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Sat Jul 1, 2017, 05:39 AM

McKinsey: Cheaper batteries present imminent threat of load defection for utilities

McKinsey: Cheaper batteries present imminent threat of load defection for utilities
AUTHOR Peter Maloney@TopFloorPower
June 30, 2017


Dive Brief:

Continued energy storage cost declines present a growing threat of disruption for utility business models, a new study from McKinsey & Co. finds.

The study reports energy storage is already economical for many commercial customers at today’s prices and that with the paring back of incentives such as net metering in many states, combining solar power with energy storage is beginning to be attractive for some households.

Continued cost declines are moving energy storage from niche applications, such as grid balancing, to broader uses such as replacing conventional power generators for reliability, providing power-quality services, and supporting renewables integration, according to McKinsey.


Dive Insight:

Energy storage prices are falling faster than anyone expected, with battery costs down to less than $230/kWh in 2016 from almost $1,000/kWh in 2010, McKinsey noted.

The cost declines are being driven by a growing market for consumer electronics and demand for electric vehicles. In addition, companies in Asia, Europe, and the United States are building large factories to scale up for expected demand for lithium-ion batteries...
http://www.utilitydive.com/news/mckinsey-cheaper-batteries-present-imminent-threat-of-load-defection-for-u/446193/



McKinsey report in full:
June 2017
Battery storage: The next disruptive technology in the power sector
By David Frankel and Amy Wagner

http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/battery-storage-the-next-disruptive-technology-in-the-power-sector

<snip>

net energy metering (NEM) refers to rules that allow excess power to be sold back to the grid at retail rates; and feed-in tariffs, which are guaranteed price adders for renewable power, have played an important role in expanding the global market for renewables. In the US states that have implemented such rules, NEM has proved to be a powerful incentive for consumers to install solar panels.

Would you like to learn more about our Electric Power & Natural Gas Practice?
Although it has been helpful for solar, NEM also has put utilities under pressure. It reduces demand because consumers make their own energy; that increases rates for the rest, as there are fewer bill payors to cover the fixed investment in the grid, which still provides backup reliability for the solar customers. The solar customers are paying for their own energy but not paying for the full reliability of being connected to the grid. The utilities’ response has been to design rates that reduce the incentive to install solar by moving to time-of-use pricing structures, implementing demand charges, or trying to reduce how much they pay customers for the electricity they produce that is exported to the grid.

However, in a low-cost storage environment, these rate structures are unlikely to be effective at mitigating load losses. This is because adding storage allows customers to shift solar generation away from exports to cover more of their own electricity needs; as a result, they continue to receive close to the full retail value of their solar generation. This presents a risk for widespread partial grid defection, in which customers choose to stay connected to the grid in order to have access to 24/7 reliability, but generate 80 to 90 percent of their own energy and use storage to optimize their solar for their own consumption.

We are already seeing this begin to play out in places where electricity costs are high and solar is widely available, such as Australia and Hawaii. On the horizon, it could occur in other solar-friendly markets, such as Arizona, California, Nevada, and New York (Exhibit 2). Many utility executives and industry experts thought the risk of load loss was overblown in the context of solar; the combination of solar plus storage, however, makes it much more difficult to defend against.

...<snip>....

http://www.mckinsey.com/business-functions/sustainability-and-resource-productivity/our-insights/battery-storage-the-next-disruptive-technology-in-the-power-sector

Much more, including discussion of how stacking the value derived from multiple uses of the same system works to make behind the meter storage more enticing. It includes a chart showing various applications for battery storage and the general value of those uses...

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Reply McKinsey: Cheaper batteries present imminent threat of load defection for utilities (Original post)
kristopher Jul 2017 OP
Voltaire2 Jul 2017 #1
NeoGreen Jul 2017 #2
WhiteTara Jul 2017 #3
NickB79 Jul 2017 #6
kristopher Jul 2017 #4
customerserviceguy Jul 2017 #5
kristopher Jul 2017 #7
customerserviceguy Jul 2017 #8

Response to kristopher (Original post)

Sat Jul 1, 2017, 07:27 AM

1. As soon as the wall batteries make sense I'll go off grid.

Vermont is already subsidizing residential storage as an alternative to new capacity. The Republican states are trying to kill net metering, but residential storage will effectively undo that bullshit.

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Response to Voltaire2 (Reply #1)

Sat Jul 1, 2017, 07:37 AM

2. Same here...

...my electric bill has been about $10 electricity and $30 delivery for the last 6 months.

I declined installation of a solar array in part because it required continued connection to the grid and did not include a battery. Plus, prices for solar hardware keep dropping.

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Response to NeoGreen (Reply #2)

Sat Jul 1, 2017, 08:57 AM

3. Those are my thoughts.

it doesn't seem realistic to use solar without storage capacity.

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Response to Voltaire2 (Reply #1)

Sun Jul 2, 2017, 11:40 AM

6. Here as well

Our roof has the perfect slope, facing dead-south, and will need to be replaced in 5-8 years. I really want to have an array installed at the same time the roof is replaced to save money, but I don't want a battery bank in our damp, unfinished cellar or unheated garage. A PowerWall battery would be perfect for our needs if the price comes down enough.

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Response to kristopher (Original post)

Sat Jul 1, 2017, 01:28 PM

4. 10 Battery Gigafactories Are Now in the Works. And Elon Musk May Add 4 More

10 Battery Gigafactories Are Now in the Works. And Elon Musk May Add 4 More
Could a gigafactory glut lead to oversupply?

by Jason Deign
June 29, 2017

Gigafactory announcements have been trending in recent months, with plans for at least 10 new plants revealed in the last six months. Half a dozen have been planned in the last month alone.

In Germany, for example, the Daimler subsidiary Accumotive laid the foundation for a $550 million plant designed to take annual lithium-ion battery production from its current level of 80,000 units up to around 320,000.

<snip>

The most aggressive gigafactory plans, however, remain with the company that came up with the concept. Tesla’s Elon Musk has said he will announce “probably four” new gigafactories this year. One has long been slated for Europe, and another has been confirmed to be in the works in Shanghai, China.

The recent announcements follow at least five gigafactory proposals put forward for Europe before the end of last year, including facilities in Sweden, Hungary and Poland. Not all the new plants will focus on lithium-ion batteries, though.

More at https://www.greentechmedia.com/articles/read/10-battery-gigafactories-are-now-in-progress-and-musk-may-add-4-more?utm_source=Daily&utm_medium=Newsletter&utm_campaign=GTMDaily

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Response to kristopher (Original post)

Sat Jul 1, 2017, 01:40 PM

5. The solution

is to change the business model. Somebody will come up with a plan to deal with a world where consumers can store energy, instead of just being users of it. I used to work for a utility company, and their innovation powers are severely crippled. Not having competitors can sometimes do that to a business.

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Response to customerserviceguy (Reply #5)

Sun Jul 2, 2017, 01:04 PM

7. You're absolutely correct other than the verb tense...

1)
MICROGRIDS
You Don’t Have to Wait to Make Money on Microgrids
Several early adopters have found success in the microgrids-as-service business model.
by Julian Spector June 29, 2017
It may be neither a widespread phenomenon nor easy to achieve, but people can actually make money on microgrids today.
The localized, islandable networks of interconnected loads and energy resources have long eluded commercialization, in part because they are hard to commoditize and extract revenue from. The model of microgrids as service, though, has started to yield success, as three companies attested at GTM’s Grid Edge World Forum conference Wednesday.
Under the microgrid-as-service model, the customer doesn’t have to foot the bill for all of the expensive pieces that go into the system. Instead, a provider does that and extracts regular payments for the services desired.
Multiple value streams make it easier to pencil out, but one in particular stands out.
“Transmission and distribution deferral for us on microgrids is going to be huge,” said Jason Handley, director of smart grid technology and operations at Duke Energy...

https://www.greentechmedia.com/articles/read/you-dont-have-to-wait-to-make-money-on-microgrids

2)
Vehicle to Grid (V2G)
Building to Grid (B2G)

If you download a copy of the McKinsey report (link at bottom of OP) and look at exhibit 1 it gives the various income streams that can be tapped with storage. V2G and B2G exploit a number of those to varying degrees. The most profitable is probably frequency regulation.

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Response to kristopher (Reply #7)

Tue Jul 4, 2017, 12:59 PM

8. Glad to know

I was wrong on the tense! But my bet is, this was developed by someone who was not from a classic utility provider. I had all kinds of ideas when I worked for one, and they all died, in spite of costing nothing (in some cases) for the company to implement. My previous job with a semiconductor facility penalized me on my reviews for not coming up with ideas, this one just wanted me to keep them to myself.

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