More power to the low carbon global grid

The market for batteries to support global power grids is set to surge

May 22, 2017

low carbon grid

Lithium ion (Li-ion) batteries (many of which employ nickel) will play an integral part in supporting power grids in a global shift to become cheaper and cleaner.

This move is largely due to a significant increase in renewable energy resources, primarily wind and solar. In the US, wind and solar made up more than half of the new generating capacity over the past three years. Asia and Europe have invested billions in renewables and are on the way to creating a trillion-dollar sustainable power grid.

The problem is, the wind doesn’t always blow, and the sun doesn’t always shine. That’s why batteries are being recruited to help stabilise our complex and far-reaching electricity infrastructure.

What’s in storage?

Recent numbers from the Energy Storage Association showed that energy storage is increasing rapidly. In fact, total US installation almost tripled in size in 2016. But that’s just the beginning.

In 2017, US storage numbers are expected to increase by nearly another 50%. Three installations in California in January of this year—all lithium ion and containing nickel—were equal to 15% of all US storage installed last year.

Other countries are also pushing stationary storage—Li-ion batteries—into their grid quite rapidly. Korea Electric Power Corporation, for example, is planning on 500MW of NMC batteries for fast-reacting storage facilities for grid stability. Japan has recently injected hundreds of millions of dollars of storage projects into its power grid as well.

Economies of scale make Li-ion the dominant technology

This is a result of both the long history of Li-ion in the market for consumer electronics and the enormous recent scale of investments in Li-ion manufacturing—much of it devoted to supporting the electric vehicle (EV) industry.

Tesla’s famous Gigafactory in Nevada, for example, is expected to manufacture 35,000 megawatt-hours (MWh) by 2018.

That single US factory will produce the equivalent of all the lithium ion batteries produced worldwide just four years ago. Approximately one-third of Tesla’s factory output will be devoted to electric grid storage.

Tesla is not alone, however, and it may not even be the biggest kid on the Li-ion block.

China is in the driver’s seat

China will drive global economies, pushing prices down and demand up.

The growth trajectory for battery grid storage is going to be very steep. China already owns the lion’s share of global production.

If China can do with batteries what it has done with solar modules, it may dominate the market. By promoting electric vehicles (EVs), the country is driving demand for Li-ion batteries, resulting in manufacturing economies of scale. Some analysts expect that increased volumes and supply chain efficiencies will reduce costs as much as 40% in the next year.

The biggest Chinese company in the sector, Amperex Technology, tripled its Li-ion battery output over the past year and has overtaken LG Chem, one of the world leaders. At production of roughly  8,000 megawatt-hours (or 8-gigawatt hours – GWh) today, it plans to burgeon to 50GWh by 2020 (or half again as large as Tesla).

Good news for nickel

This is good news for nickel demand in the long run. Global suppliers of Li-ion battery cathode material are increasing production capacity of nickel-manganese-cobalt (NMC, with a typical ratio of 33% for each of the elements).

Much of this output will be devoted to EVs, but stationary grid storage will have its place as well. In grid storage, the NMC technology is rapidly gaining traction over other competing lithium technologies such as lithium ion phosphate and becoming the cathode of choice for developers.

A world of possibility

Stationary grid storage is still in its early days, and future projections as to the size of the market vary widely. For the visible future, EVs will drive new demand for lithium ion batteries and the nickel contained inside them.

The role of stationary energy storage will be quite significant in the very near future, as costs fall and business models get refined. It is quite likely that stationary storage will complement the millions of solar arrays already on people’s houses. At the grid level, leading storage companies such as AES Energy Storage already see Li-ion storage as cost-competitive with new peaking generation plants and a significant part of the future global grid architecture.

What is clear, is that nickel will play a critical role in the low-carbon power grid of the future.

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