Thursday, June 22, 2017 08.42AM / CFI
For more than a hundred years, electrical grids have been built with the assumption that electricity has to be generated, transmitted, distributed, and used in real time because energy storage was not economically feasible . This is now beginning to change. Battery storage at grid scale is on the verge of commercial viability. This is good news, not only because of the over one billion people worldwide who continue to live without access to electricity, but also because of the enormous contribution energy storage can make to greater supply and use of clean energy.
As clean energy generation becomes more mainstream around the world, its variability and supply fluctuation begin to impact the electricity systems for which energy storage is a key factor. Storage can help even out spikes and dips in solar and wind resource availability and enable energy distribution to be shifted from the time of generation to the time of peak demand. There is no well-defined threshold level of renewable energy supply needed to ensure nonstop supply but in most cases grid systems operators begin to invest in storage when 10% of their overall supply comes through renewable sources of wind and solar.
Over more than a decade, energy storage system vendors and battery manufacturers have been perfecting large-scale battery technology by extending its life cycle, toughening it to harsh environments, evolving management systems and, most importantly, continually driving down the cost. The industry has now reached a pivotal moment, with large storage systems becoming more competitive with other grid assets from a business perspective.
While we have observed a remarkable transformation of the market in the last couple of years, with energy storage growing to become part of the mainstream power sector in emerging markets, challenges remain for taking this to scale. Financing appears to be the most pressing of these challenges. Although energy storage costs are expected to continue decreasing in the years to come, their current levels remain relatively high, enough to restrict access to affordable financing across emerging markets. Innovative investment mechanisms, in coordination with improved industry standards and stronger government support, will be needed to unlock the transformative potential of energy storage.
The IFC has ambitious goals for creating and opening up markets for clean energy. Supporting energy storage technology is a strategic focus as a means of extending the reach and uses of renewable energy beyond intermittent power. Energy storage will be a key third component in IFC’s clean energy asset mix, in addition to generation and efficiency. The World Bank Group’s Scaling Solar Programme, which has made it easier and faster to procure solar PV in emerging markets, may be extended to energy storage once costs fall further. Storage technology is well-suited for a similar standardised procurement approach.
Our commitment to stepping up as an advisor, investor, and partner in this important sector has never been stronger.
Initially published in the World Bank’s Development in a Changing Climate Blog.
About the Authors
Author: Bernie Sheahan
Bernard Sheahan is Director of Global Infrastructure and Natural Resources at IFC, the largest global development institution focused exclusively on the private sector. He is responsible for IFC’s investments in power, transport, utilities, and extractive industries. He joined IFC in 1986, and has previously served as Director of IFC’s Infrastructure Advisory Department and IFC’s Director of Strategy.
He holds a Bachelor’s Degree from Dartmouth College and an MBA from Harvard University.
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