Moody’s: Battery Storage Viability is Increasing
Battery storage’s emergence as a tool to boost grid reliability and a viable project finance opportunity is good news for utilities and grid operators, said Moody’s Investor Service in an infrastructure and project report on March 19.
The ratings agency noted that currently, lithium ion battery costs hover at about $400/kWh installed—the battery itself which is about $200/kWh, and the balance of the plant (with traditional electric components) at another $200/kWh. While that figure is the result of an already significant cost decline over the last several years, if current trends continue, costs will continue to decline to $100/kWh between 2020 and 2022.
The cost decline could translate to a “significant reduction in project costs, which will make storage applications more economically viable,” it said.
Cost declines for battery storage can be pegged to growing economies of scale in manufacturing and improvements in battery technology, Moody’s noted. The energy storage sector also has regulatory backing. Along with energy storage mandates in several states, including California, Massachusetts, New York, and Hawaii, a 30% investment tax credit is available for energy storage coupled with renewable generation at a federal level.
Driven by falling costs and strong regulatory support, the U.S. storage market will likely show a nine-fold increase in volume growth between 2017 to 2022, it projected.
However, the agency noted that from a technological and operational standpoint, the key issue for the utility-scale battery storage market is whether the operating profile for which the storage system was designed is consistent with the way it is actually operated. “The project sponsor/developer will want to develop a particular set of specifications for the battery storage project with the help of the operator/integrator and provide these specifications to the [original equipment manufacturer (OEM)] supplier,” it said.
“These specifications typically deal with the number of times the battery is cycled, the maximum allowed depth of discharge, size, replacement parts, etc. The operator is then expected to make sure the system is operated in a way that is consistent with the design. Degradation is highly dependent on system operation and is a function of intended versus actual use.”