By Frank Wouters, Chairman at the MENA Hydrogen Alliance
I have spent my entire professional career on renewable energy and related things we now call energy transition, but I always had the nagging feeling that I never really understood energy storage. As a board member of Gore Street Capital, one of the earliest and largest investment managers in battery systems, I understand how batteries work in current energy markets. And during my time as president of the Long Duration Energy Storage Council (LDES Council), I was involved in understanding and positioning many kinds of new storage technologies and applications. I even wrote one of the earlier international IEC standards for standalone PV systems with batteries in the 1990ies. And a decade working on #hydrogen made me understand some of the differences between electrons and molecules. But how much storage there is in the world’s energy system and why was still somewhat of a mystery.
So last year we started working on storage at Dii Desert Energy. The results surprised and even somewhat shocked me. The first thing we found was that nobody knew. Not the IEA, not IRENA, not McKinsey. Of course there are armies of people knowing everything about oil, and then you have the gas people, the LNG folks, the coal industry, the battery people etc. But nobody had the complete picture. So, we had to do our own research and did a deep dive. The second thing we found out, and that is perhaps related to the previous point, is that none of the energy modelers have a good idea about storage. After we took stock of the current situation, we wanted to understand how storage would develop in the future. So, we looked at many models projecting a clean energy system in 2050, interviewed the modelers, and found that energy storage was a small aspect in their modeling. To their defense, modeling a global energy systems decade away is not easy. There are way too many variables and assumptions, so most institutions end up with annual energy balancing approaches. Unfortunately, we found that that approach lacks the granularity required to project a functional energy system. Our focus on storage made that very clear, because once you understand the magnitude and reasons for energy storage, you will factor that in.
Let me share the main findings:
- Energy storage serves three functions. Firstly, it addresses the mismatch between supply and demand. Secondly, it provides a buffer against energy supply disruption, contributing to energy security. A third driver for storage is commercial. Prices fluctuate and traders and operators buy fossil fuels when prices are low, store, and take advantage of price fluctuations. We found that modelers only consider the technical mismatch to some extent, although the other two are equally important because they guarantee secure and cost-effective supply.
- Storage is molecules, molecules, and more molecules. We store 20.8% of all oil, gas and coal we use in a year, adding up to 28,541TWh. Storage of electricity, mainly pumped hydro now since batteries are not yet visible on these scales, currently amounts to 9.5TWh. This means that we store 3000 times more energy in molecules than in electricity.
- The share of variable renewables in our electricity system is increasing rapidly, but the system still relies on 60% generated by molecules. This will not change in the future given that storage of molecules is so dominant. Batteries and other electricity storage technologies will grow exponentially but will remain tiny compared to molecules. Electrification of our energy system will more than double, but the electricity system of the future will also require molecules. In our modeling we reduced the share of molecules supporting the electricity system from 60% to 50% and used the IEA’s assumption for growth of batteries. We found that electricity storage in batteries and pumped hydro will constitute a mere 0.05% of all stored energy but their associated capex of $2.4 trillion in 2050 represents 13% of all storage capex, a clear indication of how much cheaper storing molecules is compared to electricity storage.
- The reasons why we have energy storage won’t change in the future. We still want a secure and cost-effective energy system, which relies on storage, and energy traders will do what they do. Molecular storage is thousands of times larger than electricity storage, now and in the future. What needs to change is emissions, we must replace fossil fuels with clean molecules.
Please read our full report here and let us know what you think!