Towards Net Zero Electricity: Deploying Long-Duration Energy Storage for Renewable Grid Systems

China Energy Storage Network: As the global energy system continues to innovate in the direction of green and low-carbon, emerging long-term energy storage technologies will become a key condition for the large-scale deployment of renewable energy.

Authors: Alberto Bettoli, Martin Linder, Tomas Nauclér, Jesse Noffsinger, Suvojoy Sengupta, Humayun Tai and Godart van Gendt

How to control greenhouse gas emissions and curb the trend of global warming has become a major issue that all countries have seriously considered. As we all know, the power industry is the "main force" in energy conservation and emission reduction. The power industry contributes one-third of the total global carbon emissions. At the same time, since the low-carbon transformation of other industries also largely depends on the growth in demand for renewable electricity (such as electric vehicles and residential heating), the power industry becomes even more important.

Most forecasts indicate that in order to achieve global temperature control goals, the power industry must achieve zero carbon emissions by 2040. It is encouraging that the global power industry is making great progress in reducing carbon emissions by adopting new energy technologies, mainly wind and solar power, to gradually replace fossil fuel power generation.

However, as the proportion of renewable energy in the power structure continues to rise, new challenges are also coming. In particular, the intermittent and volatile nature of new power sources and renewable energy generation have caused a series of structural pressures on existing power generation and transmission and distribution infrastructure, including possible imbalances in supply and demand, changes in transmission methods, and increased potential instability in the system.

A new industry report from McKinsey explores and analyzes this in depth, pointing out that long-duration energy storage (LDES) is one of the viable solutions. The report was written by the Long-Duration Energy Storage Council (LDES Council), a newly established organization led by the CEO. Based on more than 10,000 sets of cost and performance data from the technical member companies under the council, the report points out that if a long-duration energy storage market can be established in a timely manner with government support, the energy system can operate smoothly even if renewable energy accounts for a large proportion of the energy system, thus making a significant contribution to the low-carbon transformation of various industries.

Long-term energy storage includes a range of traditional and cutting-edge technologies, such as mechanical energy storage, thermal energy storage, electrochemical energy storage, and chemical energy storage. After optimized deployment, these technologies can be used for long-term energy storage and can be scaled economically and efficiently to ensure power supply for days or even weeks. [1] In addition, long-term energy storage can also increase the flexibility of the power system, that is, storing electricity when there is an oversupply of electricity and releasing it when needed, thereby alleviating the contradiction between supply and demand and regulating supply and demand fluctuations. It can be seen that long-term energy storage can not only integrate energy systems (including electricity, thermal energy, hydrogen energy, and other forms of energy), but also give them flexibility (see Figure 1).

Currently, various new long-duration energy storage technologies, although they have their own advantages in terms of technical maturity and market feasibility, have attracted unprecedented interest from governments, utilities and transmission operators, and investment in this field has grown rapidly: more than 5 gigawatts (GW) of installed capacity and 65 gigawatt-hours (GWh) of energy storage capacity have been announced to be under construction or put into operation.

However, all this is just the beginning. McKinsey's modeling research results show that by 2040, the global installed capacity of long-term energy storage is expected to reach 1.5 to 2.5 terawatts (TW), which is 8 to 15 times the total installed capacity of energy storage systems currently deployed worldwide. Similarly, by 2040, the long-term energy storage industry can deploy 85 to 140 terawatt hours (TWh) of energy storage capacity and store up to 10% of total electricity consumption. This corresponds to a cumulative investment of US$1.5 to 3 trillion (see Figure 2).

McKinsey estimates that by 2040, the world can achieve 1.5 to 2.3 billion tons of carbon dioxide equivalent emissions reductions per year through the deployment of long-term energy storage technology, which is about 10% to 15% of today's power industry emissions. In the United States alone, by 2040, long-term energy storage can completely decarbonize the power system and reduce total costs by about $35 billion per year.

The above data not only shows the multiple uses of long-term energy storage technology, but also its core role in balancing the power system and improving its operating efficiency, including improving power system stability, improving corporate power purchase agreements, and optimizing energy for industries that use long-distance transmission or unstable power supply. However, so far, it is expected that long-term energy storage technology will be mainly deployed in core areas such as peak shaving and valley filling in large-capacity power systems, capacity supply, and transmission and distribution (T&D) system optimization.

A key advantage of long-duration energy storage is that it has a low marginal cost for storing electricity: it decouples the amount of electricity stored from the rate of charge and discharge; it can be widely deployed and expanded; and it has a relatively short lead time compared to upgrades to the transmission and distribution grid. This makes it more competitive than other energy storage options such as lithium-ion batteries, dispatchable hydrogen energy equipment, and pumped storage hydropower, and has an economic advantage over expensive, time-consuming and labor-intensive grid upgrades. In fact, there is evidence that in many applications, long-duration energy storage may be the most cost-competitive solution for energy storage lasting more than 6 to 8 hours.

Therefore, although new technologies for long-duration energy storage are still in their infancy, their deployment is likely to accelerate rapidly in the coming years. The McKinsey model predicts that in the scenario of accelerated decarbonization, by 2025, the installed capacity will reach 30-40 GW and the storage capacity will reach 1 terawatt-hour.

Many countries with ambitious climate goals hope to achieve a 60% to 70% market share of renewable energy in bulk power systems between 2025 and 2035, which will be an important milestone for long-duration energy storage technology. These countries may include the UK, the US and many developed countries that have made "net zero" commitments before the 26th United Nations Climate Change Conference in Glasgow in November 2021. The widespread popularity of renewable energy will promote the widespread deployment of long-duration energy storage technology as a lowest-cost and flexible solution.

To achieve these goals, the cost of long-duration energy storage technology must be significantly reduced. Fortunately, forecasts from Long-Duration Energy Storage Council member companies show that significant cost reductions are achievable and consistent with the learning curve of emerging new energy technologies (such as solar photovoltaics and wind power generation) in the past few years. In turn, the extent of cost reduction will depend on improved research and development, increased deployment volume, and the realization of economies of scale in manufacturing. Similarly, the scale of deployment of long-duration energy storage technology is closely related to the progress of carbon reduction in the power industry and the deployment of different renewable energy generation.

This requires decisive government action in the short and medium term, including reducing costs, mobilizing the necessary investment capital, and building a market ecosystem that enables investors to earn attractive returns to kick-start the long-duration energy storage market. Policymakers can help in three ways:

Long-term, systemic planning, including clear targets for the share of renewable energy in the electricity mix and the infrastructure needed to maintain a stable power system, is critical to underpin investor confidence, and work is already underway in states such as California in the US and New South Wales in Australia.

In the early deployment stage of long-duration energy storage, active government support will help investors avoid market risks and expand the market scale. Special support for large-scale demonstration power plants will ensure that these technologies can fully realize their potential in terms of technology and cost reduction, and test new market mechanisms. The United Kingdom and the United States have already carried out relevant work. In early 2021, in order to accelerate the commercialization process, the British government launched a long-duration energy storage demonstration competition with a total investment of US$100 million. Currently, the U.S. Department of Energy is overseeing the implementation of a US$1 billion plan ("Earthshot"), which aims to reduce the cost of long-duration energy storage systems with a storage time of more than 10 hours by 90% within 10 years.

Building supportive market mechanisms, such as capacity mechanisms and policies that capture the full value of long-duration energy storage, would allow investors to earn a return on their investment within an acceptable risk range. This is not currently possible because electricity markets are mostly short-term, and multi-day and multi-week market signals are much weaker than single-day market signals. Moreover, carbon emission reduction compensation programs are either non-existent or insufficient to compensate investors for their additional contributions. However, some market leaders, such as California and Arizona in the United States, are setting an example for the industry - they have enacted laws designed to meet the needs of long-duration energy storage. Among them, Arizona has launched an incentive program to encourage the research and development of energy storage technologies that can provide longer continuous discharge times by providing incentives for energy storage technologies with continuous discharge times of more than 5 hours.