With lithium-ion batteries raising ESG-related concerns, investors are increasingly seeing value in long-duration storage
It’s the question being asked by the biggest movers and shakers in the energy storage industry – which type of storage will challenge the dominance of lithium-ion batteries? Lithium-ion batteries are currently the indisputable technology of choice for storage developers, representing 90 per cent of the total amount of storage deployed globally in 2020 and 2021.But energy storage investors are starting to think twice about lithium-ion, partly because lithium-ion carbonate prices soared more than ten-fold between 2021 and 2022 – prices have since fallen, but lithium carbonate is still around five-times as expensive as it was two years ago. Other concerns include the fact that the mining of lithium can have negative social and environmental impacts. As a result, lithium mining companies are facing increasing scrutiny from investors regarding their environmental credentials. Fears have been expressed that an ESG-related “investor backlash” could derail the lithium mining industry – there have also been allegations of toxic chemicals from lithium mines polluting water supplies.
In light of such controversy, the hunt is on for the ‘next big thing’ in energy storage, specifically an alternative form of technology that is likely to raise fewer environmental concerns. However, there are other factors that will also determine the attractiveness of alternative types of storage. Frequency-response management – that is, maintaining grid frequency at around 60 hertz (in the case of the US) or 50 hertz (in the UK and Europe) to prevent declines in system stability – is currently one of the primary applications for energy storage, and often requires a duration of one hour or less (to which battery storage is best suited because it is more cost-effective when used over shorter periods). But in the future, energy storage will be more frequently used for price arbitrage or capacity provision, and as a result the focus will shift towards the development of long-duration storage technologies. Consequently, investors are increasingly seeing the value in such technologies.
So which types of long-duration storage are currently generating the most interest among investors? Here, Energy Storage Report gives you a run-down of four to watch:
Primitive CAES systems were deployed in the 1870s to provide effective, on-demand energy for cities and industries. Though there are many smaller types of CAES, the first utility-scale system was established in Germany in the 1970’s with more than 290 MW nameplate capacity. It’s a technology that is now starting to catch investors’ attention in a big way, with one international bank having told Energy Storage Report that it is in discussions about a potential investment in CAES. The touchpaper was lit in January last year when Canadian CAES company Hydrostor secured a preferred equity financing commitment of $250 million from the private equity and sustainable investing businesses within Goldman Sachs Asset Management. Investors see Hydrostor as being well-placed to be a leading player in the market and many are convinced that the need for utility-scale long duration storage is becoming increasingly urgent. Elsewhere, at the end of last year, Australian energy developers Sunshine Hydro and Energy Estate said they were exploring the possibility of utilising long duration energy storage technologies, including compressed air. In February this year, compressed air energy storage company Corre Energy raised approximately €8.9 million via the placing of new shares. This came a month after the company launched a subsidiary in the US – the US Department of Energy has ranked CAES as one of the lowest cost long duration storage technologies.
Flow batteries appeal to investors because they are safe and non-toxic, which makes them more robust when installed in harsher environments. These were among the main drivers behind Energy Storage Industries Asia Pacific’s decision last year to enter a strategic partnership with ESS for the provision of up to 12GWh of iron flow batteries in Australia, New Zealand and Oceania. Indeed, some observers have tipped ESS’ product to become the “gold standard in the flow battery industry”.
However, flow batteries do score highly in other areas among investors. For example, they make use of low-cost materials – vanadium, the most commonly used electrolytes in flow batteries, is widely available. Vanadium can be recovered from waste products such as mining slag, oil field sludge and fly ash (a coal combustion product that is composed of the particulates that are driven out of coal-fired boilers together with the flue gases). As a result, flow batteries are appealing to investors from an environmental, social and governance (ESG) perspective as they do not utilise ‘conflict’ materials such as cobalt.
In September last year, the Sacramento Municipal Utility District (SMUD) in California placed its faith in long-duration iron flow batteries with the announcement of a deal with ESS for the provision of 200MW / 2GWh, which will be integrated into the SMUD electricity grid from 2023. Last year also saw special purpose acquisition company (SPAC) Mustang Energy PLC enter into an agreement with Acacia Resources to acquire its 27.4 per cent interest in VRFB Holdings – a shareholder in Austrian vanadium redox flow battery system manufacturer CellCube – for US$10.5 million. In August last year, Largo Clean Energy, part of Largo Inc, signed a ‘non-binding’ memorandum of understanding with Ansaldo Green Tech to negotiate the formation of a joint venture for the manufacture and commercial deployment of vanadium redox flow batteries in the European, African, and Middle East Power Generation Markets. Also in 2022, Australian energy developers Sunshine Hydro and Energy Estate said they were exploring the possible use of flow batteries.
Some analysts expect gravity-based storage to figure much more prominently in energy systems around the world in the coming years. In September last year, it was announced that Energy Vault’s gravity energy storage technology will be deployed at a 2GWh storage project in China being developed by Atlas Renewable LLC, the Investment Association of China, environmental management company China Tianying and a group of provincial and local governments. Meanwhile in February this year, underground gravity storage technology company Gravitricity signed a memorandum of understanding with Czech state enterprise DIAMO with the aim of working together to seek EU funds to transform the former Darkov deep mine into a large-scale energy store, a project that could be a pathfinder for projects Europe-wide. A month earlier, Gravitricity appointed corporate finance specialists Gneiss Energy to spearhead a £40 million funding drive with the goal of building three demonstrator projects in the next five years. But some gravity-based energy storage technologies have been plagued by sceptics that question their effectiveness. Last year, Energy Vault – despite its roots in gravity-based storage – signed a contract for the deployment of a 275.2 MWh battery storage project at W Power’s Energy Reliability Center in Stanton, California, in a move it said reflected the company’s new “technology-agnostic” integration and software strategy – ultimately, it was a development that added fuel to the gravity-based storage sceptics fire.
Zinc-air batteries are appealing because they have a higher energy density and better cycling stability than other batteries. Zinc8 Energy Solutions, which manufactures zinc-air batteries, says the technology has no fire and explosion risk, which makes it much safer. The company also says the batteries have “no capacity fade over extensive lifetime”. Earlier this year, Zinc8 was approved for a $9 million grant from Empire State Development, a New York economic development corporation. The grant took the form of tax credits offered as an incentive for the company to locate and establish its first US-based production facility in New York State. Meanwhile, in January this year, zinc-powered long-duration energy storage system provider Eos Energy Enterprises received $13.75 million in investment from a number of investors including Clear Creek Investments, LLC, Ardsley Advisory Partners and AltEnergy, LLC. Elsewhere, in December last year, Oregon-based Nickel-zinc battery-based systems company ZincFive raised $54 million in Series D funding, bringing the company’s total funding since inception to $139 million. Despite, the undoubted potential of zinc-based energy storage systems, concerns have been raised about possible limitations on future zinc supplies.
With demand for long-duration storage set to rise in the coming years, investors are aware that the use of long-duration storage will become more commonplace. DNV has forecast that long-duration technologies such as CAES, flow batteries, gravity-based storage and zinc-based technologies will “enter the market at scale” in the second half of the 2030s. Prior to that, despite some reservations about some types of gravity-based storage, we can expect notable growth in the deployment of all these types of long-duration storage in the near future.
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