Dive Brief:
- The least expensive long-duration energy storage technologies are now cheaper than lithium-ion batteries for discharge durations longer than eight hours, according to a May 30 report from BloombergNEF.
- Fully installed systems’ global average capex costs were $232/kWh for thermal energy storage and $293/kWh for compressed air storage, compared with $304/kWh for four-hour lithium-ion battery storage, according to the report. However, the global averages reflect significantly lower capex costs in China, BNEF Clean Energy Specialist and report co-author Yiyi Zhou said.
- “While other nations are still in the early stages of commercializing LDES technologies, China is already developing gigawatt-hour scale projects, driven by favorable policies,” particularly for compressed-air energy storage and flow batteries, Zhou said.
Dive Insight:
A January study sponsored by the California Energy Commission found that the California Independent System Operator’s grid would require up to 5 GW of LDES by 2045 if it retains existing gas generation assets or up to 37 GW of LDES if those assets retire, underscoring the scale of the role LDES could play in a deeply decarbonized future.
BNEF examined seven energy storage technology groups that can discharge for durations of at least six hours, including compressed air, compressed gas, pumped hydro, thermal, gravity, flow batteries and lithium-ion batteries. Cost data for most technology groups came from projects deployed globally between 2018 and 2024.
At $232/kWh, thermal energy storage was the cheapest technology group, followed by compressed air storage. At $643/kWh, gravity storage had the highest average global capex cost, BNEF said.
In non-China markets, installed LDES system costs were 54% higher for thermal energy storage, 66% higher for flow batteries and 68% higher for compressed air storage, BNEF said.
According to Zhou, the disparity stems from greater adoption of LDES technologies in China.
“While other nations are still in the early stages of commercializing LDES technologies, China is already developing gigawatt-hour scale projects, driven by favorable policies,” Zhou said in a statement. Commercialization is particularly far along for compressed air and flow battery systems, she added.
In contrast, capex costs for compressed gas storage systems are 42% higher in China. Chinese compressed gas storage system costs are based on demonstration rather than commercial-scale projects, BNEF said.
Operating and maintenance costs for LDES systems in China also tend to be lower than for systems elsewhere due to the Chinese industry’s maturity and larger project sizes, BNEF said.
One long-duration storage executive questioned whether economies of scale could fully explain lower Chinese capex costs for compressed air, flow battery and thermal energy storage systems.
“There are domestic market conditions in China that frankly can’t be replicated in other markets for commercial viability,” said Curt VanWalleghem, co-founder and CEO of Hydrostor, which develops and operates energy storage systems that use compressed air, rock and water. “We're not convinced that the amount of LDES deployment in China is related to technological innovation or scale, but rather is likely related to factors like domestic labor rates and government subsidies.”
Accordingly, while China is likely to be an important LDES market in the future, “[Hydrostor’s] focus is on ensuring policies in markets like the U.S., the U.K., India and Australia acknowledge the importance of developing LDES for the continued reliability of the grid, and that they outline timelines for those procurements,” VanWalleghem added.
Though China has lower capex costs than other countries for most LDES technology groups at present, Chinese-made lithium-ion batteries are cheaper than those made elsewhere, raising questions about non-lithium technologies’ future competitiveness there, BNEF said. BNEF found only a few LDES technologies, including systems that store compressed air in natural caverns, that are cost-competitive with lithium-ion batteries in China today.
The higher cost of lithium-ion batteries outside China means “the U.S. and Europe have a chance to invest in their own [LDES] industries,” BNEF Energy Storage Senior Associate and report co-author Evelina Stoikou said in a statement.
Non-China markets have seen development of “more technology types within flow batteries, compressed air, compressed gas, thermal, gravity and novel pumped hydro” driven in part by efforts “to develop alternative technologies that do not rely on lithium,” Stoikou added.
However, non-lithium ion storage technologies are “[not likely] to replicate the economies of scale seen for lithium-ion batteries,” which have been aided by rapid electric vehicle adoption, and thus “are unlikely to fall as fast as those of lithium-ion batteries this decade,” BNEF said.
