Vintage Radio Batteries by France1978 at Flickr

Information asymmetry in energy storage: implications for battery system costs

First published on LinkedIn on 03 April 2015

Energy storage costs

March 2015 at Electroferocious looked at information asymmetry in energy storage markets as a mechanism that increases project costs and threatens grid reliability, resilience, and security.

System costs

It’s difficult to get real numbers about energy storage system costs, and yet that is just what Greentech Media Research did this month, reporting a weighted average system cost of $2,064/kW ($2.064/Watt). Although the technologies are not clear from the reporting, the systems are mostly front of the meter energy storage systems, likely grid-scale systems.

Last month, I presented numbers for grid-scale energy storage at a US Commercial Service export conference. The presentation, which includes numbers which are significantly lower than those shown in the GTM Research report, was shared in a March post I authored at Electroferocious, the energy storage and project finance blog where I made the point that:

Competitive energy storage is ready today and is especially relevant when numbers from commercial projects can be shared.

For a long time, demonstration projects have defined discussion of the economics of the energy storage space so I make it a point to discuss commercial numbers whenever possible. These numbers reflect downward market pressures on cost and competing revenue, offtaker pricing, and cover ratio requirements. It is difficult for a demonstration to capture these realities in a form meaningful to potential project investors, especially in unsubsidized markets. As more reporting about energy storage project costs becomes available, clear indications of whether the reports represent commercial vs demonstration activity will aid analysis of (and entry into) the real market.

Security costs

Another issue which I expect to receive increased scrutiny in industry is cyber-physical security and the related costs and benefits. In Why Battery System Cyber-physical Security Matters, I argue that:

Poor battery system security negatively impacts project performance and revenues. [tweet this]

Part of the problem with emerging energy technologies is that the lifecycle timescale and lifecycle costs associated with new technologies are subject to demonstration instead of market reality; the integration of the new technologies with the existing install base may not have clearly defined responsibilities for security and control; and information asymmetry between storage developers and other stakeholders threatens project performance and reliability.

With impacts such as degraded performance, loss of equipment, and long replacement lead times (paywall for full article), the revenue and cost implications associated with the security aspects of a project during project planning, technology selection, and the operations phase can be significant.

One way to mitigate these impacts (and information asymmetry) is increased information sharing which is why I blog today and am writing a book about cyber-physical security and battery systems that will be available later this summer. I’d love to know what you think about information asymmetry, energy storage costs, and cyber-physical security of battery systems. Message me or comment below.

Photo credit: CC-BY-SA Joe Haupt aka France1978/Flickr

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