The rapid growth of wind and solar energy poses a well-known problem: they don’t work all the time. Energy storage is a solution that investors should be monitoring in 2021, even if it is not yet lent to stock selection.
Governments around the world raised their decarbonization ambitions a lot this year. There is great uncertainty about how their promises will be fulfilled, but almost every scenario involves the massive construction of solar and wind farms. As your share of energy production grows, it will be crucial to save the times when the wind doesn’t blow and the sun doesn’t shine.
Wind and solar construction together can reduce gaps, while gas-fired power plants can provide a non-renewable backup. Demand-side response agreements are also useful, when large energy consumers promise to reduce their use during contact points in exchange for lower prices.
Even with all these methods, however, it will be necessary to store excess electricity for use in thin times.
Lithium-ion batteries similar to those powered by an electric vehicle are expected to provide most of the new storage capacity. Residential batteries can store energy from rooftop solar panels, but they are the really needed fixed-scale utility solutions for wind and solar parks. They are often custom turnkey installations that provide between one and four hours of backup power. Battery packs cost nearly 90 percent less than in 2010 and will continue to drop, according to BloombergNEF researchers.
The chemistry shared with the auto industry is a mixed blessing. Large-scale production will help reduce costs, but it can also lead to a reduction in supply. Some Korean producers have recently given priority to stationary vehicle batteries, pushing buyers to new suppliers in China. Battery racks and costly construction costs also place utility-scale fixed solutions on a different trajectory than car batteries.
In addition to short-term storage, there is a need for long-term solutions to cover days or even months. Pumped hydrogen, where excess energy is used to pump water up into a reservoir, from where it can be released to an on-demand hydroelectric plant, is a cost-effective, clean option. It currently provides the largest utility storage capacity globally, but finding new sites is a challenge.
Green hydrogen is another solution, which involves “storing” renewable energy using it to operate electrolyzers that divide water into hydrogen and oxygen. It is less efficient than other methods, but produces transportable and versatile gas.
Safety issues have arisen over batteries and hydrogen, but they are unlikely to be removed: fossil and nuclear fuels are not without risks. Other storage options include heating volcanic rock or molten salt, pressurizing air into containers, storing energy in flywheels, and moving weights into the air or toward the old shafts of the mine. Pilot projects have proven their efficiency, but most are not yet commercialized.
One problem with the issue for investors is that, for now, it remains a secondary business for large battery companies like LG Chem and Panasonic..
The same goes for General Electric equipment manufacturers,
ABB and Siemens,
which make energy conversion systems for storage facilities. Smaller, purer companies with promising technology face great uncertainty about how the market will develop.
However, storage could soon become a more dominant feature of the green energy landscape and the benefits of some companies. The boom in renewables has overcome the pandemic and even picked up speed. It may not be long before a technology crucial to its effective use takes off.
Write to Rochelle Toplensky to [email protected]
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