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Humble battery leads charge towards green energy and smart grids

22 April 2016 in

The big story for the lowly battery is its potential to electrify the shift to green energy. Their role in powering electric vehicles and ushering in a modern electric grid are part and parcel of this story. The numbers support the story: Goldman Sachs currently pegs the total available market for electrical energy storage at $100-$150 billion over the long term, though it believes its value could be much bigger.[1]

Electric car battery makers are serving a nascent but growing market. Electric vehicles (EVs) were less than one percent of vehicles on U.S. roads last year;[2]  add in hybrids like the Toyota Prius, and you slightly edge above just three percent. [3]  But this market is likely to continue its momentum as electric vehicles’ sticker prices are expected to drop. This is helped by lower battery prices which fell 35 percent last year and prices should be halved over the next decade thanks to greater scale and manufacturing efficiencies.[4] With batteries accounting for a third of the cost to make electric vehicles, the electric car battery market could reach $30 billion by 2020 from $5 billion last year[5].

In the driver’s seat of electric cars
Carmakers are anticipating greater uptake by consumers for plug-in cars, as Tesla, Chevy, GM and others have announced plans to sell long-range electric cars that start at the more affordable entry range of $30,000 within a year or so. This will certainly help more people get behind the wheels of electric cars, but for consumers to ditch their fossil fuel-burning vehicles, they have to be convinced that the end-to-end economics and convenience of driving electric cars are there.

Many consumers will likely worry about the prospect of dead batteries amid the relatively few fast-charging stations on the road. Plus, with $2-a-gallon gas, electric cars can be a hard sell, until the next oil crisis.

Making power grids smarter
Where else do battery makers hope to make a killing? On the electric grid. One issue with the electric grid, the networks that carry electricity from power plants to your home and office, is that supply doesn’t always meet demand. This is because utilities try to forecast demand using historical data since it’s slow and expensive to change the plant’s voltage output. But as anyone who has experienced blackouts know, utilities can sometimes miss the mark.

Enter the smart grid. Transforming the grid will mean we go from a one-way street where power plants deliver electricity to us through “dumb” wires to an information highway where real-time data will inform how to deliver more energy with less cost and greenhouse gas emissions. When we embed sensors and devices that can share data and talk to each other to help us manage the supply and demand, that’s when the grid gets smart.

It’s estimated that about $2 trillion in investments are needed to upgrade U.S. power grids and this could translate to to $70 billion market for smart grid technologies.[6]

Adding green to the grid
Not long ago, the use of renewables to generate electricity had its critics: solar and wind power is intermittent – sometimes the wind blows, sometimes it doesn’t. But the grid needs constant and reliable energy sources.  The solution? Batteries, of course. They store the energy generated from solar and wind sources then supply that energy to the grid on demand.

So now the idea is to combine the grid energy storage technology (aka batteries) with the load management capabilities of a smart grid. The big deal besides the embedded smart technologies is that batteries with their stored renewable energy can help respond quickly to looming demand spikes or maintain balance to the grid. Electricity produced from stored renewable energy could double over the next decade to 14 percent, up from 7 percent in 2014.[7]

Our Smart Grid motif has beat the S&P on one-year performance, up 12 percent versus S&P’s 2 percent. Our Battery Charged motif is down 7 percent on one-year performance.

Batteries’ usefulness doesn’t end there. The electricity market can put batteries to uses like back-up power, integration of renewable energy into the grid and bulk storage, says Goldman. Tesla’s Powerwall, the largest battery factory in the world, is lending some star power to grid-scale storage, which is still very new.

Batteries have been the quiet hero powering our lives in the background over the last couple of centuries. And now, as the world unites to beat a path to a carbon-free world, batteries are again quietly reshaping our future.

[1] Goldman Sachs, The Great Battery Race

[2] Bloomberg New Finance, http://www.bloomberg.com/features/2016-ev-oil-crisis/

[3] Bloomberg New Finance, http://www.bloomberg.com/features/2016-ev-oil-crisis/

[4] Goldman Sachs, The Great Battery Race

[5] Lux Research via the Wall Street Journal

[6] The Edison Foundation and Navigant Research via https://www.edf.org/energy/smart-grid

[7] Goldman Sachs, The Great Battery Race

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  1. Nick Walther
    5 May at 2:06 pm

    add my name to updates RE battery investment