Spanish banking giant Santander has announced this week it will invest £28.5 million into London-based Battery Energy Storage Solutions for the express purpose of building and operating a grid-scale battery storage portfolio of 100 megawatts by the end of the year.

Battery Energy Storage Solutions (BESS), a London-based independent provider of power storage, energy security, and energy flexibility services, owns and operates five operational sites in the UK and boasts a large pipeline of projects for imminent delivery. The company was only formed in March of 2017 by leading energy storage executive experts, and as of the end of 2017 the company owned and operated 14 megawatts (MW) worth of grid-scale battery storage projects, and had a further 49 MW worth of grid-connected batteries to be connected by the end of this month.

Santander UK, the UK subsidiary of Spanish banking giant Santander Bank, N. A., announced last week that it was committing £28.5 million to BESS in an effort to support the company’s plans to become one of the UK’s largest independent owner-operators of battery storage assets and to meet their short-term strategy of building and operating a portfolio of 100 MW worth of grid-scale battery storage assets by the end of 2018.

The timing of Santander’s investment — and that of the creation of BESS itself — stems from efforts to capitalize on the booming energy efficiency and energy storage industries across the UK. Battery storage technologies are also obviously tailor-made to partner with renewable energy technologies, which have similarly exploded in the UK over the last few years, and in 2017 the country broke 13 separate records, including the first 24-hour period without coal-generated power, the first time that wind, nuclear, and solar produced more than coal and gas, and the “greenest summer” with 52% of electricity generated from low-carbon sources.

“The UK’s power system is now the fourth cleanest in Europe,” said Nicholas Beatty, co-founder of Battery Energy Storage Solutions. “However, the pace of transition to a low carbon power system brings with it challenges for the National Grid in balancing the network and ensuring supply and demand is matched on a second by second basis. Such balancing of supply and demand only being possible by the introduction of new technologies like battery storage. We believe our company is uniquely placed to capture that market demand. We value the guidance and support provided by the Santander deal team in this complex transaction.”

“We are delighted to have closed this landmark transaction with a new client in a new niche market segment: project finance for battery storage,” said Howard Whitehead, Head of Infrastructure & Renewable Energy, Santander Corporate & Commercial. “We believe we are one of the first senior debt lenders to close a project finance transaction in this space, a fact which underscores Santander’s desire to be a leader in this fast developing sector.”

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Significant seasonal demand spikes affect a number of areas around the country. Addressing them in a cost effective manner is a priority for those utilities that face large differentials between summer and winter loads.

One of those places, Nantucket, is both an isolated island and a wealthy summer colony whose population swells in the warmest months. It is a growing load area served by National Grid, and to meet that new demand, an expensive new transmission line could be required in the future. With the island’s backup generation aging, it leaves residents and the tourism industry in a precarious spot, should anything go wrong.

In an increasingly prevalent move, the island is turning to energy storage for a solution that illustrates how scalable battery systems can be. But while National Grid plans to avoid a costly transmission upgrade, its storage-based solution won’t be in place until 2019, leaving Nantucket’s residents and businesses vulnerable to potential outages as demand rises this summer.

In some respects, Massachusetts’ Nantucket Island is similar to North Carolina’s Ocracoke — highly seasonal, powered by undersea transmission cables, with some backup generation in place.

Ocracoke lessons

Last summer, Ocracoke Island experienced a week-long partial outage when one of those undersea cables was cut. Tourists had to evacuate and island businesses lost a significant chunk of their seasonal revenues. A microgrid developed on the island managed to keep some power on for residents, but unfortunately its diesel backup generation failed as well.

Nantucket is looking to avoid a similar disaster, and has employed a larger, yet similar approach to resiliency. Each island is looking to diesel backup and energy storage from Tesla, along with demand management, to ensure they can meet summer peak demand.

Ocracoke Island has about 1,000 full-time residents, and so its system is much smaller, including a 3 MW diesel generator, 500 kW/1 MWh Tesla battery and 15 kW of solar.

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Trade associations NY BEST and the Energy Storage Association have been quick to applaud New York Governor Andrew Cuomo’s historic setting of a 1,500MW energy storage procurement target for his state.

Energy-Storage.News reported earlier this week that Cuomo, in his annual State of the State address, had set out plans for US$200 million to be invested via New York’s NY Green Bank and US$65 million via NYSERDA in the development and deployment of energy storage projects, while the 1,500MW target should be reached by 2025.

The announcement was made along with a raft of other environmental, energy and sustainability policy measures as Cuomo attempted to set out a “comprehensive agenda to combat climate change”.

These included establishments of energy efficiency targets, moves to cap greenhouse gas emissions and limit pollution from natural gas plants, establish a solar PV programme for 10,000 low-income households and to reconvene a scientific panel on climate change disbanded by the Trump presidential administration.

Energy Storage Association CEO Kelly Speakes-Backman said her group “heartily applauded” the establishment of the target. Meanwhile William Acker at NY BEST, pitched as a regional trade association as well as a technology development group – NY BEST has its own battery testing and research facilities available to its members – said the deployment of 1,500MW by 2025 and the US$265 million investment would help cement New York’s position as a leader in the energy storage industry while contributing strongly to the state’s climate change and sustainability goals.

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Tesla (NASDAQ:TSLA) is wrongly regarded by some as “just another auto company”. It is true that in the short term its stock price will probably be mainly affected by the progress of Model 3 production. Autos represent 80% of revenue at the moment. In the long term though its energy storage business can become an engine of further organic growth for the company. My article in June last year gave details of Tesla’s strong position in the market compared to competitors. Developments since then have strongly reinforced this perception.

Tesla’s Energy Storage Business.

Tesla bears point to the fact that the energy storage business is on a small scale. This is true in terms of sales, but not in terms of investment or potential. Tesla Management has repeatedly said that they regard energy storage as the greatest growth area for the company.

The Q3 2017 earnings call gives the details on this. “Energy generation and storage revenue” in Q3 increased to US$317.5 million. This was up from US$23.3 million year-on-year, a percentage increase of 1261%

Gross margin was at 25.3%. The margin will improve this year with better capacity utilisation and manufacturing cost reductions at the Gigafactory. It is relevant here that in the results the facility in Nevada was referred to as “Gigafactory 1”. “Gigafactory 2” has since opened in Buffalo and more will follow.

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A new survey of automakers from the leading research group KPMG points to a gloomy future ahead for the electric vehicle market, but the naysayers don’t appear to be taking energy storage breakthroughs into account. In the latest development, new research headed up by Brookhaven National Laboratory points the way to reducing battery charging times, a key obstacle cited by auto industry executives in the survey.

Auto Execs Still Not Sure About Electric Vehicles…

On the surface, the new KPMG electric vehicle survey paints a sad face on the electric vehicle market. Under the title, “2018 KPMG Global Automotive Executive Survey,” the research firm presents this finding from the responses of about 1,000 executives:

Despite the hype and massive automotive OEM investment in battery electric vehicles (BEVs), more than half (54%) of global auto executives say they believe these vehicles will fail commercially due to infrastructure challenges while 60 percent say excessive recharging times will do them in…

Ouch!

90 of the respondents are based in the US. Not surprisingly, the survey finds the US group to be “far more skeptical than their global counterparts.”

It also appears that automakers are having a tough time convincing the general public that all-electric transport is the way to go. KPMG surveyed 2,100 consumers in 42 countries including the US:

Only 13% of consumer respondents outside the United States and 5% in the U.S., said they would buy a pure battery electric vehicle over the next five years.

The relatively low interest among US consumers is not surprising, either. The disparity between US and global attitudes comes into even sharper focus when consumers are asked about buying hybrid EVs:

…50% of consumers outside of the United States indicate they would opt for a hybrid — hybrid electric (33%) or plug-in hybrid electric (17%) vehicles — over the next five years, or internal combustion engine (18%). U.S. consumers, on the other hand, say they’ll stick with ICE vehicles (54%), followed by hybrid electric (24%).

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On islanded (or isolated) grids with growing renewable penetrations, grid operators often struggle to maintain system stability. Operators in places as diverse as Ireland, Puerto Rico and Australia frequently rely on inertial response from thermal power plants like coal or gas-fired generators to balance sudden mismatches between supply and demand. However, recent research from Northern Ireland’s Queens University Belfast (QUB) finds that battery-based energy storage can provide inertial response for system reliability much more efficiently, at a lower cost and with substantially reduced emissions than a much larger quantity of thermal generation.

QUB’s research found that just 360 megawatts (MW) of battery-based energy storage could provide the equivalent stabilisation to Ireland’s All-Island electricity system as would normally be provided by 3,000MW of conventional thermal generation. That shift to batteries could save up to €19 million (US$22.5 million) annually and could achieve approximately 1.4 million tonnes of annual CO2 savings.

Inertia: A blink-of-the-eye grid balancing service

The California Public Utilities Commission ruled Thursday to authorize PG&E to procure energy storage or preferred resources (such as demand response or distributed solar) to ensure local reliability in areas previously served by the gas plants. The new resources can be individual or aggregated, and must be available by 2019 “if feasible and at a reasonable cost to ratepayers.”

This appears to be the first time a utility will procure energy storage to replace existing gas plants for local capacity needs. In Oxnard, a procurement process has begun to select storage instead of the proposed Puente gas plant. California deployed more than 100 megawatts of storage to shore up capacity after the loss of a major gas storage facility in the southern part of the state.

In this latest decision, though, regulators have chosen storage as a potentially cheaper alternative to maintaining two gas peakers and a 580-megawatt combined cycle plant. This process could become a playbook for phasing out more gas plants that become uneconomical in the future.

“The commission is showing confidence in the idea of preferred resources and energy storage as an alternative to the gas assets that currently provide reliability,” said Katie Ramsey, staff attorney at the Sierra Club, which filed a motion in support of the proposal. “This is a signal that clean resources don’t just compete with new gas plants — they can also perform the same services as existing gas plants.”

The case will test the economics of storage compared to existing gas infrastructure, and whether batteries in practice can provide the full range of services that a large gas plant performs.

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AES and Siemens are combining their efforts to launch new energy storage startup called Fluence Energy and compete with Tesla Energy in the fast-growing, new energy storage industry.

The new company is off to a strong start as the supplier of the soon-to-be new world’s largest lithium-ion battery-based storage project.

Today, the company announced that they received “all government approvals and authorizations and the launch of business operations on January 1, 2018.”

Stephen Coughlin, president and CEO of Fluence, commented on the launch:

“We continue to believe in and deliver on the promise of energy storage to reduce costs, improve power systems, and create a more sustainable future. However, we saw customers struggling to find a trusted technology partner with deep knowledge of the power sector and the ability to deliver an industrial grade solution they could count on to be there in the future. With a team drawn from both Siemens and AES, we are fluent in the power sector and bring the capabilities, global reach and experience to make sure our customers achieve the full value of storage.”

Fluence will become the supplier of AES’ Alamitos power center energy storage project in Long Beach, California serving Southern California Edison and the Western Los Angeles area.

The 100 MW/400 MWh is expected to become the biggest in the world – beating Tesla’s 100 MW/ 129 MWh project in South Australia in energy storage capacity and reaching parity with Tesla’s power capacity record.

The new startup listed some of its energy storage features in a press release:

• Bankable, proven and industrial-strength technology platforms optimized for different customer needs, including speed of response, long-term dependability and integration with other power resources;
• A comprehensive set of services and warranties covering the entire energy storage journey, from early-stage commercial analytics through the full operations and maintenance life-cycle of a project;
• The broadest set of energy storage grid applications including power generation, transmission and distribution alternatives, renewable energy integration, and commercial and industrial applications;
• Full turn-key installation and support services in more than 160 countries, tailored to meet specific needs and conditions; and
• A suite of financing packages through a new partnership with Siemens Financial Services, including leasing and project finance options.

AES and Siemens claim that the new startup instantly became the new world leader in energy storage with “nearly 500 MW deployed or awarded across 15 countries.”

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Last month at Greentech Media’s Energy Storage Summit, I had the pleasure of moderating a panel, Crowdsourced Market Insights: Role of Energy Storage in Creating the Grid of the Future. This panel employed a unique structure where our experts on stage were asked to interpret and weigh in as 500 attendees answered live polling questions on the top themes in the market. 

The results, with additional context from our research, are presented in a new research report, available for free here. Below, I summarize some key findings.

Storage will displace natural gas peakers (eventually!)

Only 1 percent of attendees feel that natural-gas plants will always out-compete storage, a perspective that may have been shaped by Shayle Kann’s earlier presentation indicating that 4-hour storage begins to compete with peaker plants within four years, and always wins financially within 10 years. The majority of attendees foresee energy storage dominance outside of a five-year time frame.

Broad optimism among the industry on utility engagement

More than four out of five attendees believe 41 percent or more of utilities will be including energy storage in their IRPs within five years — and their optimism seems justified. GTM Research’s tracking shows the trend is not just emerging — energy storage is becoming the norm in utility planning. 

In fact, Oregon is a sign of the times for utilities — Portland General Electric recently announced RFPs for up to 39 megawatts, the upper limit of the state’s energy storage mandate. When was the last time we saw a utility outpace legislators?

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