Remi Eriksen, group president and CEO of Det Norske Veritas (DNV), is clear in the introduction to an Energy Transition Outlook published earlier this year.
"New power systems—systems where most of the electricity is generated by solar and wind—are poised to become the new energy reality for almost every country in the next three decades," says the head of the international accredited registrar and classification society.
The extent of this shift is apparent in the changing share of wind and solar on grids between now and 2050. Europe already had a respectable 24% share in 2023—and this will rise to 62% by 2050, hitting 50% by 2039, according to DNV.
In North America the 2023 share of wind and solar was just 16%, yet it is set to rise to 80% by 2050, crossing 50% in 2037. Globally, wind and solar made up 16% of the power mix in 2023 but will hit 50% in 2040 and 70% in 2050.
“By then,” says Eriksen, “the amount of electricity consumed globally will have doubled compared with today’s use.”
Demand is set to soar on the back of transport electrification, with DNV estimating that three quarters of the world’s vehicles could be electric by 2050—consuming 7 petawatt-hours of electricity a year.
Further demand will come from a switch away from fossil fuels for industrial processes and applications such as space heating and cooling. There will also potentially be massive demand for clean energy to produce hydrogen, with electrolyzers consuming up to 3.4 petawatt-hours of electricity a year. The question is how grids will cope.
Keeping the lights on will require new levels of grid flexibility, the Outlook claims. “The power system operates within a mosaic of timescales, each demanding varying degrees of flexibility to maintain stability and reliability,” it says.
“As the timescale extends to hours, the need for flexibility becomes more pronounced, particularly during periods of peak demand or renewable generation lulls,” it adds. “Short-term flexibility will increasingly rely on storage and international connections.”
More demand for longer duration storage
One technology is set to dominate future flexibility markets, says DNV. In its Energy Transition Outlook, “Li-ion batteries emerge as the primary source of flexibility worldwide,” it says. “These batteries will either be integrated with renewables or operate as standalone systems.”
DNV calculates that global lithium-ion battery capacity could hit 1.2 terawatt-hours (TWh) by 2030, then balloon to 27 TWh by 2050. For context, that is enough to absorb all the electricity produced in Slovakia in 2022.
“Intriguingly, a significant portion of this capacity will be directly integrated with renewable generation,” DNV notes.
The organization also points out that a shift is underway in major battery storage markets including China, South Korea, Japan and the US. “As storage capacity surpasses 0.5% of grid capacity, the focus is transitioning from frequency response management to broader applications such as price arbitrage or capacity provision,” it says.
Such applications are leading to demand for projects with longer average storage durations than previously.
While the standard hitherto has been for battery systems that can provide an hour or so of storage, the duration is now being extended to between two and four hours.
“In general terms, the storage duration at present is two hours for standalone utility scale Li-ion batteries, and with increasing penetration of these Li-ion batteries, their duration will increase to four hours,” DNV says.
“However, there could be situations where in the future, due to higher-than-expected variability in electricity generation and better price arbitrage opportunities, we have standalone Li-ion batteries with more than four hours of duration.”
Traditionally it has not been very cost effective to build lithium-ion battery systems that can store large amounts of energy if their full capacity will only be called upon occasionally. However, the economic viability of lithium-ion for long-duration storage is being helped by reductions in the cost of technology.
By 2030, DNV believes, utility-scale lithium-ion battery systems could operate at a levelized cost of less than $200 per megawatt-hour (MWh).
A separate analysis, by the financial advisory and asset management firm Lazard, shows lithium-ion battery costs are already close to this level, with a 100 MW, one-hour utility-scale system having a range of $222 to $352 per MWh and a four-hour system getting as low as $170 per MWh—or $124 with subsidies.
Revenue generation crucial for developers
Lithium-ion batteries could also provide flexibility services from within electric vehicles if a technology called vehicle-to-grid (V2G) takes off. One of the models developed for the Energy Transition Outlook, where 25% of EV battery capacity is available for V2G, shows up to around 5% of global grid flexibility coming from vehicles.
“EVs deserve special attention in this flexibility narrative,” DNV says. “More than just transportation mediums, EVs are evolving into crucial grid components. EV owners could potentially offer stored energy to the grid during high demand, opening a revenue channel that can reduce EV ownership expenses.”
Revenue generation will of course be even more crucial for the developers of standalone utility-scale battery projects.
The revenue model used in DNV’s base study incorporates what is described as a relatively conservative charging and discharging regime, in which energy arbitrage opportunities are only realized when there is the chance of a significant premium.
However, DNV also modelled a more aggressive regime, which it said might be expected to emerge as the power market matures, the penetration of variable renewables increases, and the storage market becomes more saturated.
The change in regime led to a general decrease in the price of electricity received by the battery operator, as might be expected when operators trade against lower power pricing differentials. However, it also created overall higher revenues, presumably because batteries were trading more often.
“This implies that storage operators in the future will be well placed to tailor their behaviour based on the power system characteristics and optimize their revenue based on their spatial market, while also playing the critical role of ensuring integration of new and renewable power technologies in the power system,” says DNV.
Publish date: 13 November, 2024