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Different markets for storage systems

Discussion in 'Tesla Energy' started by Auzie, May 19, 2015.

  1. Auzie

    Auzie Tree Hugger Member

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    Different markets for storage systems

    In the past, the cost of storage systems was not competitive with traditional energy supply options, hence the market for storage was very limited. Numerous markets will be opened up once the cost of storage reaches parity or becomes competitive with current options available to either electricity suppliers or customers, in some peripheral markets.

    In some peripheral electricity markets, the cost of storage need not compete with the costs of grid supplied energy. It is sufficient to be competitive with the price of building a new grid or a capacity incease, the price of peak demand and the price of supply disruption. In these markets, the storage competes on a more level playing field with the traditional options due to capital hurdle symmetry.


    Supply (grid and utility) side opportunities:

    The storage markets on the electricity supply side are created when there is a need to increase electricity supply (with the exception of no.1 below).

    1. Cost of operating peaker plants

    2. Cost of building new peaker plants

    3. Cost of grid upgrades to meet increased demand

    4. Cost of supply interruption

    5. In regions with no supply or grid, the cost of building both the grid and the power plants VS the cost of storage + wind/solar/etc VS the cost of combination of all.


    Peaker plants are expensive to build and run, and relatively slow to come on line. The costs of these plants are region dependent and fuel source dependent. When the cost of storage reaches parity with the cost of building and later on with the cost of running these plants, the bulk storage is likely to gain huge market share with various grids and utilities around the world.

    Any capacity increase solution on the supply side faces the capital investment hurdle. Whenever and wherever the need arises for supply increases, business cases will include an alternative scenario of storage system use vs building extra capacity, due to falling storage costs making storage a viable option.

    Economic benefits of the storage systems for various specific scenarios are quantifiable. The costs of supply capacity increases are known and vary greatly from region to region and from utility to utility.

    Each case will have its own economics and math. I would be surprised if storage were not already cost effective at the curent costs in some parts of the world.

    I see no force that can stop this dynamics in which each single utility will weigh the economics and benefits of storage against the cost of traditional options. Storage may not always prevail in these competitions, but it is likely to increasingly chip away at traditional solutions, either as a partial inclusion or as a complete substitution.

    Societal and environmental benefits of storage are more difficult to quantify. These also vary from region to region. It might be more valuable to have storage systems in more polluted regions. These regions might regulate for mandatory storage inclusions in some solutions.


    Demand (customers) side opportunities:

    6. Arbitrage shifting, peak and off-peak prices

    7. Differential between feed-in tariffs and grid price for net metering in some regions

    8. Cost of supply interruptions, cost of diesel generators

    9. Cost of supply of the most expensive grids in some regions

    10. Regions with no grid, the cost of alternative energy sources + storage


    In most customer side markets, the requirement for capital outlay is only on the storage systems which compete with the supply from the established grid. This capital hurdle asymmetry worsens the economics of storage options and requires lower storage costs, at which storage becomes competitive with the alternative solutions available to customers.

    In summary, as the storage technology improvements push the cost of storage down, at some cost point the storage becomes competitive in some supply side markets listed above. Subsequent storage adoption will drive the benefits of scale and technology improvements, leading to further cost reductions, thus making storage progressively competitive with the traditional options listed above.

    My expectation is that the utilities and the distributors are more likely than customers to be the early adopters of storage due to more favourable economics at the same storage costs.
     
  2. Yoda101

    Yoda101 EM and TM Model3 Fan

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    #2 Yoda101, May 19, 2015
    Last edited: May 20, 2015
    Seeing EM comes originally from my home country South Africa:

    In South Africa there is a huge market already as the daily rolling blackouts is a terrible inconvenience and also negatively impacts on economic growth.
    1) The monopoly of government electric utility neglected maintenance for many years, ignoring many early warnings.
    2) The union led strikes prevent the planned powers stations from being completed on time with costs and time overruns.
    3) The daily rolling blackouts is becoming a daily accepted nuisance, the traffic is a mess during a rolling blackout, wasting even more personal time.
    4) The utility applied for additional increase authorization to cover the additional costs of continuously running peaker plants as base loads.

    The solution based on the storage options are becoming more viable every day
    5) The utility reverted to implementing alternative energy and 20 year fixed feed in tariffs
    6) This benefited the alternative energy ranking of South Africa which moved to position 9 (on solar) in the world
    7) The additional benefit should lead to reduced need for transmission and infrastructure expansion

    In most of these items a utility scale storage will be very beneficial and economically viable.
    The home storage is beneficial from a convenience point even if it is not economically viable.

    Go Elon!
     
  3. Auzie

    Auzie Tree Hugger Member

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    #3 Auzie, May 20, 2015
    Last edited: May 20, 2015
    Talking about blackouts, I just spent my day sorting out huge havoc created by a failure of incoming HV switch.

    Our provider, Ausgrid, the owner of the switch, significantly reduced infrastructure upgrades and maintenance. The switch is as old as Methuselah and had to be replaced.

    There were 3 different Ausgrid crews involved in the switch replacement, each crew having several people, most of them some sort of bystanders, chit chatters, crane operators and dog guides, and food and coffee providers for the diggers, permit signers, overseers, what a circus on monopoly's dime.

    Here is how monopolies provide essential response to customers:

    There is a single Ausgrid phone number that is available to any customer, commercial or non-commercial, to call in case of power supply failure. That call goes to a call center wich dispatches Ausgrid first responder on a first call first serve basis. Commercial customers get prioritised over private ones, but there is a queue of commercial customers which is unavoidable.

    Response crews are significantly reduced as a least painful cost cutting measure, there is nothing customers can do about poor response times.

    The first responder arrives within 4 hrs if there are no rain or storms. Good luck during storms. The first responder is licensed to 415V only, so once he establishes that the problem is above his voltage, he books in the second responder, HV guy. The first responder can not be skipped despite having site hired HV expert who diagnosed the problem to be incoming HV switch and asking for the appropriate response from Ausgrid.

    The second responder arrives from far away part of town as soon as he is available, within next few hours. Once on the site, the second responder confirms the diagnosis established several hours ago by both the first responder and the site hired HV expert. The switch had a distinct gas smell and low gas levels. Once the diagnosis is confirmed by the second responder, he books in the repair crew. If they are available.

    The repair crew looks into parts availability. There are no guarantees or options available or open to the customer, just plain mercy. Information is scarce and must be extracted by hard work (lots of phone calls to people who do not care to care).

    If parts are readily available, the first repair crew fleet drives in. They study all the diagrams, do all the permits and specify required isolations in the neighbourhood. They also start the agreement with the customer for the repairs -lots of documents get signed by a lot of people.

    Then the isolation crew arrives. They go around isolating everything on the street that needs to be isolated. Permits are signed off.

    After they are done, the repair crew fleet roll on with the parts, cranes, shovels, etc etc. It is quite difficult to establish what all these people are doing, most of them just stand around chatting, eating, sitting in open vans, enjoying the sun, whilst a couple of guys are really busy around the switch, undoing it, digging out cables, etc. Then they wait for some extra parts, couple more hours.

    Power on a commercial property went down at 3am and was restored at 10pm. There is no compensation for the business loss. Over 100 people were sent home for the day as that is the safest thing to do with no power.

    Storage would not make much difference in this specific case. There is a diesel generator for the servers only.

    The way storage can help is by gradually eroding the grids monopoly power over customers by incrementally empowering customers to gain more and more independence from the grid, kWh by kWh.
     
  4. Auzie

    Auzie Tree Hugger Member

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    Morgan Stanley downgrades Origin and AGL due to Tesla Powerwall

    Happy to see this. This bit of news may be a positive sign of things to come.

    Morgan Stanley downgrades Origin and AGL due to Tesla Powerwall

    AGL is an Australian energy services provider, both retail and generation. Thermal power stations are the largest power generators, although there is some diversification into renewable sources. Thermal is PC language for coal.

    Origin is also both an energy retailer and energy generator, gas and coal.

    MS carried out a survey of 1600 households, probing for interest in a home storage system. Based on the survey outcome, MS estimates that 2.4 million households may be willing to invest in solar coupled with battery storage.

    The cumulative effect of households with these systems is expected to have a depressing effect on power demand and retailers returns.
     
  5. Auzie

    Auzie Tree Hugger Member

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    Interesting article in Breaking Energy, New Storage Technologies Open Doors for Wind and Solar

    Highlights:

    Recent studies from GTM research and ESA project the US deploy 220MW of energy storage, 90% of that in front of the meter.

    Yoy rise in deployment is, 2013-2014, 40%; 2014-2015 three times as much.

    By 2019, the storage market is projected to represent an 861 MW annual market valued at $1.5B.

    State legislations and regulations are the key drivers that continue to create energy storage opportunities and markets.

    USInstalledEnergyStorage.png
     
  6. Auzie

    Auzie Tree Hugger Member

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    Australian electricity prices, domestic

    The economic opportunity for storage behind the meter is in the regions with the high differential in peak and off-peak rates.

    Apart from the rate differential, there are few other parameters that influence storage economics for a household.

    One relevant parameter is daily kWh usage in a household. Households with high daily usage are more likely to benefit from the storage. It may be easier for them to juggle their appliances to be able to utilize power at the right times of the day, as there is more available to be juggled.

    The second parameter is lifestyle flexibilities and varying willingness to run certain appliances during restricted hours, in order to make the most of the storage system.

    Simplified model for calculating the desired return on daily cycling of 7kWh:

    365 x 7 x D x 0.8 = C / Y

    D = peak - off peak difference, $
    C = Installed cost of 7kWh battery pack, $
    Y = Desired return (break even), years
    0.8 = efficiency factor, this is my assumption. This may vary.

    1. Scenario 1, installed cost $5000, desired return in 10 years, required differential peak - off-peak = $0.24

    2. Scenario 2, installed cost $7000, desired return in 10 years, required differential peak - off-peak = $0.34

    3. Scenario 3, installed cost $5000, desired return in 6 years, required differential peak - off-peak = $0.41

    All above numbers are in USD.

    This post is about the opportunities in the Australian domestic market, hence I need to apply conversion factor, AUD.USD = 0.77, to my 3 scenarios

    In Australian dollars:

    1. Scenario 1, installed cost $6493, desired return in 10 years, required differential peak - off-peak = $0.32

    2. Scenario 2, installed cost $9091, desired return in 10 years, required differential peak - off-peak = $0.44

    3. Scenario 3, installed cost $6493, desired return in 6 years, required differential peak - off-peak = $0.53

    Here are TOU rates of 5 Australian grids. The rates are obtained from iselect, by punching in various post codes, to get the rates in various regions covered with various grids. Households are able to obtain these rates by negotiating with their providers.

    GridRates.JPG

    TOU times
    TOUGrids.JPG

    Rate differentials are 35c, 38c, 14c, 15c. Ausgrid and Endeavour (Sydney, NSW) have the highest difference in peak - off peak rates.

    Storage systems economics, as calculated above, is only one of the factors that people consider when deciding to invest in a storage system. There are other advantages to having a battery apart from possible bill reduction. People's willingness to install a storage system is likely to be present before full economic justification is achieved, due to these other storage advantages.

    Grid coverage in Australia is sparse, limited to populated areas. There are vast areas that are not covered by any grid, but have plenty of sunshine. Isolated towns, like Alice Spring, have their own power plants (gas, diesel).

    Grid&PowerStationsAuz.jpg
    Both these remote, isolated areas and the densely populated areas along the coast are markets that are very likely to embrace the household solar + storage system, even at current Tesla storage costs.

    In Australia, the economic benefits hurdle of installing Powerwall is quite reasonable with returns of 10 yrs for the installed price of ~AU$6500. The current price of Tesla Powerwall may be verging on passing the barrier at which the product pricing becomes so affordable that the economic benefits hurdle ceases to apply.



     
  7. Auzie

    Auzie Tree Hugger Member

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    Tesla already forcing down battery storage prices in Australia

    RenewEconomy, Tesla already forcing down battery storage prices in Australia

    Highlights:

    AGL Energy storage offering has gone down in price 30% in the last 6 months.

    StoragePriceAGL.JPG

    Solar Juice is offering 3.6kWh Samsung battery storage product with inverters and smart meters for $7,999.

    Some estimates point to payback period as short as 6 years in some regions.
     

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