Dive Brief:

• Storage-plus PPAs are already less expensive than the levelized cost of energy (LCOE) for combined cycle natural gas in the United States, according to a recent report from Navigant Research.
• Lithium-ion batteries are one of the main drivers in the growth of the utility-scale energy storage market, accounting for almost 30% of non-pumped storage capacity developed since 2011, the report found.
• The report comes amid growing expectations that electric utilities increase their investment in storage-plus renewable energy projects as power purchase agreement (PPA) prices continue to fall and adoption expands.

Dive Insight:

Storage-plus-renewable energy projects, in particular solar, are expected to play an important role as electric utilities develop their strategies for the gird of the future. The risk and cost associated with battery technology continues to decline, enabling utilities to transition large-scale renewables from intermittent to dispatchable energy resources.

The utility-scale energy storage market has seen a steady growth since 2011, with more than 8.9 GW of non-pumped hydro storage projects coming online over the past seven years, according to Navigant Research, "How Utilities Can Look Beyond Natural Gas with Cost-Effective Solar Plus Storage Strategies."

One of the technologies driving market growth is lithium-ion batteries, the report said. The latest analysis showed that lithium-ion batteries accounted for 29.4% of non-pumped storage capacity and 70% of advanced battery capacity developed since 2011.

Due to the advancements in lithium-ion battery technology, Navigant Research expects that PPA prices for projects combining energy storage and renewable resources will continue to decline as their adoption expands. Storage-plus PPAs are already less expensive than the LCOE for combined cycle natural gas in the United States, the report found.

"In 2018, storage-plus made its first shift from the validation and first-mover adopters to diffuse adoption led by utilities," Alex Eller, senior research analyst with Navigant Research, said in a statement. "The accurate valuing and positioning of storage-plus by utilities will continue to drive the market in coming years."

Regulators and utilities should push for all-resource solicitation to take advantage of the price disruption in the area of storage-plus renewable energy and to meet aggressive renewable portfolio standard targets in the process, the report said.

Navigant Research's findings are in line with last week's analysis by Bloomberg New Energy Finance (BNEF), which showed that the LCOE for lithium-ion batteries has fallen 35% to $187/MWh since the first half of 2018.

Going back to 2012, BNEF found the cost of battery storage has dropped 76%, from almost $800/MWh.

This significant reduction in cost means that battery storage in combination with solar or wind projects can start competing with traditional coal- and gas-fired generation to supply dispatchable power, even in markets without subsidies, BNEF said.

Florida Power & Light (FPL) and Hawaiian Electric (HECO) have made recent investments in large-scale solar-plus-storage projects.

FPL on Thursday unveiled plans to build what it says will be the largest solar-powered battery system in the world, a 409 MW/900 MWh energy storage center that is scheduled to begin operation in 2021. 

On March 25, regulators in Hawaii approved HECO's plan for six grid-scale solar-plus-battery storage projects, which are all priced at $0.10/kWh or below.