Energy storage solutions are essential for the stable and reliable availability of energy. With the increasing importance of renewable energy sources on the electricity sector, they are needed to balance energy supply and demand. As a result, the topic “energy storage” was the focus of the conference “Innovations in Storage Technology”, presented by the KPMG Global Energy Institute EMEA on 14 July in Berlin. Experts from Germany and Europe discussed the most recent findings and future perspectives in battery storage technology at the event. The most urgent issues: How are battery systems currently positioned in comparison to other flexibility options? Which markets and potentials are relevant for battery storage systems and what are the possible applications of this storage technology? The conference was divided into two blocks and delivered answers: “Battery storage technologies of the future” (national) and “European View on Battery Storage” (international, web-based). This report summarizes the findings of the conference.

1. Battery Storage Technologies of the Future (national)

Status of battery technologyThe conference began with a speech on the status of battery technology by Peter Hussinger of the Fraunhofer Institute for Chemical Technology (ICT). He provided participants with an overview of the different battery technologies lead-acid, high-temperature batteries (NaS, NaNiCl), lithium-ion and redox-flow, including their advantages and disadvantages and their development opportunities.

Application determines optimal cell chemistry of the battery There are a range of different cell chemistries for Li-Ion batteries. The relevant application determines the choice of cell chemistry, whereby no single technology is superior to the others in all of its properties, which include for example cost, fast charging capacity, safety, specific output and cycling capability. The most important Li-Ion battery cell type 18650, whose use previously included laptops, is an extremely cost-effective option since 2012. This is particularly due to an overproduction. A major advantage of Li-Ion batteries is their flexibility regarding dimensions and cell size and charging time, particularly in comparison to lead-acid batteries. As is the case for high-temperature batteries, there is also the risk of fire. The required cooling and air conditioning for stationary batteries has a negative impact on the overall efficiency.

Innovations in Storage TechnologyConference presented by the KPMG Global Energy Institute Europe, Middle East and Africa (EMA) on 14 July 2015 in Berlin

Conference Report

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Separation of storage and conversion in redox-flow batteries brings high flexibilityVanadium-vanadium redox-flow batteries (VRFB) are currently in the commercialisation phase. The decisive advantage of RFBs in comparison to conventional batteries is the separation of storage and conversion. Storage and conversion takes place in the cell of the battery. In order to double the capacity, the battery cells must also be doubled. The same applies for doubling the performance. RFBs consist of stacks and electrolytes. In order to double their capacity, only the tank needs to be doubled. For doubled capacity, twice the amount of cells are required. This enables high flexibility in battery design, depending on the application.

Lithium-ion technology is currently the primary battery technologyThe largest share of power storage solutions is claimed by pumped-storage power plants with 142 GW installed power versus 0.6 GW battery power and 1.4 GW compressed air storage and flywheel generated storage. Installed power has, however, experienced a significant increase since 2010. Stationary battery storage solutions with higher performance can currently be found particularly in North America, Europe, China and Japan. The categorisation of the installed stationary battery storage power in the various technologies has drastically changed in recent years. Although lead-acid battery projects were built almost exclusively up into the 1990s, these were mixed with other technologies (sodium and nickel-based battery storage systems and flow batteries) starting around 2000. In about 2008 the further development of lithium-ion technology began, which currently accounts for the largest share of planned battery power according to an American energy storage database.

Battery storage solutions—business model of the future?“Energy Transition Doesn’t Need Storage” was the headline run by newspapers when the AGORA Energy Transition study was published. Many other studies also reach the conclusion that storage systems will be required no sooner than 2030. According to Dr. Jens Kanacher, Head of Energy Systems and Storage Solutions at RWE AG, profitability analyses by RWE have shown that short- and medium-term central energy storage solutions are not commercially viable, with the exception of applications for the provision of primary control power in special situations. Even on a regional level, energy storage solutions to compensate local distribution grid overloading and to eliminate voltage problems are only economically viable in particular cases in the short- and long-term. For example, RWE is installing a 1 MWh battery storage system to support the grid in Wettringen that will begin operation in late summer 2015. Generally, grid development would be the more cost-effective alternative here.

Decentralised energy storage profitable on the microeconomic level Decentralised energy storage systems for increased private consumption are already currently profitable on the

microeconomic level in some cases, although they are significantly more expensive as central storage solutions from an economic perspective. The profitability is based on the private consumption advantage (avoidance of grid fees, taxes and levies) and therefore rises and falls with the regulation. Furthermore, decentralised energy storage solutions for aggregation and intelligent coordination can provide additional services while keeping marginal costs low. This development of decentralised capacities can further reduce expected future demands on central storage systems, so that in the extreme case there may no longer be a need for regional and central storage systems in the future. This development is, however, highly dependent on the regulatory framework conditions and can change at any time. In addition, batteries are not able to take on any long-term seasonal storage. For these reasons, RWE also conducts research activities on central energy storage systems, like compressed air storage as an option for daily storage and power-to-gas systems as an option for long-term storage.

Technological development and cost perspective Torsten Buddenberg, Head of Product Development at Mitsubishi Hitachi Power Systems Europe (MHPSE) GmbH, assessed the use of storage solutions as arbitrage strategy as currently not worthwhile. In the future, however, a strategy like this could be profitable. But there is a great difference of opinion about the development of electricity price fluctuations. Assuming that the target of generating 80% electricity from renewable energies by 2050 is achieved, new storage systems will be built to store the resulting approx. 6000 hours of overproduction. It would not make good economic sense to leave this electricity unused.

Liquid Air Energy Storage—profitable only from a certain volume and for special applicationsOne technology that could be implemented in the future is Liquid Air Energy Storage (LAES). MHPSE developed this technology in cooperation with Linde. As a technical procedure, LAES is similar to compressed air storage, whereby the advantage lies in the higher energy density by a factor of 10. If LAES is combined with a gas turbine, a hybrid system is created that does not only constitute a storage solution. This type of system would have been inferior to battery storage systems in arbitrage trading 2013. This technology will only be profitable starting at a certain volume and for other applications.

Power-to-fuel—methanol more economic than methane productionA further technology, which being pursued by MHPSE, is power-to-fuel. The production of methanol with this type of system is more economic than the production of methane using power-to-gas, since methane is worth significantly less and requires more hydrogen, and therefore more electricity. Power-to-fuel uses surplus energy, avoids downregulating renewable energies and saves fuel launching costs for conventional energy generation. In addition, the sale of methanol generates a supplementary source of income. In the steel industry, methanol

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production can be profitably integrated. This results in interesting business cases in ranges of 50-100 MW. MHPSE is currently examining application cases of this technology for some potential customers. Methanol plants are currently being built worldwide, due to the growing demand and increasing methanol prices, whereby the price for “green” methanol (from renewable sources) is still higher than for “black”.

Discussion: Utilisation of “surplus energy”Will there be strong competition for the utilisation of “surplus energy”. Torsten Buddenberg concluded that this would not be the case, since there would be no single winning technology, but rather the local application of different solutions. Industrial and residential applications would thereby exist side by side. In contrast, Dr. Jens Kanacher expects that the generation from renewable will in part exceed the current demand, but that the foreseeable volume will not be significant. This should therefore be considered as application potential. In addition to storage, there are potential uses in the electromobility sector or for heat generation. The exciting challenge here is actually the practical coordination of the different applications.

The energy world of the future: centralized or decentralized structure? Whether the energy world of the future will be centralized or decentralized is still open for discussion. Social will, which will be manifested in regulations, will determine this. Due to the current lack of a regulatory framework on a European level, many projects waiting to be launched will be held back. In addition to the regulatory framework, the profitability of many projects is extremely dependent on the ratio of reserve capacity to provided primary control power.

2. European View on Battery Storage (international, web-based)

Battery storage systems and economic viabilityHow are batteries positioned in comparison to other flexibility options? Which markets and potentials are relevant for battery storage systems and what are the possible applications of this storage technology?

According to Prof Bemtgen, the problem with storage today is that it does not make economic sense. This must be changed in the very short term if Europe intends to dramatically increase the share of renewable energy generation. The goal is 50-60 percent renewables by 2050. So the key buzzword today is flexibility – on the generation, transmission, distribution and demand sides. A fully integrated approach is necessary where all of those four sides are taken into account, otherwise the system will always be suboptimal.

New, future-oriented business cases for storage solutions are importantUsing the current dilemma of pumped hydro storage (PHS) systems, Prof Bemtgen demonstrated the need for new business cases in the field of energy storage systems. Although new PHS plants are being planned and people call for more energy storage systems to integrate renewables, many PHS plants cannot be operated profitably due to their currently failing old business case of balancing energy demand and energy generation of huge inflexible nuclear power plants. A core subject of the European Commission’s research project “Horizon 2020” is to generate a large number of innovative, integrated projects on storage systems where the projects also have to develop a business case. The European Commission selected seven highly innovative projects from that pool, which will be published in the next few weeks. Between those storage projects and ten smart grid projects, a cooperation has been established that includes a total of more than two hundred organizations throughout Europe, who are now collaborating on those problems. The aim is to facilitate quick and successful commercialization and to develop different business cases for the integration of energy and storage systems.

On 14 and 15 September 2015 the European Commission’s “Horizon 2020” information days will take place in Brussels and there will be specific information days on 2 October 2015 for Grid and Storage and 6 November 2015 for Smart Cities.

How low can we go?—A European view on cost potentials of stationary batteriesProf Dr. Michael Stelter, Deputy Institute Director, Fraunhofer Institute for Ceramic Technologies and Systems IKTS, focused on how to turn the current battery storage business case, which is unsuccessful in regard to battery pricing, into one that might work in the future.

TWh dimensions of storage capacity needed in the future – materials for batteries have to be cheap and abundantDue to the growing share of renewable energy, in the long term we are talking about huge dimensions of storage capacity needed in the range of several 100 GWh to TWh. Therefore, materials for batteries have to be cheap and abundant and should not include any rare earth metals or precious metals. Furthermore, Li-ion options are limited for Europe because a mature Asian market is established in that sector. Consequently, sodium, sulphur, iron, nickel, zinc and chlorine are the elements that should be chosen to build, for example, NaS, NaNiCl, Zn/Air or next generation Na batteries, according to Prof Stelter.

Promising cost potential analysis: 32.42 EUR/kWh for the raw materials of a sodium batteryA cost potential analysis conducted by Fraunhofer IKTS in 2015 establishes a price of 32.42 EUR/kWh for the raw materials of a sodium battery. That sounds very promising compared to the current cost of a lithium battery cell of about 200 EUR/kWh, with no real cost reduction potential. In addition, the price forecast for sodium batteries is lower

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than the forecast for lithium batteries. However, the cell is only one part and the total system costs have to be taken into account. The price target for such a system is 400 EUR/kWh. Below that price, a valid business case could be established in the long-term.

Low total battery system costs with modern production technologyThe pertinent question is how to get from about 32 EUR/kWh raw material cost to about 250-300 EUR/kWh battery system cost. Prof Stelter’s answer: Modern production technology throughout the whole process, including the areas of testing and quality control, to reduce production cycle time. According to a comprehensive cost model developed by Fraunhofer IKTS, the cost for NaNiCl battery cells with 10-1000 kWh capacity can be below 55 EUR/kWh and about 250 EUR/kWh total system cost and the cost for NaS-batteries with MWh capacities and above can be brought down to less than 25 EUR/kWh for the cell and about 150 EUR/kWh for the whole system, providing that Europe leverages its core competencies in the areas of inorganic functional materials, world class production technology / machinery and in-process monitoring / quality control (“industry 4.0”). Ultimately, Prof Stelter concluded that it is possible to drive down prices of batteries significantly with modern European production technology and the use of cheap materials to beat Asian lithium batteries by a factor of two. In Europe, the technology exists and the growing share of renewables, especially in Germany, presents a huge driver and chance for large-scale battery production.

Energy storage use cases in an international contextChristian Mayr, head of Quality, Organization and IT at Sonnenbatterie GmbH, outlined that there are different drivers of storage technologies in different markets, for example grid parity of renewables, rising and volatile energy prices and unreliable power supply. There are three main factors which determine an interesting market for stationary battery storage systems, namely its size, the level of sunshine and the average price of electricity.

Self-consumption, peak shaving and back-up power solutions are the main applications for batteriesAside from the application of batteries in combination with solar power in the residential segment to achieve higher self-consumption rates, batteries can be used in the commercial sector for peak shaving to cut down energy bills. A third use case is back-up power solutions to lower power outages and enhance the reliability of a power system. Furthermore, small, decentral batteries can be pooled and controlled via the Internet to enable a quick response to voltage increases that would lower the need for higher voltage grids, particularly in the outermost parts of the grid.

Discussion: Standardization of container-size batteriesThe current Technology Readiness Level (TRL) of sodium batteries is that the cheap batteries are currently at TRL four and that the Fraunhofer IKTS hopes to increase this to

TRL six within the next two to three years, once the funding that is currently being negotiated with the industry is provided. An Italian company is already on the market with those kinds of batteries (consequently, they are at TRL nine) but those are not in the price range Fraunhofer wants to achieve. The idea to develop standardized, plug-and-play, container-sized options which can easily be transported is exactly what Fraunhofer IKTS has in mind. Half an oversea container would have the capacity of about 250 kW.

Lithium vs. sodium batteries—using the appropriate technology for each applicationSodium batteries are operated at elevated temperatures of 250-300°C, which means that the container would be hot inside. That does not present a problem though, due to very good insulating materials that keep the battery hot with the outside temperature being irrelevant. There is no need for active heating or cooling once the battery is heated up to working temperature and in operation, because it then remains at its temperature. This is not the case for lithium batteries, which need active temperature regulation. This does not pose a problem for home applications, but it is relevant for large external systems. Following up on that, the question arose whether sodium batteries are appropriate for primary and secondary reserve markets. Prof Stelter replied that this was not the case, saying that he would recommend lithium batteries for the 15 minute time range, but sodium batteries would be the better alternative for storage needs of five hours and more. For each different application, the most appropriate technology should be used.

Prof Stelter’s technology plan in line with the technology projections of the AGORA study Regarding the controversial statement of the AGORA study that renewable energy (today) does not need storage, Prof Stelter agrees with AGORA in that storage in the GW-range is still too expensive. Although the AGORA study also finds that we will need large-scale storage by 2020 or 2030. That is in line with Prof Stelter’s technology plan. At the moment, as mentioned, they are at TRL 4 with their sodium batteries but in a couple of years they will have developed batteries in the GW-range ready for commercialization. He added that batteries can only contribute to the stability of the grid and to the integration of renewables. They are not the only solution.

Batteries—an emotional product in the residential marketProf Bemtgen addressed the question of a business model for creating/selling battery security. Batteries are a very emotional product that can be used to gain independence from the utility companies and from changing electricity prices. However, up to now, companies do not differentiate between selling to men and women. There is a significant difference here; the so-called “women’s acceptance factor”. The product has to be user-friendly and receive approval by women.

The self-consumption rate that Sonnenbatterie’s battery systems achieve in combination with solar PV depends on the size of the PV plant, but on average the rate is about 60 percent. An economically best suited system would reach

Contact

Michael SalcherPartner, Chair KPMG Global Energy Institute Europe, Middle East & Africa (EMA)

T +49 89 9282-1239msalcher@kpmg.com

www.kpmg.de

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55-60 percent, but many customers are oversizing to maximize independency rates. Prof Bemtgen drew the conclusion that system operators could lose up to 40 percent of their current market share in that segment. That is why some distribution system operators direct strong lobbying efforts towards the prohibition or strict control of self-consumption. Self-consumption is forbidden in many Member States. The European Commission is preparing a communication on the subject—it might be a rather hot communication—which will come out in autumn.

Today seven out of 28 Member States allow self-consumption—European Commission wants to change thatToday, only seven out of 28 Member States allow self-consumption of energy, in some countries it is completely forbidden and in others legislation is not clear. The European Commission wants self-consumption to be allowed and to be promoted to the greatest possible extent and with the application of consistent rules for every country, so that consumers are empowered and that the benefits are shared in a fair way between DSOs and citizens.