States should adopt aggressive energy storage targets that include carve-outs for non-lithium ion battery technology in an effort to encourage continued innovation in the sector, according to a report released April 27.
Lithium-ion, or Li-ion, batteries are becoming the dominant energy storage technology and may be poised to be “locked-in,” or so dominate that alternate, and possibly more beneficial, technologies fail to come to market, William Bonvillian, Massachusetts Institute of Technology professor and one of the report’s authors, said during a presentation.
Li-ion batteries, which started production in 1991, make up nearly the entire worldwide and U.S. battery storage market, according to David Hart, one of the co-authors of the report, Energy Storage for the Grid: Policy Options for Sustaining Innovation.
Li-ion batteries are relatively inexpensive, light-weight and have a high-power density, which is good for electronics and transportation, Bonvillian said. However, other battery technologies such as redox flow and liquid metal with longer term storage and life cycles may be better for grid applications, he said.
Li-ion batteries have already become so dominant that is already making it hard for companies developing alternative storage technologies to survive, Hart said.
The report warns that China is moving to become the dominant producer of batteries, much like it took over the production of photovoltaic panels by undercutting other producers.
Li-ion batteries will likely remain the dominant grid storage technology for at least the medium term, according to Frank O’Sullivan, director of research and analysis at the MIT Energy Initiative.
Also, storage deployments will likely grow more quickly in vertically integrated markets where state regulators can set policy than in the RTO markets where rules are more complex, O’Sullivan said.
Energy storage is dimming the outlook for new peaking power plants, according to O’Sullivan.
“The future of peakers is pretty bleak,” he said.
The federal government, states and regional grid operators should take steps to make sure innovation continues in grid-scale energy storage, according to the report. “The objectives of such action should include growing the grid-scale energy storage market overall, creating niches within the market in which a range of technologies have opportunities to establish their cost and value characteristics, and ensuring that [research and development] continues in order to expand the portfolio of technology options,” the report said.
Efforts should aim to encourage innovation without undermining the benefits of Li-ion batteries, according to the report.
The report called for expanded research and development funding for storage and tax incentives from the federal government. “Congress should create a tax incentive system that supports emerging storage technologies and phases out as they mature, excluding the dominant design while encouraging more advanced alternatives,” the report said.
Federal and state government should support energy storage demonstration projects, according to the report.
In what Hart said was perhaps the report’s most controversial recommendation, states should establish storage targets with carve-outs for various technologies.
“Much as solar carve-outs in renewable portfolio standards aided solar power to compete with wind power, technology-restricted subtargets can create niches that are temporarily sheltered from competition with the dominant design,” the report said. “States should use this mechanism to support long-duration and other grid-scale applications for which the alternative storage technologies have greater long-run potential.”
So far, only four states have storage targets: New York with 1,500 megawatts by 2025, California with 1,325 MW by 2021, Massachusetts with 200 megawatt-hours by 2020 and Oregon with 10 MWh by 2020.
States and regional transmission organizations should craft rules so energy storage can fully participate in electricity markets and earn revenue from “stacked” value streams, according to the report.
State regulators should adopt integrated resource planning rules and approve rate designs that encourage storage innovation and deployment, according to the report.
“Utilities are increasingly expected to incorporate grid modernization and decarbonization into their long-range plans,” the report said. “They should be encouraged by regulators and other oversight bodies to incorporate storage into these plans and, where functionally appropriate, encourage adoption of non-Li-ion technologies.”
State and local authorities should work together to make bulk storage purchases, according to the report.