How Will Grid-Scale Energy Storage Impact Gas Turbine Market Share?Alex Forbes
The falling costs of grid-scale energy storage batteries affect the gas turbine market. What does the effect look like?
In the fast-moving world of energy, it is vital to anticipate developments that may impact your business long before their full effects are felt. These can be developments in technology or policy—often the two together. A case in point is the likely impact of grid-scale energy storage on the overall use of gas turbines, as battery storage increasingly makes its way into utilities.
These are early days for utility-scale batteries because while capacities are now in the tens of megawatts (MW), such batteries are only economical in certain applications. But costs are falling fast and, at some point over the coming decade, likely to reach levels at which batteries will impact the gas turbine market.
There are several factors at work, aside from costs. The growth of nondispatchable generation sources—such as grid-connected wind and solar power and distributed generation in various forms, including renewables—is increasing the complexity of power system management. System operators are working harder to match supply and demand. There are also policy pressures to minimize emissions along with commercial pressures to minimize consumption of fuel, which for nonrenewable generators is usually the single biggest operating cost.
Today, the electricity industry relies primarily on generators driven by gas turbines or diesel engines to manage incremental changes in demand. This is because it has not been economical to store electricity in sufficient quantities for utility applications. Even pumped hydroelectric storage facilities store water rather than electric power and, in any case, are only available in certain areas.
But that is changing. There is a consensus that the trends for aggregate battery storage capacity to grow, and for storage costs per unit of power to fall, are set to continue for at least the coming decade, with fundamental impacts on the economics of power system investment and management.
According to Navigant Research, lithium-ion battery costs have fallen from over $1,000/kWh in 2009 to around $200/kWh today. Looking ahead, Navigant sees global revenue from utility-scale battery storage growing from $232 million in 2016 to $3.6 billion by 2025, as installed energy capacity grows from around 1.4 gigawatt hour (GWh) today to 43 GWh.
In assessing how gas turbines are likely to be affected by grid-scale energy storage, we need to review the main gas turbine sectors.
At one end of the spectrum are the large gas turbines used with steam turbines to make up combined-cycle gas turbine power plants, or CCGTs. Since the 1980s, these large centralized facilities have become popular in markets all around the world because they bring a number of advantages, in particular, their high efficiency. Roughly speaking, the turbines in CCGTs are the larger sizes, generally above 50 MW but more often than not larger than 120 MW.
Because of their high efficiency, CCGTs are generally dispatched before less efficient simple-cycle plants, which use only gas turbines to generate power. The turbines used in simple-cycle plants are generally smaller than 120 MW but often smaller than 50 MW.
Because small gas turbines are generally less efficient than large ones, plants using turbines with power ratings of 50 MW or below tend to be used mainly for peaking duties when the price of electricity is high enough to justify running costs.
Over the short and medium terms, the turbines used in CCGTs are unlikely to be affected much by the rise of grid-scale energy storage due to their size and usage patterns. It is the peaking gas turbines that will be most affected by the falling costs of grid-scale energy storage batteries as power plant managers weigh up the return on investment of one technology versus the other.
Over the long term, much will depend on how the economics and deployment of utility-scale battery storage evolves. We have seen already that the rise of new technologies can lead to unexpected consequences.
Take the rise of renewables, for example. In some European countries such as Spain, renewables have had a large impact on CCGT utilization, taking owners and operators by surprise.
The decision will depend on need. In areas where fuel costs are high, where there are tight controls on emissions of pollutants, or where there are pressures to reduce natural gas use while maintaining high reliability of supply, power plant managers may need to be prepared to spend extra for a battery-based solution.
Going even further, a recent development has been the introduction of a hybrid technology that uses a gas turbine, a large-scale battery, and a control system to provide reactive voltage support, primary frequency response, regulation, and contingency reserve. It has been deployed by a utility in California, following a crisis at a gas storage facility where circumstances justified the cost.
Conversely, in an emerging country where the prime need is more MWs to meet growing demand, gas turbines have proved themselves to be an economical solution, especially where fuel is cheap, such as in hydrocarbons-rich countries in the Middle East.
Elsewhere, the question of whether batteries will start to replace some peaking-duty gas turbines is no longer if but when.
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