For most of 2022, energy has been a hot topic as a result of its soaring cost. Russia’s invasion of Ukraine has caused a pinch point in the supply of energy commodities by reducing the former’s exports into particularly Western Europe. That’s had a knock-on effect, driving prices up globally.
But while this year’s energy market volatility has thrown a spotlight on the global economy’s exposure and vulnerability to any stress to fossil fuel supplies, it’s not a problem we were unaware of.
There are a number of well established issues with our reliance on fossil fuels, not least of which, it is now abundantly clear, is energy security. Their impact on climate change and air quality is another big problem to solve and the one that has been, at least until this year, at the top of the agenda.
There are other drawbacks to fossil fuels including the environmental impact of their extraction and transport and the fact they are in finite supply so will eventually be depleted; even if scientific and technological progress means that point is farther off than once thought.
Nuclear energy solves many of the problems of fossil fuels, is highly efficient and results in no harmful emissions. However, while nuclear will almost certainly play an increasing role in the global energy mix, it is controversial due to the potential danger posed if anything goes wrong; even if the safeguards built into nuclear power generation have vastly improved over the years.
There is also a lot of optimism around the progress being made by scientists towards being able to harness nuclear fusion. The technique inverts the atom splitting of traditional nuclear fission and replicates how the sun produces energy. In theory, mastery of nuclear fusion could one day lead to a limitless supply of carbon-free energy. But the science and technology are still experimental and there’s no guarantee if and when we can rely on it for our energy needs
Which, alongside next-generation traditional nuclear, leaves renewable energy sources such as solar, wind, tidal and geothermal as the main candidates to reduce our reliance on and consumption of fossil fuels.
Why is energy storage important?
While great strides have been made in renewables technology over the last few decades and, under optimal conditions, the cost of producing renewable energy can now even beat fossil fuels, there are weaknesses. Far from everywhere benefits from optimal conditions for producing renewable energy, or enough forms of it to provide the kind of stable mix that could replace fossil fuels; either entirely or in large part.
The inherent disadvantage of renewables is that they are limited by geography, capacity and reliability. The first point, and to some extent the second, also apply to fossil fuels but we have built up global infrastructure so they can be, at least under normal conditions, reliably transported to where they are needed. Storing and transporting fossil fuels is relatively cheap and convenient thanks to their concentrated nature.
If renewable energy could also be efficiently captured and stored in a concentrated format at its point of generation, it could also be cheaply and efficiently transported to where it is needed. At that point, the localisation of optimal conditions for its generation would no longer be much of an issue.
Electricity produced by burning fossil fuels can also be stored and, in theory, a significant leap forward in battery technology would help smooth out supply chain volatility for fossil fuels if enough could be stored and kept in reserve. That would reduce the energy security issues that come with fossil fuels and have been highlighted this year.
All this is why energy storage is seen by many experts as a ‘mega trend’, with developments in the technology destined to have a major impact on everything from geopolitics to the global and local economies over the next few decades. And why investors are now also keeping a close eye on the space. Any technology that will have that much influence on the world will inevitably also have huge commercial value.
The energy storage technology landscape
The Economist report, Beyond Batteries, published this summer starts with a brief insight into just one of the new energy storage technologies currently being developed it is hope will soon be commercially viable – CO2 batteries:
Most climate action centres on getting rid of carbon dioxide. Energy Dome, an Italian startup, wants to put it to use. Its “CO2 batteries” will store the gas under high pressure when electricity is plentiful; when electricity is needed the stored gas will be run through a turbine to generate some.
The advantage of using CO2 is that it can take on a dense sort-of-liquid form at room temperature; similar systems using other gases need low temperatures. The company has built a pilot plant in Sardinia and is moving up to a commercial scale. “I dream that our domes will become an icon of the energy transition,” says Claudio Spadacini, its charismatic boss, “like windmills and solar panels.”
The report focuses on new technologies for long-duration energy storage (LDES) it is hoped will be able to provide large amounts of electricity for hours, days or weeks in a cost efficient way. McKinsey consultant Godart van Gendt believes LDES are the key to being able to “go from 60-70% renewables on the grid to 100”.
LDES technology is not an entirely new development. Pumped-storage hydropower (PSH) facilities pump water into a high-level reservoir when electricity is abundant and cheap and then release it down to a lower level, spinning a turbine on its way, when it is scarce and expensive.
PSH is a significant power source in some regions that provide the right conditions for it but the current global capacity is 9twhrs of electricity that could be generated if all upper reservoirs were filled.
However, to meet global LDES needs, PSH generation would have to multiply by at least ten times. The industry thinks capacity can be increased by 50% over the next decade, a long way short of the needed 1000%. Most obviously good potential locations for PSH have also already been developed or are located too far from where the energy is needed. And project development timeframes are long, capital costs are high and objections on environmental grounds common.
Other LDES technologies, like the CO2 batteries being developed in Italy, are being invested in but are starting from a low base. Bloomberg’s 2021 Global Energy Storage Outlook expects non-PSH LDES capacity to still only be 1twh by 2030, even if that represents 20-fold growth.
Which brings us back to battery technology that can effectively capture and store power generated by renewables.
Lithium battery technology is currently leading the race here after a 90% decline in its costs between 2010 and 2021. Huge banks of lithium batteries already provide up to four hours of on demand backup power to California’s grid operator and winning proposals for a recent tender to increase that buffer to 8 hours were all anchored on lithium technology.
Most of the energy storage capacity that is expected to be added to global grids by 2030 will be, say experts, lithium batteries. However, there are concerns over the supply of lithium and most of the R&D in the space is being driven by the EV industry, which does not prioritise the kind of long-term storage with minimum leakage grids and backup infrastructure needs.
Lithium batteries alone, even considering more efficient future generations of the technology, are not expected to be able to meet future energy storage needs as the grid pivots towards renewables over the next couple of decades.
This is the need, and therefore opportunity, investors and innovators like Energy Dome are pursuing. Energy storage and LDES technology can be split into four main sub-categories:
- Mechanical
- Electro-chemical
- Hydro
- Chemical
The mechanical category is dominated by PSH but also includes alternatives that work on the same principle like lifting extremely heavy blocks with cranes when electricity is cheap and lowering them to generate electricity when it is scarce. Energy Dome’s CO2 batteries based on storing gas under pressure is also a technology founded on mechanics.
Electro-chemical batteries which store and release power thanks to voltage differences between various sorts of metals and chemicals have been around for a long time now. However, new designs and materials may offer further potential, especially aided by AI which is being used to analyse different materials and combinations in the search for new ideas.
New flow battery designs, which are not self-contained but hold chemicals in an external tank and pump them through the battery as it charges and discharges, are showing some promise. They are bulky and not suitable for consumer electronics or cars but could make a contribution attached to grids.
Thermal storage is also a direction drawing interest. For example, blocks of carbon and other materials can be heated to temperatures of up 2000C with the stored energy then used to heat steam or air in a pipe.
Chemical storage technology is based on using electricity to heat a chemical which can subsequently be used in a generator or engine. The most advanced example of this technology is the production of green hydrogen using electrolysis – running a current of electricity through water in a way that splits it into separated hydrogen and oxygen atoms.
If the electricity used is from a renewable source, the process is almost emissions-free and many experts see the creation of hydrogen from renewables, then stored for later use as a fuel, as likely to be a key component of the future low-carbon energy mix.
Over the coming decade and beyond, all of the energy storage technologies mentioned here will be expected to be improved upon immeasurably, as the progress of lithium battery technology and renewables generation has in the past decade. New technologies and techniques will also be developed and added to the mix.
Our ability to discover and harness energy sources, from fire to steam and fossil fuels, is arguably the foundation that has allowed all other technological progress. The pivot from fossil fuels to renewables is also set to define the next three decades at least.
The development of energy storage technology will, more than anything else, determine how successful that process is.
