Affordable storage is seen as the missing link between intermittent renewable power and reliable energy supply. McKinsey research anticipates costs could fall to $200 per kWh in 2020 – half of today’s price, which would help transform the energy mix of many nations. By 2025, costs of power storage are expected to fall to $160 kWh or less, making it affordable to use for utilities and grid operators.
As technology costs fall, the market for energy storage in the United States is estimated to reach up to $2.5 billion by 2020 – six times as much as last year. As the technology matures, McKinsey analysts estimate that the global opportunity for storage could reach 1,000 gigawatts in the next 20 years.
Identifying and prioritizing projects and customers is complicated; so analysts pointed out that aggregating numbers is not useful when evaluating prospects for energy storage.
To identify today’s desirable customers, McKinsey analysts built a proprietary energy-storage-dispatch model that considers three kinds of real-world data:
- electricity production and consumption (“load profiles”), at intervals of seconds or minutes for at least a year
- battery characteristics, including price and performance
- electricity prices and tariffs
Using both public and private sources, we accessed data for more than a thousand different load profiles, dozens of batteries (including lithium ion, lead acid, sodium sulfur, and flow cell), and dozens of electricity tariff and pricing tables.
Some customers are charged for using power during peak times and the model used calculates that in North America, the break-even point for most customers paying a demand charge is about $9 per kilowatt. Yet analysts suggest that “based on our prior work looking at the reduction in costs of lithium-ion batteries, this could fall to $4 to $5/kW by 2020.”