• Blackouts due to climate change related events are becoming commonplace.
  • Energy storage can provide grid stability and eliminate CO2 but it needs to be more economical to achieve scale.
  • We explore the technologies that can expedite deployment, ensure safety and boost ROI supporting a faster race to zero.

In September 2017, Southern Australia suffered a state-wide blackout, sparking energy security debates around the intermittency of renewable energy. The solution came via a tweet from Elon Musk: “100 days from contract signature or it’s free”. Musk was referring to a 100MW battery storage system that would be installed quickly and help alleviate the pressure on a grid with high generation but low transmission and distribution connections. Tesla went on to successfully deliver the battery storage system, with a further 350MW procured since then, bringing the total to 450MW. However, in July 2021 a fire incident during storage system commissioning highlighted the importance of testing, monitoring and strict safety controls of these systems.

Much like Australia, many other nations experience such power outages, including the US and Indonesia, with dire consequences for business activities and compromising key infrastructure, such as transportation and telecommunications. Battery Energy Storage Systems (BESS) can play a critical role in preventing the human and financial cost of large-scale power outages by plugging the intermittent renewable energy supply and alleviating transmission and distribution (T&D) congestion, a major cause of blackouts. This allows for grid independence from renewables and flexible storage, reducing peak demand and increasing grid stability.

Renewable energy storage also reduces reliance on fossil fuels by facilitating system-wide energy orchestration through peak-shaving, integrating distributed energy resources and reducing carbon emissions supporting countries on the “race to zero”. Lithium-ion batteries are currently the preferred choice of technology for these systems due to lower cost, broader understanding of technology and greater energy density.

With a compounded annual growth rate of 32.8%, the energy storage market is expected to reach $12.1 billion by 2025. This market value is justified by the functions BESS provides throughout the value chain:

Image: Envision Digital.

With the cost of electric batteries dropping by 89% over the past decade, driven by the spill over of electric vehicle (EV) battery technology advancements, the market is set to boom in the coming years. It is forecasted to represent 40% of total battery demand by 2030. Furthermore, as regulation progresses, the expansion of ancillary services and flexibility markets will enable the monetisation of storage assets via “value stacking”, reducing payback periods by four to six years.

However, quantifying the value of a BESS can be challenging due to future market changes and lack of long term historical data, making it difficult to evaluate the potential revenue streams and costs. This is exacerbated by the complexity of deploying long-term BESS with optimized market participation. Software, a critical component in BESS, can address these challenges by modelling short and long term battery performance (including ageing) and automating optimized market participation to maximize revenues and minimize damage to cells and modules.

A further concern is that the supply of raw materials for batteries (nickel, cobalt, lithium, and graphite) may not be able to meet increased demand, but longer battery lifetimes, new chemistries (e.g. Cobalt free) and improved battery recycling can mitigate this challenge.

Key considerations and challenges when introducing BESS

  • Systemic value: what is the overall value that BESS adds to stakeholders? (e.g. delaying asset investments, reducing carbon emissions, etc)
  • System modelling and design: what is the ideal battery configuration to maximise ROI? What cycle rates, fire safety, depth of discharge, energy throughput, cell degradation and software systems need to be optimized to balance asset profitability and performance?
  • Revenue streams: what is the core revenue driver in your market and what additional services can you offer?
  • System integration: how to connect your batteries to other assets to maximize profits?
  • Supplier selection: battery manufacturer and EPC contractor selection to ensure strong performance, warranty attainment and low maintenance costs.
  • Operating system: how will you operate your battery to ensure cost-effective management, optimal performance, and maximum revenues?

Role of technology

Technology plays a critical role in overcoming the challenges associated with implementing and operating BESS. Key solutions include:

  • Digital twin for bankability design and financing: AI-enabled modelling provides investment-grade business cases and greater visibility on systemic value and higher credibility for investment decisions. The model considers system setup, financial investment, energy trading, market participation, carbon emissions reductions, weather patterns, BESS cycle ageing and calendar ageing and several other variables. Failure modelling, asset maintenance and replacement costs are covered to ensure that battery size selection is optimized, and ROI projections are achieved. This can reduce payback periods by up to 25%, in certain markets, and CAPEX by 23%. Digital twin modelling can also contribute to design improvements that enhance the recyclability of batteries.
  • Battery monitoring and analytics: BESS monitoring provide useable and configurable visualization for operation and maintenance needs in a hardware/vendor-agnostic way. These systems integrate monitoring for generation, demand, and storage for multi-asset systems with relevant alerts and KPIs to optimize performance. This not only protects the assets against fire, corrosion and other issues, but also helps enforcing warranties with OEMs if the asset is underperforming. Advanced analytics further improves performance by automating troubleshooting, offering accurate state of charge throughout asset lifetime, predicting battery health, and providing insights such as: adjusted charging strategy, preventative maintenance actions and improved project design. By identifying structural issues, providing mid-term actions, detecting battery performance deviation, and optimizing operation, battery life can be improved by up to 10%.
  • Artifical intelligence of things (AIoT) optimization and control: AI coupled with high reliability and low latency control ensure the business case is achieved through trading (forward, intraday, day ahead), self-consumption, and grid services (frequency response, demand response, peak shaving). Energy management systems provide real-time control, down to milli-second level reactivity, required to provide certain grid services. AI optimization can also provide high resolution weather demand and price forecasting. With multi criteria optimization and a feedback loop from ageing observations and environmental data, the payback period can be reduced by 25%. Such solutions offer grid integration, demand and supply side control, trading, and consumption optimization, enabling the realization of revenues and smart system integration.

BESS are essential in enabling grid resilience and integrating renewable assets to reduce CO2 emissions and support global efforts to achieve net-zero pledges. Digital twins to support bankability, optimization through AIoT, and battery monitoring and analytics can prevent accidents, enhance the economic viability of adopting BESS, and act as a catalyst to ensure governments and corporations meet net-zero targets. Much like Elon’s project in Australia, similar BESS projects are nearly doubling in total installed capacity every two years. The hardware and financial incentives are in place, now AIoT technology can help expedite deployment, ensure safety and boost ROI of such projects supporting a faster race to zero.