The rapid growth of wind and solar power comes with a known problem: it does not work all the time. Energy storage is a solution that investors should look to in 2021, even if it is not yet borrowable for equities.
Governments around the world have greatly increased their ambitions for carbon dioxide this year. There is great uncertainty about how their promises will be fulfilled, but almost all scenarios involve the massive construction of solar and wind farms. As their share in power generation grows, it will be important to bridge the times when the wind is not blowing and the sun is not shining.
The combination of wind and solar power can reduce the gaps, while the gas-fired power stations can provide an irreversible backup. The demand-side response agreements are also useful – when large power consumers promise to reduce their use during bottlenecks in exchange for lower prices.
However, even with all these methods, it is necessary to store excess electricity for use in a lean time.
Lithium-ion batteries similar to those powered by an electric vehicle are expected to provide most of the new storage capacity. Residential batteries can store power on solar panels on the roof, but it is so-called stationary solutions for wind and solar farms that are really needed. These are often custom key installations that provide between one and four hours of backup power. According to researchers at BloombergNEF, battery packs cost almost 90% less than in 2010 and will continue to grow cheaper.
Shared chemistry with the automotive industry is a mixed blessing. Large-scale production will help reduce costs, but it can also cause a stock crisis. Some Korean manufacturers have recently preferred vehicle batteries over stationary ones, pushing buyers to new suppliers in China. Expensive batteries and the cost of building sites also put stagnant utility scale solutions on a different path than car batteries.
In addition to short-term storage, there is a need for long-term solutions to cover days or even months. Pumped hydro – where excess power is used to pump water uphill into a reservoir, from where it can be released on demand in a hydroelectric plant – is a cost-effective and clean option. It currently offers the most storage capacity of utilities worldwide, but finding new sites is a challenge.
Green hydrogen is another solution that “stores” renewable energy by using it to run electrolytes that divide water into hydrogen and oxygen. It is less efficient than other methods, but produces gas that is transportable and versatile.
Safety issues have arisen over batteries and hydrogen, but they are unlikely to arise: fossil fuels and nuclear power are not without risks. Other storage options include heating volcanic rocks or molten salt, pressing air into containers, storing energy in flywheels and shifting weights in the air or on old mine shafts. Pilot projects have been shown to be effective, but most have not yet been commercialized.
One problem with the theme for investors is that it is currently a side issue for large battery companies such as LG Chem and Panasonic.
The same goes for manufacturers of electrical equipment, General Electric,
ABB and Siemens,
which makes power conversion systems for the storage facilities. Smaller, pure-play companies with promising technology have great uncertainty about how the market will develop.
Yet storage could soon become a more dominant feature of the green energy landscape, and the profits of some businesses. The renewable boom has endured the pandemic and even gained momentum. It may not be long before a technology that is crucial to its effective use begins.
Write to Rochelle Toplensky by [email protected]
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