Dive Brief:

Despite rapid cost reductions and promotion as a “game changer,” the growth of energy storage is hampered by inaccurate business models, according to a new report from the World Energy Council.

The least cost methodology frequently employed can be misleading because “cheapest is not always best or possible,” the report said.

The report recommends examining storage through “holistic case studies with specific context.”

Dive Insight:

It may be relatively easy to track the falling cost of energy storage, but assessing the value of storage is more difficult, yielding a variety of studies and opinions.

In storage assessment, an approach that focuses on least cost of storage (LCOS) seems to be gaining traction.

The most recent contribution to the field comes from the World Energy Council, which in a new paper calls for new metrics to measure storage.

Even though storage costs are forecast to decline by as much as 70% by 2030, using only the levelized cost of energy (LCOE) does not give a proper understanding of the value of storage, according to the paper, “E-storage: shifting from cost to value.” While LCOE is useful its “narrow focus” is misleading because it does not take into account locations and applications.

“Too often the industry only talks about one half of the profit formula, namely cost. Policymakers should recognize the wide span of market places that can benefit from energy storage,” Christoph Frei, secretary general of the World Energy Council, said in a press reports.

Instead, the report recommends the use of LCOS, defined as “the (fictitious) average ‘net’ price that must be received per unit of output (effectively kWh or MWh) as payment for storing and discharging power in order to reach a specified financial return.”

The report argues that the narrow focus on cost is insufficient and a legacy of the renewable energy industry in which policy mechanisms served to de-risk revenue streams. A more important and useful metric for storage, according to the report’s authors, is value, defined as the function of both cost and revenue.

An important aspect of LCOS is that is depends on load factor for discharging, which means that the way the storage system is used cannot be ignored.

The report models the use of storage in two applications, with a solar plant and with a wind plant.

In considering solar storage, the report looked at a six hour discharge time. While batteries are currently too expensive for large-scale use, improving technology is cutting costs. The report says solar storage would become more competitive as new battery technology drives prices down.

For wind applications, the report looked at a two-day storage structure with 24 hours of discharge time at rated power. For this application, few technologies appeared attractive, the report said. Levelized costs are higher for the wind-storage than for solar-storage because of the high sensitivity of LCOS to the number of discharge cycles per year, and the suboptimal energy-to-power ratios required for the wind-storage case as defined, the report said.