As a general rule, I love @drvolts stuff on our energy system and almost always learn from him. But I have to quibble with this one that - like most LCOE pieces conflates capex & opex. Short thread: #energytwitter
1/ My view is that for any energy storage system *once built* the only thing that really matters is round-trip efficiency (e.g., how much electricity you get out / how much you put in). For most battery systems it's around 80%.
2/ That means that you will run that asset as long as the price you get from selling the electricity is >= 1/0.8 = 1.25x the price you paid to buy the electricity. Above that point you will make marginal money and knock any more expensive source off the grid.
3/ In lots of parts of the country, on lots of days, the on-peak / off-peak price differential is > 1.25x. So - again, with the *once-built* caveat - the technology is already there. And frankly, that 80% value isn't likely to get much better.
4/ So now to address construction costs. Energy storage systems are, in general pretty expensive to build per MWh of capacity, but pretty cheap per MW of peak power. Generation technologies (think gas turbines) are the opposite.
5/ Since more MWh of storage = more hours of discharge, that makes it hard for long-duration storage to pay off it's capital as fast as investors would like. e.g., you're making marginal money, but may not be keeping up with your debt payments.
6/ But that's a question about your initial investment thesis, not whether or not the assets are competitive on the margin with other dispatchable generation. Again, *once built* they will run.
7/ And here's the thing: that problem applies to darned near EVERY generation technology. There's a reason why folks in the power industry like to say "everyone wants to be the third owner of a power plant"
8/ In the 90s, we built 200 GW (roughly 20% of the entire US power grid!) of combined cycle gas turbines. Lots of those investors went bankrupt because they never earned as much money per MWh as they thought they would. But the assets are still there, still running.
9/ Once they were sold out of bankruptcy to new owners (who paid pennies on the dollar) they were good investments. That's a problem for our power grid, and a structural failure of the way we designed electric markets. But it's not a statement on the technology.
10/ By all means, let's keep doing R&D to lower the cost of energy storage technology, and let's figure out how to make sure we provide economic signals to invest in things that the grid - and our climate - need.
11/ But don't confuse a structural problem in the market with a short-coming in any given technology. Rant over. And, again, @drvox is super-smart and a great writer. Just a small quibble. /fin

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More from @SeanCasten

2 Jun
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