I came across a recent article about the price of electricity and the costs associated with stowing renewable energy and it got me wondering: will storage turn electricity pricing into a nightmare?
Before getting to the crux of the issue, let’s first try to understand why we need to store electricity.
EARTH, WIND & FIRE
The bulk of the electricity today is generated from coal and natural gas in their various forms and nuclear fusions. Heavy-duty plants ensure reliable production.
Electricity’s core components are generated from renewable sources, such as sun, wind, rain, and tides. And one of the main characteristics of renewable energy is its dependency on external elements. For example, there is no sun at night, less in winter, winds can be too weak or too strong, rain can be random or absent. In other words, renewable energy production is not linear throughout the day and difficult to forecast beyond two weeks due to so many natural variables.
Renewable energy complements more and more legacy means of production, but mostly during the day when there is more sun. This is when we run into issues: traditional (and usually heavy-duty) electricity production is not flexible enough and wasn’t designed as a stop-start system. You can’t turn a coal plant on and off as the day goes by and depending on near-immediate demand fluctuation.
As a consequence, renewable energy can only represent a bigger part of the energy we produce and consume once we’re able to store electricity on a large scale and at a reasonable cost. We will get there at some point but it’ll be an incremental journey.
WHAT CAN IMPACT THE PRICE OF ELECTRICITY?
When we do reach that stage, the price of electricity – regardless of how it’s been generated – will need to be adapted to incorporate storage costs. This will be a turning point because modelling electricity storage pricing is tricky and depends on some important factors:
- The storage technology used: we should assume there’ll be a few: thermal storage, pumped hydro, lithium-ion, sodium-ion, flywheel, lead acids, capacitors etc
- The performance of the storage technology: efficiency losses of charges and discharges, reliability, output, running cost, system lifetime
- The pricing model itself: for instance, atemporal models, perfect and imperfect information models, strategic operations models.
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