Finding the energy for the fight against inflation

• 1 year, 6 months ago (2022-10-13)
• Junior Isles

Storage 37

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By Alan Greenshields , Director of Europe ESS Inc.

The largest interest rate increase in 27 years was enacted by the Bank of England on August 4th.  The hike was intended to combat inflation, primarily caused by the more than doubling of energy costs over the past year and the consequent increase in the cost of most consumable goods.

At the same time, the cost of renewable-generated electricity is one sixth the cost of the gas-generated electricity that makes up around half of the UK’s power supply. So, the solution should be simple: a rapid transition to renewable energy to cut the cost of energy and reduce inflation with the added benefit of reducing carbon emissions and saving the planet. However, reality is more complicated. The path to a renewable energy economy will require not just significant investment but also the deployment of new energy storage technologies to enable a fully renewable grid.

Inflation reduction is an energy Issue

Instability in global energy markets is the fundamental driver of the current inflationary cycle affecting the UK and other European countries. A report by the World Bank highlighted the impact of rising energy costs on the world economy and predicted that global output growth could be reduced by 1 per cent in 2022.  If governments want to address the underlying vulnerabilities of economies reliant upon fossil fuels, they must accelerate the transition to renewable energy.

In reaction to inflation and recent energy price volatility, the U.S. Federal Government has enacted the Inflation Reduction Act. The Act delivers a down payment on deficit reduction which will fight inflation while investing in domestic renewable energy production and reducing carbon emissions by roughly 40 per cent by 2030.

The Act’s clean energy provisions aim to incentivise individuals and industry to move away from fossil fuels. The biggest share of funding goes to tax credits and rebates for a host of renewable generation and energy storage technologies, with President Biden pledging US$369 billion to advance America’s clean energy deployment.

The Act’s investments are true to its name: the investments in clean energy and electrification will reduce future demand for fossil fuels, reducing exposure to unstable energy markets.

Renewables offer a solution

Between 2000 and 2020, the price of renewable power has fallen sharply and is now the lowest cost form of new energy generation. In fact, it was recently reported that UK offshore wind farm operators will sell power for £37.35 per megawatt hour (MWh ), while electricity produced using a large (600 MW 500 hr) open cycle gas turbine is £222 per MWh according to The Department for Business, Energy & Industrial Strategy based on today’s wholesale gas prices.

The six-fold difference in costs between wind and fossil fuel energy implies that renewables have the potential to save money for consumers and address a key driver of inflation in the U.K., while cutting carbon emissions and reducing reliance upon imported energy.

The low cost of renewables has helped drive a major increase in renewable energy capacity, with the IEA reporting that in 2021 alone, 295 GW of renewable energy capacity was added . This represents a 6 per cent increase in renewable energy capacity from 2020 levels, even despite the supply chain and other challenges associated with the Covid-19 pandemic.  As supply chains continue to stabilize, renewable energy capacity will only increase.

Investment in these technologies continues to rise as well. With global energy investment expected to reach $2.4 trillion in 2022, an 8 per cent rise over 2021 according to the IEA , and the most rapid growth in investment is in emerging technologies including batteries, carbon capture utilisation and storage. These new technologies will enable continued growth in low-cost, low-carbon energy.

As investment in renewables continues to grow, market reforms will be necessary to ensure that these cost savings are delivered to consumers. As Michael Liebreich recently suggested , one option could be separating the U.K. electricity market into separate renewable and fossil markets to deliver certainty to renewable generators and cost savings to consumers.

Energy storage infrastructure is needed

Regardless of market structure, as renewable energy penetration continues to increase, it is becoming clear that additional wind and solar alone will not deliver a reliable clean energy system. The issue, highlighted in the LDES Council Net-Zero Power Report , is that once renewable generation exceeds approximately 25 per cent of the power on the grid, the intermittent nature of wind and solar can challenge grid stability. To meet the needs of the grid, energy storage must be added to store excess renewable energy for use when needed.

Energy storage technologies range from thermal storage using molten metals or salts, to mechanical energy storage through the raising and lowering of concrete blocks, to electrochemical batteries. Batteries may seem to be the most straightforward option, but while the lithium-ion battery technology that powers our phones, laptops and EVs is used for grid storage projects, lithium-ion batteries are not always well-suited to this application. Their expense and concerning safety track record have illustrated the limitations of lithium-ion for grid-scale storage.

Fortunately, new technologies are available now that provide cost-effective grid-scale storage. Iron flow batteries, such as those manufactured by ESS Inc., provide an answer for grid energy storage. These non-lithium batteries use earth-abundant materials in their manufacture and provide a low-cost option for long-duration energy storage. Based on an iron redox chemistry, battery storage capacity can be expanded by simply increasing the volume of electrolyte, and the batteries are designed for a 25 year lifetime with unlimited cycling.

Utilities and planners are beginning to take notice. American electricity utility Sacramento Municipal Utility District ( SMUD ), has realised the importance of these new long-duration energy storage technologies to achieve a 100 per cent renewably powered grid. SMUD has partnered with ESS Inc. to deliver 200 MW/ 2 GWh of long-duration energy storage to combat climate change and achieve net zero carbon in the utility’s energy supply by 2030 without raising customer rates.

The UK and Europe could do worse than look towards  California for inspiration to build a resilient clean energy system that delivers affordable, reliable clean energy.