Tesla recently announced they will supply 80MWh of PowerPacks to Southern California Edison.
Upon completion, this system will be the largest lithium ion battery storage project in the world.
This announcement prompted a lively discussion on Hacker New about the competitiveness of Lithium ion battery storage for supplying power at peak load and storing energy when spot prices are low or negative. Long term, I am confident stationary battery storage will replace peaker plants and many other forms of energy storage such as pumped hydro or compressed air. The question I am trying to solve is when will prices be competitive?
The cost of batteries is falling at an accelerated rate, as indicated by Tony Seba (below). JB Straubel has also indicated that the cost of batteries is falling at a new aggressive curve.
From around 1995 through 2010, energy storage costs had fallen by about 14% a year … that rate sped up to 16% a year… Tesla’s Gigafactory has now increased the rate of price decrease even faster than the 16%…. It is estimated that the Gigafactory, by doing nothing more than moving all of the supply chain arms under a single roof, has decreased the price of battery packs by 30–50% — while doubling the global volume.
This Lazard report from November 2015 indicates on page 9 the cost of gas peaker plants currently ranges from $165 — $218 $/MWh over the lifetime. I assume this could vary with gas prices. Whereas they estimate Lithium ion battery at $321 — $658 $/MWh over 5–15 year lifetime.
With regard to the value of storing energy, it will likely increase as spot prices increasingly go negative. This trend is driven by more renewables in the energy mix.
Lithium ion battery storage also has other advantages over gas peaker plants. Lithium batteries can be more easily expanded. And as Bloomberg notes, they are being deployed much more quickly.
the real significance of the deal is the speed with which lithium-ion battery packs are being deployed.
“The storage is being procured in a record time frame,” months instead of years, said Yayoi Sekine, a battery analyst at Bloomberg New Energy Finance.
The price for PowerPacks recently dropped by 5% and 19% on inverters.
At the time, the Powerpack was being quoted at $470/kWh, but now we learned that Tesla brought the price down to $445/kWh.
At larger volumes Tesla negotiates. Goldman Sachs estimates the cost to be around $200/kWh back in February 2016 and they’re targeting $100 per killowatt-hour per pack.
I am curious how these numbers relate to the Lazard model.
Elon Musks predicts the market for stationary storage is equal to the auto market. My estimation based on all this data is that stationary storage will be increasingly competitive and will reach an inflection point in 2018 and will be the default choice based on cost by 2020.
Please comment if you have any further information or research.
