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Future cost of energy storage and its impact on CO 2 emissions from the power sector Oliver Schmidt, Kate Ward, Iain Staffell International Association for Energy Economics 06 September 2017 | Vienna

Experience curves are a scientific tool to model these cost reductions Cost projection method 100.000 1976 Solar PV (23%, Module) Product Price (US$ 2015 /kW) 10.000 1.000 2015 100 0,001 0,01 0,1 1 10 100 1.000 Cumulative Installed Capacity GW) Source: Liebreich, M. Keynote - Bloomberg New Energy Finance Summit 2016. (Bloomberg New Energy Finance, 2016). 2

We derive a 1 st -of-its-kind experience curve dataset for storage technologies Dataset 20.000 System Pack Module Battery 2004 10.000 Pumped hydro (Utility, -1±8%) Lead-acid (Multiple, 4±6%) 5.000 2013 1995 Product Price (US$ 2015 /kWh cap ) Lead-acid (Residential, 13±5%) 2010 2008 Lithium-ion (Electronics, 30±3%) 2016 2.000 2013 2015 Lithium-ion (EV, 16±4%) 2015 2016 1997 1.000 2015 Lithium-ion (Residential, 12±4%) Lithium-ion (Utility, 12±3%) 500 2007 2015 Nickel-metal hydride (HEV, 11±1%) 1983 2013 2014 2011 1956 Sodium-sulfur (Utility, -) 200 2012 1989 Vanadium redox-flow (Utility, 11±9%) 2014 100 Electrolysis (Utility, 18±6%) Fuel Cells (Residential, 18±2%) 50 0,001 0,01 0,1 1 10 100 1.000 10.000 Cumulative Installed Nominal Capacity (GWh cap ) Source: O. Schmidt, A. Hawkes, A. Gambhir & I. Staffell. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017) 3

... that enables evidence-based cost projections Capital cost projection (capacity) 20.000 System Pack Module Battery 10.000 Pumped hydro (Utility, -1±8%) 5.000 Lead-acid (Multiple, 4±6%) Product Price (US$ 2015 /kWh cap ) Lead-acid (Residential, 13±5%) 2.000 Lithium-ion (Electronics, 30±3%) Lithium-ion (EV, 16±4%) 1.000 Price ranges Lithium-ion (Residential, 12±4%) 280-400 500 Lithium-ion (Utility, 12±3%) 150-200 Nickel-metal hydride (HEV, 11±1%) 135 200 Vanadium redox-flow (Utility, 11±9%) 100 Electrolysis (Utility, 18±6%) Fuel Cells (Residential, 18±2%) 50 0,001 0,01 0,1 1 10 100 1.000 10.000 Cumulative Installed Nominal Capacity (GWh cap ) Source: O. Schmidt, A. Hawkes, A. Gambhir & I. Staffell. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017) 4

The cost of installed utility-scale lithium- ion systems fall to 290-740 $/kWh by 2030 Capital cost projection (time) Lithium-ion (Utility, 12±3%, System) 1.400 Experience Rate uncertainty + Growth Rate uncertainty 1.200 Product Price (US$ 2015 /kWh cap ) 1.000 740 $/kWh 800 600 460 $/kWh 400 200 290 $/kWh 0 2015 2020 2025 2030 2035 2040 Source: O. Schmidt, A. Hawkes, A. Gambhir & I. Staffell. The future cost of electrical energy storage based on experience rates. Nat. Energy 2, 17110 (2017) 5

We model storage in the power system where it reduces CO 2 emissions at a cost Modelling scenarios Carbon Price: 200 £/ton 200 600 Solar 2050 180 Wind Strike Price: 89.5 £/MWh Installed Capacity (GW) 500 OCGT 160 Gas CCS Renewables: 70 GW Energy Output (TWh) 140 Baseline 400 Gas 120 Coal CCS 100 Coal 300 2010 - 2060 Curtailed: 159 TWh Nuclear 80 200 Emissions: 3.14 GT 60 40 Net Spend: £113 bn 100 20 0 0 1960 1980 2000 2020 2040 2060 1960 1980 2000 2020 2040 2060 200 600 Storage capacity: 14 GW (20%) Storage 180 2050 Solar Storage duration: 6 hours 500 Wind 160 OCGT Energy Output (TWh) Installed Capacity (GW) 140 Storage efficiency: 75% CCGT CCS 400 Storage CCGT 120 Coal CCS 100 300 Coal 2010 - 2060 Curtailed: 117 TWh (-25%) Nuclear 80 200 60 Emissions: 2.94 GT (-6%) 40 100 Net Spend: £130 bn 20 0 0 1960 1980 2000 2020 2040 2060 1960 1980 2000 2020 2040 2060 Source: Own analysis 6

The varying impact on renewables curtailment and CO 2 abatement... Impact of Energy Storage Storage duration Penetration 100% 12% 100% 12% Curtailed Energy (relative) 90% 90% Curtailed Energy (relative) -25% -25% 10% 10% Abatement (relative) Abatement (relative) 80% 80% 70% 70% 8% 8% 60% @ 6 hours, 75% AC-AC 60% 50% 6% 50% 6% 40% 40% 4% 4% +6% +6% 30% 30% 20% 20% 2% 2% @ 20% Share , 75% AC-AC 10% 10% 0% 0% 0% 0% 0% 5% 10% 15% 20% 25% 30% 0 5 10 15 20 Energy Storage Penetration (% of Renewables) Storage Duration (hours) The impact of storage duration on curtailment reduction and abatement improvement appears more pronounced than that of higher storage penetration Source: Own analysis 7

... is reflected in the marginal abatement cost of different storage technologies Marginal abatement cost curve 250 Marginal abatement cost ($/t CO2 ) ~300 PtG5 PtG10 PtG15 PtG20 PtG30 Redox5 Redox20 Redox15 Redox10 Redox30 200 Li-ion5 Li-ion10 Li-ion15 Li-ion20 Li-ion30 150 PtG Redox Li-ion Duration 20h 6h 3h Efficiency 30% 75% 85% 100 Lifetime 15y 15y 15y 50 0 0 100 200 300 400 500 600 700 800 900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 2400 2500 2600 2700 Abatement Potential (MT CO2 ) Source: Own analysis 8

Questions? Oliver Schmidt | PhD Researcher in Energy Storage Grantham Institute - Climate Change and the Environment Imperial College London, Exhibition Road, London SW7 2AZ Tel: +44 (0) 7934548736 Email: o.schmidt15@imperial.ac.uk Website: www.storage-lab.com

GWP of battery manufacturing Source: M. Hiremath, K. Derendorf, T. Vogt, Comparative life cycle assessment of battery storage systems for stationary applications., Environ. Sci. Technol. 49 10 (2015) 4825 – 33. doi:10.1021/es504572q.

Vanadium redox-flow & Power-to-Gas 200 Electrolysis (Utility, 18±6%, Pack) Product Price (US$ 2015 /kWh cap ) Experience Rate uncertainty 180 + Growth Rate uncertainty 160 140 120 2.000 Redox-flow (Utility, 11±9%, System) 100 1.800 Experience Rate uncertainty 80 1.600 + Growth Rate uncertainty Product Price (US$ 2015 /kWh cap ) 1.400 60 2015 2020 2025 2030 2035 2040 1.200 1.000 800 2.000 Fuel cells (Residential, 18±2%, Pack) 600 Product Price (US$ 2015 /kWh cap ) 1.750 Experience Rate uncertainty + Growth Rate uncertainty 400 1.500 200 1.250 1.000 0 2015 2020 2025 2030 2035 2040 750 500 250 0 2015 2020 2025 2030 2035 2040 11

Raw material costs suggest that these cost projections are not infeasible Sanity Check 1 – Raw material cost System Pack Module Battery Pumped hydro (Utility, -1±8%) Lead-acid (Multiple, 4±6%) Lead-acid (Residential, 13±5%) Lithium-ion (Electronics, 30±3%) Lithium-ion (EV, 16±4%) 1.000 Raw Material Cost (US$ 2015 /kWh cap ) Lithium-ion (Residential, 12±4%) Lithium-ion (Utility, 12±3%) Nickel-metal hydride (HEV, 11±1%) Vanadium redox-flow (Utility, 11±9%) 100 Electrolysis (Utility, 18±6%) Fuel Cells (Residential, 18±2%) 0,001 0,01 0,1 1 10 100 1.000 10.000 109 87 72 Cumulative Installed Nominal Capacity (GWh cap ) 52 51 20 15 14 12 12 10

The power sector needs to be close to complete decarbonisation by 2050 Introduction 50 IPCC Fifth Assessment Report Annual emissions (Gt CO2-eq /year) 40 • Annual emissions from power generation 2030 30 2050 2100 must reduce to max. 5 Gt CO2 by 2050 (glob.) 20 10 • The power sector is among the first energy 0 sectors to completely decarbonize -10 -20 Baseline 450ppm 450ppm with CCS w/o CCS 25% National Grid – Future Energy Scenarios 2015 Storage vs. Renewable capacity 2016 20% 2017 • The UK targets an 80% reduction of 15% emissions by 2050 compared to 1990 levels 10% • National Grid foresees storage capacity at 5-25% of renewable capacity to succeed 5% 0% 2015 2020 2025 2030 2035 2040 2045 2050 Source: Climate Change 2014: Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on 13 Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)], IPCC, Geneva, 2014.); Future Energy Scenarios, National Grid, 2017.

Including storage cost forecasts in power system models informs on abatement cost Methodology Experience Curves Power System Model (UK) 1. Determine experience rates for storage 1. Model baseline scenario for 80% technologies emission reduction by 2050 2. Combine with market forecasts to project 2. Model storage scenario for three future cost of three storage technologies technologies at 5-30% share of Ren. • Lithium-ion 15y, 3h, 85% AC-AC 3. Determine marginal abatement cost • Redox-flow 15y, 6h, 75% AC-AC for 80%+ emission reduction with • Power-to-Gas 15y, 20h, 30% AC-AC storage 14