Sectoral dynamics
Cost analysis of various energy storage technologies per kilowatt hour
In the new type of power system, energy storage will become a crucial part, which is a necessary guarantee for the consumption of new energy and the safety of the power grid. It will be widely applied on the power generation side, power grid side, and power consumption side, with broad demand space. In the domestic market, the mandatory allocation and storage policy of wind and solar energy drives the exponential growth of energy storage demand. Under the dual impetus of market demand explosion and policy encouragement, mature pumped storage and lithium-ion energy storage have shown explosive growth, and other new energy storage technologies have also entered the development fast lane.
Today we will take you through various energy storage cost calculations.
1、 Calculation of energy storage and electricity cost
1. Calculation Method for Levelized Electricity Cost
Levelized Cost of Energy (LCOE) is the electricity generation cost calculated by first leveling the cost and electricity generation during the project lifecycle, which is the present value of the cost over the lifecycle/the present value of electricity generation over the lifecycle.
Similarly, the full lifecycle cost of energy storage is the Levelized Cost of Storage (LCOS). LCOS can be summarized as the total lifecycle cost of an energy storage technology divided by the accumulated transmitted electrical energy or power, reflecting the internal average electricity price when the net present value is zero, which is the profit point of the investment. Levelized Energy Storage Cost (LCOS) quantifies the discounted cost per unit discharge of specific energy storage technologies and application scenarios, taking into account all technical and economic parameters that affect the discharge life cost. It can be compared to Levelized Energy Cost (LCOE) and is a suitable tool for comparing the cost of energy storage technologies.
Specifically, the cost of leveled energy storage includes investment cost, operation and maintenance (O&M), and charging cost. The sum of the three is divided by the total discharge amount during the investment period. Considering the availability of data, discharge depth and capacity decline, as well as recovery costs, will not be considered for the time being.
The specific calculation formula and indicators involved are as follows:
1) Investment cost
Capacity cost refers to the equipment and construction costs related to energy storage capacity in the energy storage system, such as the cost of equipment and construction costs such as batteries and battery containers in battery energy storage, the cost of reservoirs in pumped storage power plants, and the cost of air storage chambers and heat storage systems in compressed air energy storage.
Power cost refers to the equipment and construction costs related to power in energy storage systems, such as converters and transformers in battery energy storage systems, water turbines in pumped storage power plants, converters and transformers in battery energy storage systems, water turbines in pumped storage power plants, compressors and expanders in compressed air energy storage.
As shown in the formula, CE is the installation cost that varies with capacity, CP is the installation cost that varies with power, and power cost+capacity cost=unit power cost * energy storage power+unit capacity cost * energy storage capacity=unit power cost * energy storage capacity/discharge duration+unit capacity cost * energy storage capacity.
2) Charging cost
Charging cost is an important factor in calculating the cost of electricity per kilowatt hour, but due to the need to consider the electricity price itself, charging cost varies greatly among different regions and is difficult to compare. In addition, the electricity prices for different types of electric energy sources are also different, with wind power, gas power, and thermal power being more expensive, and wind and solar power achieving evaluation for grid access. Therefore, if we only compare the cost of electricity consumption of various energy storage technologies, we can uniformly ignore their charging cost PC and only consider the cost of their storage and release processes.
3) Operation and maintenance costs
The operation and maintenance costs of energy storage mainly include labor, fuel power, component replacement, etc.
4) Accumulated transmission power
To calculate the cost of energy storage per kilowatt hour, it is necessary to determine the number of kilowatt hours or cycles that the energy storage system can release throughout its entire lifecycle. This involves the system life T (in years), annual cycle times n (t), and cycle efficiency of the energy storage system.
In order to compare the trends in the cost of energy storage for various energy storage technologies, we first assume the energy storage capacity, energy unit cost, service life, charging and discharging efficiency of each technology by 2030:
A. In terms of capacity cost
Assuming that the development speed of energy storage technology is relatively fast before 2030, and gradually slows down as the maturity of technology and equipment increases in the later stage, that is, assuming that the capacity costs of the above energy storage methods will decrease by 20% between 2020 and 2030.
Lead carbon batteries, due to their high material cost (lead), have limited room for capacity cost reduction. Assuming that the capacity cost remains unchanged from 2020 to 2030.
In terms of pumped storage, it is assumed that the cost of pumped storage capacity will increase by 10% from 2020 to 2030.
In terms of compressed air energy storage, considering that the equipment used for compressed air energy storage has become highly mature, the cost reduction is limited. It is assumed that the cost will decrease by 10% by 2030.
In terms of hydrogen energy storage, it is assumed that the capacity cost will remain unchanged from 2020 to 2030.
B. In terms of power cost
The cost of lead carbon battery materials is relatively high, and there is limited room for cost reduction. Assuming that from 2020 to 2030, the power cost of lead carbon batteries will decrease by 10%, while the cost of other electrochemical energy storage power will decrease by 20%.
In terms of mechanical energy storage, considering that the compressors, expanders, gas storage, heat exchange and other equipment used for compressed air energy storage have become highly mature, the reduction in power cost is also limited. It is assumed that it will decrease to 7500 yuan/kW by 2030.
In terms of hydrogen energy storage, it is assumed that the cost of hydrogen energy storage power will decrease by 10% from 2020 to 2030.
C. In terms of charging and discharging efficiency
Assuming that the charging and discharging efficiency of lithium-ion and sodium ion batteries reaches 90%, and the charging and discharging efficiency of liquid flow batteries and lead carbon batteries reaches 85% in the short term by 2030. The charging and discharging efficiency of pumped storage and compressed air storage has also been slightly improved, but compared to other technologies, the charging and discharging efficiency is relatively low.
The discount rate refers to the ratio that converts the expected future finite period returns into present value. The higher the discount rate, the higher the preference for the present. This concept can also be used for cost calculation of energy storage. Assuming a discount rate of 7% for energy storage costs, the annual operation and maintenance expenses are generally around 3% of the initial investment cost.
We can roughly estimate the electricity cost of various energy storage technologies:
1. From 2020 onwards, the ranking of the cost of electricity consumption for various energy storage technologies is from low to high: pumped storage<lithium-ion batteries<all vanadium flow batteries<lead carbon batteries<compressed air<sodium ion batteries<sodium sulfur batteries<hydrogen energy storage.
Pumped storage is still the current solution with low cost per kilowatt hour, significantly lower than other energy storage technologies. Lithium ion and all vanadium flow batteries have similar energy storage costs, making them the second most cost-effective technology after pumped storage.
The cost of compressed air energy storage and sodium ion battery energy storage is also below 1 yuan/kWh, while sodium sulfur batteries and hydrogen energy storage do not yet have cost advantages.
2. By 2030, the cost per kilowatt hour (kWh) of various energy storage technologies will be ranked in descending order: lithium-ion batteries, pumped storage, all vanadium flow batteries, lead carbon batteries, sodium ion batteries, compressed air, sodium sulfur batteries, and hydrogen energy storage.
That is to say, if the capacity cost and power cost of lithium-ion batteries can decrease by 20% between 2020 and 2030, the cost of standardized energy storage per kilowatt hour is expected to be lower than the current economic pumped storage by 2030.
Overall, all vanadium flow batteries and lithium-ion batteries are expected to achieve significant cost reductions, and by 2030, they will still be the two technologies with moderate and low electricity costs for electrochemical energy storage; The cost of lead carbon batteries, sodium ion batteries, and compressed air energy storage is second, while the cost of hydrogen energy storage is still at a relatively high level.
2、 Several Issues to Pay Attention to in the Comparison of Various Energy Storage Economies
1. On the comparability of electricity cost for various energy storage technologies
Due to the longer physical energy storage lifespan of pumped storage, compressed air energy storage, gravity energy storage, and other mechanical energy storage systems, all of which are around 30 years, the cost of kilowatt hour electricity will naturally be lower at this stage. In contrast, the lifespan of electrochemical energy storage systems is shorter, and there is no significant advantage in terms of kilowatt hour electricity cost compared to mechanical energy storage. Therefore, the cost of leveling energy storage is more suitable for comparing various types of electrochemical energy storage and mechanical energy storage separately.
2. Why is the initial investment cost divided into capacity cost and power cost?
Taking a large lithium-ion battery energy storage power station as an example, 100MW/200MWh is a common configuration, where 100MW refers to the power for external charging and discharging, and 200MWh refers to the capacity. Generally, it can be understood that components related to the DC side are related to duration and capacity, while AC, the link after the inverter, is related to power and not to duration. Therefore, the cost of each component of the energy storage system can be roughly divided into two parts: capacity related and power related, namely capacity cost and power cost. There are also some costs that are not related to capacity or power, such as battery management systems (EMS), but due to their small proportion, they are temporarily not considered in our calculation process.
3. How much does the cost of energy storage and electricity need to be reduced in order to be meaningful?
Energy storage, also known as energy storage, refers to the process of using devices or media to store energy when it is surplus and releasing it when needed. Its essence is to regulate the mismatch between energy supply and demand in terms of time and intensity.
For intermittent energy sources such as wind power and photovoltaic, when the sum of current generation costs and energy storage costs is lower than that of thermal power, they have more advantages compared to thermal power. For example, in some areas with better resources, the cost of photovoltaic power generation ranges from 0.1 to 0.15 yuan/kWh. As long as the grid electricity price is higher than this price, profits can be achieved. If an energy storage system is equipped and the number of cycles increases rapidly, assuming that the electricity cost of the energy storage system itself can be reduced to 0.2 yuan, the cost of transmitting electricity through the energy storage system is 0.3-0.35 yuan/kWh. Taking Guodian Power as an example, the average online electricity price from January to June 2022 is 0.35 yuan/kWh.
Therefore, if the current cost of energy storage can be reduced to 0.2 yuan/kWh or less, then the combination of light storage and thermal power may have economic benefits, and the electricity provided by the combination of the two is more stable and controllable. However, the cost of power generation and grid electricity prices may vary among different regions, or there may be some differences.
4. Assuming a discharge time of 4 hours for lithium-ion batteries, is there room for improvement?
For lithium battery energy storage systems, charging and discharging are often related to power and capacity. Taking the current 200MWh system as an example, if discharged at 100MW power, it can be released for 2 hours, and if discharged at 50MW power, the discharge duration can reach 4 hours. If equipped with 800MWh large capacity battery cells, it is not impossible. However, due to the high price of battery cells, they account for nearly half of the EPC cost of lithium battery energy storage. Therefore, increasing battery capacity * will lead to a significant increase in costs. In the current stage of low energy storage benefits, making larger capacity battery cells is not cost-effective.
Source: Shede Low Carbon Channel (Zhihu)
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