05 per kWh.

The price of energy storage hasn’t changed in this case, but it has all of a sudden become more competitive.

This is all regarding the wholesale side of electricity. In the next article, I’ll delve into the similar but also in some ways more powerful retail side of this story.

Image Credit: Lew (tomswift) Holzman (CC BY-NC-ND 2.0 license)

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