14.08.2017 | McKinsey: Opportunities and risks in battery storage systems

Enormous potential

Battery storage systems are currently on the rise. They are considered the veritable game-changer in the energy sector. That's also how Axpo sees it. Experts at McKinsey have assessed the opportunities and risks involved in using batteries and large-scale storage systems, and here are the results.

The utilities of the Canton of Zurich (EKZ) recently announced that they would put the "largest battery in Switzerland“ into operation in Volketswil ZH at the beginning of 2018. The battery has a maximum capacity of 18 MW and can store up to 7.5 MWh of energy. It will be used for grid stabilisation.

That indicates: The current trend in the energy sector is heading toward battery storage and decentralised energy systems. This could lead to major changes. Axpo intends to take on an active role and has just started a major innovation campaign and is hoping for lots of ideas.

Ultimately, there are many uses for batteries and different business models, as Christian Capello and Olivia Fürer from Axpo Corporate Development explain:

  • Large-scale batteries can be used to compensate peak loads, stabilise fluctuations or optimise the level of self-supply. Typical customer groups are large industrial companies, utilities, energy producers (wind, photovoltaic) or grid operators.
  • Smaller batteries can be used in private households to store surplus energy or for electric vehicles, often in combination with photovoltaic systems.
  • A further possibility is the pooling of several decentralised battery storage systems comprising all types of batteries. This offers energy companies completely new opportunities in combination with digitalisation, for example in the area of battery management and intelligent control of swarm storage systems, for marketing on the energy flexibility markets, or to stabilise the grid, as well as for the development of platforms for power communities that supply energy directly to each other on the local level.
Opportunities and ...

The consulting company McKinsey attempted to find out the commercial potential of batteries in the energy sector. The company assumes that battery storage costs will continue to decrease. In 2016, costs were at about 230 US$/kWh, and by 2025 costs could decrease to 160 US$/kWh. In comparison: In 2010, prices were at 1000 US$/kWh. As a result, McKinsey's assessment of the market potential for the use of battery storage systems in the next twenty years is high at 1000 GW.

According to McKinsey, detailed model calculations indicated that the use of battery storage systems for certain applications is already economically feasible today, for example, for load balancing, to balance irregular power occurring from wind and photovoltaic, to store/self-supply solar energy in private households, and on the control energy market.

Important for all these projects is that they are tailored individually and to very specific customer solutions. Key here - as Axpo has seen in the origination business - are good customer contacts.

... risks!

Battery storage systems also present risks for the energy sector. They could turn the current system upside. Companies would have to reinvent themselves. According to the consultants, if they do not, they could become the losers in this new market dynamic. In this context, McKinsey explicitly talks about a "disruptive development", meaning one that destroys current business models and spreads rapidly.

As a result, it must be clearly determined what the impacts of increasing battery and smart grid use would have on overall grid development and planning. They must all operate in parallel in order to prevent unnecessary investments in grid expansion, which would no longer be necessary under the new parameters.

You will find details on the study here: Study 1Study 2

Batteries: Cheaper and better
Batteries continue to become cheaper

Worldwide research on new battery technologies is going forward at a face pace. In parallel, the price for batteries continues to drop and the proportion of battery storage systems has more than doubled in the last five years according to the Forum Energiespeicher Schweiz (Energy Storage Forum Switzerland). According to Frank Krysiak, Professor at the University of Basle, battery storage systems in households and neighbourhoods are not yet profitable today. However, that will change in the next five years.

Prices for large-scale batteries will also continue to drop. By 2020, system costs for large electricity storage systems will fall by 41 per cent. This is the result of a study by market researchers at GTM Research in Boston (USA).

Researchers are working on numerous new ideas for better, more environmentally friendly and inexpensive batteries. A few examples: Empa (Swiss Federal Laboratories for Materials Science and Technologies) is working on concepts for the next generation of rechargeable batteries. The researchers are using a solid-state battery that does not contain liquid electrolytes so that they are non-combustible and non-explosive. The Paul Scherrer Institute is also working on the rechargeable battery of the future. The renown Frauenhofer Institute for Materials and Steel Technology in Dresden focuses on lithium sulphur batteries in its developments. More information on the battery of the future is also available here.

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