Second Energy Innovation That’s Looking Like A Golden Age: Grid Batteries

This part of the story is about grid batteries, the second energy transition innovation—the first is liquefied natural gas (LNG). In 2016, grid-scale batteries started up in Australia to stabilize intermittent renewable sources such as solar and wind. Australia now leads the world installing grid batteries, and the U.S. is not far behind.

Batteries serve three primary purposes. The first is to shift solar power stored in batteries during the day to shore up peak demand in the evening. The second is to provide backup when the sun doesn’t shine and the wind doesn’t blow. The third is to regulate frequency very quickly so that energy supply and demand are in balance.

A golden age is a period of strong growth and runaway success. This can occur in a certain country, or it may happen world-wide. The vision of grid batteries is recent, since 2016, but is accelerating in the 2020s. Their importance to the energy transition makes it likely the vision will lead to a golden age, if not already in one.

Future For Batteries—Australian Scene

The story begins in 2016, when the entire state of South Australia went dark. The whole fascinating story is told elsewhere, while this is just a summary. The state was transitioning away from a single coal-burning power plant to wind farms. A mini-cyclone knocked out several transmission towers, so the utilities, fearing the rest of the supplies would be overburdened, shut everything down.

It was a blow to the energy transition, but sometimes a big problem can lead to a resilient solution. Mike Cannon-Brookes, an Australian tech guru who created Atlassian, made a bet with Elon Musk that he couldn’t build a large battery storage system to stabilize the wind power system of the state so that a failure like this wouldn’t happen again.

Musk took the bet and constructed the Hornsdale grid battery, just 35 miles from where I was raised in South Australia. At 100 MW, it was the largest battery in the world, and it showed that storage in a large battery system could make wind or solar power more resilient and reliable. This was a critical step in the development of wind and solar renewables.

The standard renewables system, called SWB, for solar, wind, and batteries, is replacing coal-fired power plants on a regular basis in Australia. The largest battery in the world, by Equis near Melbourne, is planned in two stages. The first stage will be 600 MW of lithium-ion cells, which can provide full supply for 4 hours. The second stage, also 600 MW, will be sodium-ion flow batteries that can store electricity for 12 hours, although this is still being developed.

The South Australia story is important. They lead the world with 75% electricity from solar, wind and batteries, and their renewables will supply 100% of electricity by 2027. For roughly half of the days in 2023, SWB provided 100% of the state’s electricity. It’s a marvelous story that shows what can be done in 16 years—the time it took the state to switch its electricity from fossil to renewable energies.

What about the price of electricity in Australia: does this support the success of renewable electricity and batteries? While the wholesale electricity price is only about a third of the retail price for customers, it allows a comparison between renewables (South Australia, SA) against traditional black coal-burning power plant costs (New South Wales, NSW, and Queensland, QU).

Figure 1 shows that SA is cheaper than black coal in NSW except for 2/8 quarters. SA is cheaper than black coal in QU except for 3/8 quarters. Both results suggest that for most of the last two years, the price of renewables is lower than black coal power plants.

But the price uptick in SA in 2024 Q2 and Q3 is spurious. This has been blamed on greater wind variability that had to be stabilized by expensive gas power plants (surprising when wind renewables are most of the 75% of electricity in SA). Another potential cause is new infrastructure (towers, etc) being built to enable transmission of electricity, with electricity absorbing the costs. The price hikes are causing some to question the belief that SWB renewable systems are really cheaper than traditional fossil power plants. More data will help South Australia find the answers.

What about backups when the sun doesn’t shine and the wind doesn’t blow? Yes, you need backups, and in South Australia the state is using five big grid batteries. Plus interchange transmission with other states. If SA is producing more electricity than they need, they ship it out to another state. If they produce less, they bring it in.

Australia leads the world in developing battery energy storage systems (BESS). Wood Mackenzie reported the country has announced BESS capacity, now 2 GW, may reach 20 GW by 2030. This would be incredible growth, as it amounts to 28% growth year-over-year for 6 years. What’s even more stunning is that by 2030 Australia will have over 8% of the world’s battery storage capacity in Figure 4. Sound like a golden age for batteries?

Battery system costs are critical. Costs of battery modules are expected to fall by 40% in Australia by 2032. This will push down costs of overall battery systems by about 20% over the next ten years. Wood Mackenzie in their report predicted that SWB will undercut coal and gas as soon as 2028 in Australia (Figure 2).

Future For Batteries—U.S. Scene

The U.S. started four years later than Australia, growing from 1 GW in 2020 to 17 GW commercial batteries now, according to analysis by ModoEnergy. Their report projects 150 GW for U.S capacity by 2030 (Figure 3).

The report points out that two utilities in the U.S. have proven that grid batteries provide essential services to the grid as well as creating strong revenues. It concludes that data centers such as AI, as well as electrifying homes and businesses, should lead to rapid growth of electricity, and batteries. Batteries will be prized because they will lower the price of electricity and carbon emissions in SWB renewable systems.

Future For Batteries—Global Scene

What about the world? Have projections been made of BESS capacity? Yes, and the vision is strong according to a study by McKinsey & Company. Projections are from 2023 to 2030 in Figure 4, and these are annual increases in battery capacity. When increases each year rise exponentially, its powerful growth indicative of a golden age.

There is great interest worldwide in batteries to enable renewable energy systems. Australia was already in after 2016. Europe jumped in after their Russian-induced energy crisis in 2022. The U.S. jumped in after the government in 2021 passed into law the Inflation Reduction Act, which allocated $370 billion toward clean energy projects. BESS are now regarded as enablers of solar and wind energy systems.

About $5 billion was invested in BESS in 2022, while the study estimates the BESS market to be $120-$150 billion by 2030 (Figure 4). The report anticipates grid-scale growth of 29% year-over-year until 2030. One U.S. company is already working on a BESS project that will amount to 6 GWh.

A lot of the BESS investment is aimed at firm frequency response, which boosts the owner’s flexibility, especially in wind farms and solar parks.

While lithium-ion batteries are predominant now, lithium is in short supply, and mining it has a higher environmental cost. But companies are researching sodium-ion batteries, which should be more accessible and 20% cheaper. Sodium-ion batteries are ready to launch.

In the US, wind energy generation hit a record in April 2024, exceeding coal-fired generation. According to IEA, the International Energy Agency, renewables by 2030 are anticipated to increase by 2.7 times their levels of 2022. Renewables are expected to make up almost 50% of worldwide electricity by 2030, but to be honest, China’s share is likely to be about half of this growth.

Still, the main reason for the success is that renewables, especially solar, are the cheapest option in almost every country of the world, according to IEA. The projections seem to guarantee the innovation becomes a golden age of grid-scale batteries in Australia, and in the U.S., and probably the world.

Post-script

A new article has just come out by Andrew Birch, a solar industry pioneer with established credentials. Over the past 20 years, Birch has been a founding member of some leading global solar companies. The analysis could shake up current beliefs by the fossil industry that oil and gas will be needed for a long time, because it is more reliable and cheaper.

Birch’s forecast, based on historical trends and an adjusted prediction equation, is that solar PV costs will continue to fall by 10% a year and growth will be 25% a year. As a result, solar renewables will undercut nuclear by 2025, and overtake oil usage by 2031. Half of the world’s energy needs will be supplied by solar PV by 2035.

The argument is even more dramatic. “We’ve been told a clean transition will cripple the economy, when in fact, it will save us $9 trillion dollars a year by 2035,” Birch says. “All we need is a level playing field. Just watch how quickly dirty fuels die in a fair fight when we stop the subsidies and remove clean tech tariffs.”