Energy Storage:

Opportunities & Challenges

Prepared by AXIS in collaboration with

June 2017
TABLE OF CONTENTS
I. Energy Storage: Opportunities and Challenges................................................. 3
a. Introduction

II. Applications, Benefits and Scope for Using Energy Storage............................. 4–5
a. Why does the electricity supply system need storage?
b. Supply and demand challenges facing electricity supply systems
c. Why are revenue streams from energy storage highly variable?

III. Mapping Storage Technologies to Applications................................................. 6–8

a. How are battery technologies applied across the value chain?

IV. Barriers and Risk to Battery to Storage Deployment......................................... 9–16

a. What are the barriers to deploying battery storage?
b. What are the risks associated with battery storage deployment?
i. Technical risks
ii. Commercial risks
iii. Market risks
iv. Natural events risks
c. What mitigation options and strategies exist for storage?

V. Conclusions............................................................................................................17

VI. Footnotes............................................................................................................... 18

VII. About the Authors.................................................................................................19

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I. ENERGY STORAGE:
OPPORTUNITIES & CHALLENGES
Introduction
This report has been commissioned by AXIS to provide Battery storage (in particular electrochemical storage systems at
insights into energy storage with a bias to battery storage, utility scale) has been identified as a critical ‘step-change’ in the
technologies and challenges for those wishing to take full future penetration of renewables and its dispatch. Even though,
advantage of the opportunities these technologies bring. the battery industry is in a period of transition, significant
advances in technology and changes in their economics has
Electricity is the world’s fastest-growing form of energy brought a wide range of storage applications to the market.
consumption1. Yet, current global trends in electricity supply In this optimistic space, the conditions are becoming more
and use are considered unsustainable from an economic and favourable for both purchasers and suppliers. Suppliers, for
environmental perspective. Consequently, the future energy example, are now seeking commercial opportunities and
landscape is changing. Decarbonisation2 and modernisation of looking to establish themselves as global market leaders5.
the electricity industry, towards smarter, more disaggregated
and more decentralised energy systems, are now a priority. The need for battery storage technologies is clear. Moreover,
Battery storage is at the heart of this transition. the evidence indicates this need will continue to grow. But
as in any rapidly maturing market, where technology types
Whilst pumped hydro-electric storage remains the incumbent are evolving at different rates of commercial readiness,
worldwide storage technology (with a global capacity of deployment is complex and comes at a price. Fortunately,
around 99%3), the market share in the remaining non-hydro- in the right situation, batteries can provide services that
electric technologies is expected to grow exponentially in the improve and secure revenue for a project.
coming decade. A key driver has been the need to integrate
intermittent4 (or sometimes referred to as ‘variable’) renewable
power generation in countries where the proportion of
renewables is high (e.g. Australia, Germany, Denmark, China
and parts of the US).

Different energy storage systems grouped by technology

STORAGE SYSTEMS
MECHANICAL Pumped hydro & flywheel

THERMODYNAMIC Compressed air, cryogenic storage & heat engines

ELECTRICAL Capacitors & superconducting magnetic energy storage

CHEMICAL Hydrogen / organic cycle, fuel cells, electrolyser & ice

THERMAL Pumped heat / heat engines, molten salt, ice & ceramics

ELECTROMECHANICAL Batteries: lead acid, nickel cadmium, high temperatures, flow, lithium & metal-air

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II. APPLICATIONS, BENEFITS &
SCOPE FOR USING ENERGY STORAGE
Why does the electricity supply system need storage?
Electricity is a continuous service and ensuring power grids However, power grids that have not been designed to
can maintain a robust and resilient delivery system, without meet intermittent renewable integration (i.e. do not have
disruption, requires supply and demand to be precisely adequate compensating measures), are often unable to
balanced at all times6. This is challenging for the network provide satisfactory performance when power from these
operator as demand is constantly changing, although it does sources exceeds 20-25% of the whole generated power11
follow predictable patterns. However, forecasting these patterns & 12
. In this case, compensation can be provided by battery
is not a precise science and failure to maintain the balance storage12. The increased penetration of renewables is making
could result in consumption needs being compromised or storage applications more critical and creates opportunities
result in costly blackouts. such as “intermittent balancing” to avoid curtailment 13

To maintain a continuous service, generators are called

upon at the request of the grid operator to make constant Electricity storage has two
adjustments to supply, either upwards or downwards in
response to predefined time frames and ramping rates. Whilst primary functions:
supply is conventionally provided by coal, gas or • Levelling the demand curve or load levelling: Storing
pumped hydro-electric resources, there has been a shift power during periods of light loading on the system and
towards battery storage to provide these frequency delivering it during periods of high demand. For the power
response services at very short notice. grid operator, this reduces the load on less economic peak-
Other applications include; alleviating saturation and electrical generating facilities and provides economic benefits by
problems8 (as storage facilities are much easier to install than deferring major capital investments to grid improvements7.
transmission lines9 ), and ‘fringe-of-grid’ energy supply (as an • Ancillary services: A suite of specialist services that allows
alternative to network or micro-grids). In this application, the power grid operator to ensure a continuous service
storage is used for maintaining high quality and reliable of electricity.
electricity supply to remote and costly load centres at the
fringes of the power network10.

Supply and demand challenges facing electricity supply systems

Globally, electricity supply systems are facing increasing supply and demand issues, which in part can be addressed by energy storage.

Supply Demand
Penetration of renewables Demand increase from digital
Hedging energy prices Electric Increasing peak demand
Distributed assets and resources Power Higher summer peak
Constrained networks
System Incorporating electric vehicles
Resilient power supplies Smart grids
Aging infrastructure Fuel saving

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Why are revenue streams from energy storage
highly variable?
The business case for battery storage is very complex and However, it is vital that developers and other parties interested
opportunities for revenue streams are highly variable. This in battery storage understand where the income streams
is because in many countries market conditions and are likely to come from. Ancillary services, for example,
regulatory frameworks, that promote their application, are provide the highest financial value for the Independent
also variable. Moreover, further complexity is introduced as Power Producer (IPP) and so many storage installations are
commercial arrangements also vary depending on where founded on this business model. Although not all markets
in the value chain storage is deployed and the type of are favourable to battery storage providing these services.
technology used (Exhibit 1). Equally, the opportunity to use batteries for time-shifting has
its technical merits, but the reality is that most power grids
Other opportunities to receive mutually inter-dependent and already have an effective control over balancing generation
multiple income streams (sometimes referred to as to match demand using cheaper alternatives (e.g. use of
‘benefits-stacking’14) include, time-shifting of electricity diesel standby).
production, overcoming network constraints, peak-lopping /
shaving15 and ancillary services. These are critical offerings in
the value proposition for many battery storage
technologies.
Exhibit 1: Commercial summary of users of energy storage across the electricity supply chain
SERVICE TYPE SERVICE KEY POINTS
GRID, Frequency Monthly to multi-year contracts. Highest value. Market competition between providers of
TRANSMISSION Reponse demand-side response, traditional generation stations and energy storage systems. Typically
AND DISTRIBUTION entails waiting in stand-by until a disturbance on the grid at which point power must be
SUPPORT delivered. Frequency response is either dynamic or static.

Short Term Seasonal to multi-year contracts. Competition as above. Entails waiting in stand-by (warning of
Reserve minutes to hours).

Reactive Power Annual or seasonal contracts. Low value service available in certain locations only.

Capacity / Peak Not commonly available via market; occasional tender or auction opportunities (there is a
Demand Reduction Capacity Market in the UK). Location-specific.

RENEWABLE Managing Not commonly available via market; occasional tender opportunities. Can be location-specific
ENERGY SUPPORT Renewable Energy if supporting transmission & distribution networks. Might require co-location with a renewable
Constraints generator.

MARKET Energy trading Accessible via energy markets. Delivery typically scheduled. Low annual average earnings
unless grid has capacity shortage. Difficult to forecast.

Portfolio Balancing Energy portfolios comprising generation and demand may be ‘short’ or ‘long’ and exposed to
a balancing cost. Flexible resources are of value in reducing the imbalance. Typically, low value
due to other options being available.

CUSTOMER-SITE Peak Demand Industrial customer is billed according to the maximum demand, which can be reduced
SUPPORT Reduction by generating from energy storage. Calculated annually. Storage must be co-located at the
demand site and dispatched at peak demand.

Energy trading Difference between peak and off-peak prices. If storage operates to discharge during peak
times and to charge during off-peak times, revenue possible. Storage must be co-located
at the site behind the meter. A separate contract is not required as the saving is made by
reducing the energy consumption, but a contract may be needed with site owner.

Energy Similar to above, storage can be operated to allow sites to operate independently of electricity
Independence networks. Desirable for green credentials or providing a more-secure and stable electricity
supply, where grid is poor quality or interruptible. No contracts required, but may be needed
with site owner. Typically, low-value.

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III. MAPPING STORAGE TECHNOLOGIES
TO APPLICATIONS
How are battery technologies applied across the
value chain?
The versatility of battery storage can ensure both short-term These characteristics determine what services they provide
and long-term services are efficiently provided through and where on the value chain they should be deployed.
a wide range of applications. However, the application of Lithium batteries, for example, provide the widest range of
battery storage technology depends on its performance applications compared to other storage technologies.
characteristics, namely capacity, speed of response
(discharge time) and physical size of a unit (measured in
power rating) (Exhibit 2). Other factors include lifetime,
environmental acceptability and safety, and efficiency
(Exhibit 3).
Exhibit 2: Battery types, by capacity, discharge times and application

Fast response Grid support: Bulk power

& power quality balancing/load levelling management
Days

Sodium–Sulphur (Na S)
Sodium–Nickel–Chloride (Na Ni Cl)
Discharge time at rated power

Fuel cells + hydrogen

Flow batteries
Hours

High temperature batteries (Na S)

Advanced lead acid batteries

High-energy super-capacitors

High temperature batteries (Na Ni Cl)

Minutes

High temperature (sodium) batteries

Lithium batteries

Conventional lead acid batteries

Nickel cadmium batteries

Nickel-metal hydride batteries

Seconds

High-power super-capacitors

Super-conducting magnetic energy storage

1 kW 10 kW 100 kW 1 MW 10 MW 100 MW

Source: RCG analysis Logarithmic scale power rating

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Exhibit 3: Summary key parameters for different battery storage technologies
and siting considerations
ENERGY ENVIRONMENTAL
TECHNOLOGY POWER STORAGE SPEED OF ACCEPTABILITY AND
TYPE RATING CAPACITY RESPONSE LIFETIME SITING REQUIREMENT EFFICIENCY
LEAD ACID Small to large Medium High <15 years Acceptable. Battery electrolyte 85-100%
BATTERIES scale (up to 3h) ~ 2000 containment important

NICKEL CADMIUM/ Small to large Medium High <15 years Restrictions in place on use 70-85%
METAL BATTERIES scale (up to 3h) of Cd. Battery electrolyte
containment important

HIGH- Medium to Medium High ~ 2500 Good environmental. Suitable 70-85%

TEMPERATURE large scale (up to 6h) full cycles for industrial areas
BATTERIES

FLOW BATTERIES Small to large High High Varies. Battery electrolyte containment 70-85%
scale Can be ~ important
15 years

LITHIUM Small to large Low High ~ 10 years Acceptable 85-100%

BATTERIES scale

Power to the electricity supply system is usually required at short notice (e.g. seconds to just a few minutes and hours)
(Exhibit 4). Battery storage technologies are ideally suited to providing power at short notice. This feature is critical as
supply to the power grid on these terms is considered to be of high revenue value.

Exhibit 4: Application of battery storage across the electricity value chain

Battery application and discharge  *me  

Short duration Medium duration Long duration

(<2 min) (2 min – 1 hour) (>1 hour)
Operating reserves(A) Replacement reserves
Black-start services
Generation Firm renewable outputs
side Fast response services Energy trading(B)
Frequency response & management services Avoid curtailment

Smooth intermittent resource output

Transmission Fast response services Improve system reliability
side
System inertia Defer upgrades

Defer upgrades
Distribution Mitigate blackouts
side
Improve power quality Integrate distributed intermittent renewable generation

Maintain power quality Peak lopping/shaving

End-user
side
Uninterrupted power supply

Flow
High temperature (Na S)
Advanced lead-acid
High temperature (Na Ni Cl)
High temperature (saline)
Lithium
Conventional lead-acid
Nickel cadmium
Nickel-metal hydride
AAlso known as spinning reserves
Source: Adapted from SBC Energy Institute. (2013) Ancillary services BSometimes referred to as arbitrage

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The arguments for battery storage are very persuasive. They offer important opportunities due to their modularity, relative
simplicity, speed of installation, low maintenance, high reliability, and (more recently) a steep downward trend in their price
trajectory.

There are now a wider range of battery storage technologies on the market with different applications (Exhibit 5).

Exhibit 5: Summary of battery storage technologies and their application

BATTERY
TECHNOLOGY APPLICATION
LEAD ACID • Lead acid batteries are still the most popular and widely available throughout the world (e.g. flooded cells and gel
BATTERIES type systems).
• From small installations in domestic or remote areas to larger systems (>10MW) as in telephone exchanges or data
centers where they have been used for standby power.
• Over 95% of battery can be recycled.

NICKEL CADMIUM/ • Nickel cadmium / metal batteries are used in applications where long lifetime and durability is required (e.g.
METAL BATTERIES aviation, rail, telecoms, engine starting and standby power.
• Environmental legislation on pollution from toxic heavy metals is inhibiting use of nickel cadmium batteries and
special care needed for disposal.

HIGH-TEMPERATURE • Sodium sulphur batteries are one of the most widespread advanced battery systems in commercial deployment.
BATTERIES • They are very efficient and with good reliability.
• Ideally suited to larger scale applications (>5 MW).
• Sodium nickel chloride batteries share some characteristics with sodium sulphur batteries, but have different
operational parameters.
• Originally intended for vehicle applications, but are now used in a small number of stationary storage applications.

FLOW BATTERIES • Flow batteries may be configured as packaged systems, containerized or large-scale.
• Electrolytes can be chosen from a wide selection of electrolytic couples depending on cost, availability and
performance.
• Two popular electrochemical couples are zinc bromine and vanadium / vanadium.
• Zinc bromine battery systems tend to be either packaged or containerized.
• Vanadium / vanadium are available in all configurations.

LITHIUM BATTERIES • Lithium batteries are light weight and used for large scale applications on power networks and configured for low
cost of maintenance and high lifetime.
• Lithium is highly reactive to water and must be used with non-aqueous electrolytes.
• Cells can be prismatic, cylindrical or of the pouch type to suit the application.
• Performance can be optimized to match the power requirements, weight and volume.

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IV. BARRIERS AND RISKS TO BATTERY
STORAGE DEPLOYMENT
What are the barriers to deploying battery storage?
The advancement of battery storage systems is
concentrated in selected markets and regions
across developed economies, and widespread
deployment still faces a number of barriers (Exhibit 6).

Exhibit 6: Summary of main barriers to battery deployment

BARRIER DESCRIPTION
SUPPORT MECHANISMS Policy and regulatory changes are needed to support deployment (e.g. supporting storage demonstrator
AND POLICY DRIVERS projects); to support integration of variable renewables to meet country renewable targets, and create an equal
level playing field or cross border trading of electricity storage, provide clear rules and responsibilities
concerning technical and financial conditions. Yet, few countries have implemented the necessary regulatory
changes to facilitate market growth (exceptions: USA, Germany, Australia, UK, Denmark). Tariff structures,
competition in metering and incentives for demand management will allow storage to become more
competitive with other fuels supporting load curtailment, intelligent control systems and embedded generation.
It must address barriers preventing integration of storage into markets.

REGULATION & Industrial standards for grid storage are in their infancy. Industry acceptance could reduce uncertainty
STANDARDS surrounding how storage technology is used and monetized at scale. Ultimately, the experience of real-world
application will provide confidence and expand installed storage capacity.

COST COMPETITIVE Generally, mass deployment of battery technologies is still too costly. Significant changes to relevant regulatory
ENERGY frameworks (to incentivize development & deployment), improvements in technology and manufacturing,
commercialization, and a greater deployment history will be needed.

GRID RESILIENCY & Energy storage should be available to industry and regulators as an effective option to resolve issues of grid
RELIABILITY resiliency and reliability. Validation of the safety, reliability, and performance of storage is essential for user
confidence.

INDUSTRY ACCEPTANCE Energy storage should be a well-accepted contributor to realization of smart-grid benefits; specifically
enabling confident deployment and optimal utilization of demand-side assets.

Industry acceptance requires confidence in storage and needs to deliver as promised. The industry is still in
its infancy and must address questions from developers, funders, and interested parties.

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What are the risks associated with battery
storage deployment?
Technical risks
The risk profile of a battery is technology specific (Exhibit 7). Safe operation of a battery is only assured within certain
Many battery technologies are still under development environmental conditions (e.g. temperature, humidity,
and so have fundamentally different profiles compared to condensation) and operational conditions (e.g. overcharge
more mature technologies, where the risks have already or undercharge) are controlled and maintained using a
been identified by the insurance industry and appropriate Battery Management System (BMS). A BMS is also one way
mitigation proven. to mitigate risks.

Battery technologies are also inherently hazardous as The weight and size of the battery is also an important
they utilize materials that have the potential to react consideration for ground loadings, the construction and
violently with each other. Lithium batteries, for example, installation of racks, and their accessibility. Dedicated craneage,
are non-hazards in most contexts, but have properties fork lift trucks or other equipment may be needed.
that can develop hazardous conditions (e.g. voltage, arc-
flash, blast, fire and vented gas combustibility and Each battery technology should be assessed on its own
toxicity)17. The major concern is the risk of fire or an merits as they often have fundamentally different responses
explosion and consequential thermal runaway. Recent to physical damage (e.g. shocks, drops and collisions). Physical
experience of lithium batteries suggests that mishandling the damage could create electrical short-circuits or other battery
battery or an external event is a contributing factor (e.g. malfunction, which could (worst-case) result in total loss of
recently cases in aviation). battery module. Damage to the battery casing could cause
a leak of electrolytes and potentially the secondary effects
Battery systems have narrow operating temperatures. from the flows of acids or other corrosive materials.
Lithium batteries, for example, need to be maintained
within a temperature range of +5°C to +25°C (usually
controlled by air conditioning). Failure in the air
conditioning system could result in the battery
temperature rising outside its safe operational limits and
causing serious damage.

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Exhibit 7: Risk profile card: Technical asssesment of a battery storage project
COMPONENT SUB-ELEMENT RISK POTENTIAL IMPACT QUESTIONS TO ASK RATING
ELECTRICAL Switchgear • Explosion Physical damage, outage • Substation design codes
CONNECTION

POWER Transformer • Explosion • Physical damage, outage, • Location

CONVERSION • Noise complaints • Bunding
SYSTEM • Shielding

Controller • Data • Inability to trade • Risk increases if all one supplier

• Communications • Importance can be neglected
failure by new entrants
• Experience
PCS Modules Short-circuit failure • Minor physical damage, E xperience and track record of
outage supplier–
• Green if established
• Amber if new and own-brand
BATTERY Transport • Physical damage • Delay to commissioning • Appropriate for technology type
• Toxic chemicals • Early failure • In accordance with shipping
• Explosion • Physical damage legislation

Off-loadin • Physical damage • Delay to commissioning • Method statements for off-

• Toxic chemicals • Early failure loading and installation
• Explosion • Physical damage

Installation • Physical damage • Delay to commissioning • Design for access for e.g. fork lift -
• Toxic chemicals • Early failure replacement mechanism suitable
• Explosion • Physical damage for weight

Battery • Over / under- • Quality dependence: if a • Supplier and experience of BMS

Management charging good system - single designer – importance can be
System (BMS) • Damage and fire until replacements, if overlooked by new suppliers
not, possibly whole
system replacement

Commissioning • Over / under- • See BMS • See below

charging
• Damage and fire

Operation • Over / under- • See BMS • See below

charging • Zero impact to • Locational and context required
• Damage and fire catastrophic damage
• External physical
damage

ANCILLARY Environmental • Poor operating • Reduced life, early • Set for technology type,
CONTROLS controls conditions replacement maintenance

Fire-suppression • Failure to operate • Physical damage to • Effect on other units under

more than affected unit operation; maintenance regime

Note: Rating is post-mitigation (assuming the recommended precautions have been taken from suppliers
and methods)
Key: Very low risk Low risk Medium risk High risk

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Commercial risks
The majority of battery storage opportunities are capital- another asset does not necessarily increase risk for third party
intensive and the main risk is loss of income streams liability, as the two assets can be positioned to minimise
due to multiple and short-term uncertainties that could incidents, where one could impact the other and vice
compromise the return on investment (Exhibit 8). versa. However, third party risks can arise when battery
Managing uncertainty is complicated by the considerable manufacturers develop their own bespoke PCS18. Whilst
variability in skills and experience across a project. PCSs are mature and used in most types of renewable
energy plants, bespoke products can carry risks with a
single-supplier (e.g. limited support and spares for PCS
elements).
System integration is another major
Third-party damage could be caused
risk and includes: unintentionally, particularly by other activities near to
the storage plant (e.g. during the installation of a new
• H
 edging opportunities: Hedging against price uncertainty
electricity cable the supply to the battery is cut-off
or volatility, and potential loss of income.
leading to loss of revenue). Intentional physical damage
• L ost opportunity costs: Technical failure resulting in can be mitigated through monitored security systems,
low sales from the renewable generation, additional although electronic hacking (via communication routes
costs for an unplanned activity, and loss of additional intended for metering, remote monitoring of battery
income streams caused by non-delivery of ancillary health and control) would also cause damage.
services (where the market is favourable), which may
It is possible for the battery, PCS and network connection
include penalty payments for lack of availability.
equipment to be damaged by unauthorized control if
not specifically designed to analyse the control being
requested. However, this is a very low risk and it is more
However, system integration risks can be addressed by the likely that losses in revenue will be measured in days with a
purchaser of the storage technology by transferring risk recommendation to maintain systems more effectively.
to an expert supplier through an engineering,
The quality of the device or component is another
procurement, and construction or engineering,
consideration for the engineer, as those designed
procurement, installation and commission contracts (EPC
with minimal margins are under maximum stress for
or EPIC, respectively). This gives a single contracted
most of their working life, and can lead to cascade
entity the responsibility of managing system integration
failure. This has occurred in solar farms. It is, therefore,
and many other installation-related risks.
important to use a reputable supplier and ensure
Operational risk is more often in the power conversion compliance with local grid codes.
system (PCS) and BMS. Co-locating battery storage with

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Exhibit 8: Risk profile card: Commercial assessment of a battery storage project
COMPONENT SUB-ELEMENT RISK POTENTIAL IMPACT QUESTIONS TO ASK RATING
SYSTEM PCS • Failure to operate • Inability to trade and • Experience on system design
INTEGRATION operate • Experience on implementation
• Potential downtime

Communications • No communication • At best don’t know what • Local communications

• No knowledge has been sold, at worst standards
• Control on trading unable to take advantage • Dependencies on
of high tariffs communications
Despatch • Not reacting to grid Reduced earnings • Understanding of market
requirements • Understanding of income
streams

Data security • Third party • Loss of income • Security measures

disruption • Disruption

THIRD PARTY Impacts of third • Vandalism • Loss of earnings • Location risks

RISKS parties – intentional • Sabotage • Loss of plant
• Terrorism

Impacts of third • Nearby works and • Loss of earnings • Local legislation

parties – activities • Loss of plant • Signage
non-intentional • Clearances

Impacts on third • Explosion • Loss of earnings • Signage

parties – people • Toxic chemicals • Loss of plant • Clearances in location
• Loss of life • Restrictions on nearby activity
• Damage to life
Impacts on third • Explosion • Loss of earnings • Signage
parties - plant • Toxic chemicals • Loss of plant • Clearances in location
• Loss/damage of other • Restrictions on nearby activity
buildings and equipment

Note: Rating is post-mitigation (assuming the recommended precautions have been taken from suppliers
and methods)
Key: Very low risk Low risk Medium risk High risk

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Market risks
The market for battery storage technologies is rapidly evolving Battery manufacturers are still choosing to produce their
and has changed considerably over the past decade19. There cells in different formats with changing characteristics. In
are now many more participants within the storage industry. addition, the way that cells are linked together and
Some are well-funded and give the impression they have operated by the BMS means that in the event of one or
sufficient capacity to meet high levels of demand. However, more cells failing, it may not be possible to replace those
there is a risk of over-capacity in the market, as investment cells without the need for significant alterations to be
has been made ahead of developing projects with sufficient made. For this reason, reliable and enduring manufacturers
reliability and certainty in their business models to sustain are generally preferred.
sales (Exhibit 9).
The track record of new manufacturers within the industry has
Many suppliers may be located in geographic areas away not been good, with a number of high profile new
from the demand, whilst others don’t have sufficient liquidity entrant manufacturers either departing from the business
and reputation to sustain investment. For example, a large or being taken over by another supplier. The most enduring
battery installation of 10 MW, requires US$10-15 million of suppliers tend to be those who have an established
battery cells. This represents a sizeable investment and a business model, cover other parts of the industry or
new market entrant is unlikely to give sufficient confidence provide several battery technologies. This gives them
and certainty to an investor to justify purchase at this scale. confidence and the ability to be able to withstand minor
disturbances in the storage market.
Exhibit 9: Risk profile card: Market assessment of a battery storage project
COMPONENT SUB-ELEMENT RISK POTENTIAL IMPACT QUESTIONS TO ASK RATING
SUPPLIER Over-capacity Suppliers drop out • Drop current projects • Supplier history
VOLUME • Loss of spares to operational • M otivation
projects • Commitment to the sector
Insufficient liquidity Suppliers drop out • Drop current projects • Supplier history
Insufficientreputation • Loss of spares to operational • M otivation
projects • Commitment to the sector
NEW ENTRANTS Commitment  ay drop-in and
M • Drop current projects • Motivations for entering
drop-out • Loss of spares to operational the sector
projects • Funding sources
Experience May overlook key • Failures of PCS, BMS etc. lead • Evidence of learning from
technology issues to loss of income experiences suppliers
• Replacement design • Smaller scale trials
• Supply all system costs
TECHNOLOGY Module development  evelopment
D • Replacements, scheduled or • Evidence of backward
DEVELOPMENT removes backward unscheduled compatibility of systems
compatibility • Need wider system re- developed to date
design and re-configuratio
New battery Suitability for • Major system failure (though • is diversification driving
technologies application recognising there remains market entry, rather than
always the potential catering to market specifically
for a disruptive positive
technology improvement)
GEOGRAPHY Supplier remote from Spares supply time • Cost of spares • Volume of supply in interest
demand • Delay to repairs market
• Spares strategy
REPUTATIONAL Environmental Public relations • Damages to firm’s reputation • Appropriate mitigation,
disaster • Lost revenue permits
• Increased operating cost • Contingency plans in place
• Increased capital costs
• Increased regulatory costs
• Destruction of shareholder
value

Note: Rating is post-mitigation (assuming the recommended precautions have been taken from suppliers
and methods)
Key: Very low risk Low risk Medium risk High risk

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Natural events risks
Extreme weather conditions are not expected to cause reaches batteries and PCS they should be regarded as a
problems, provided the building or other structure, which total loss. It can be important to protect battery systems
contains the battery, has been suitably constructed and against snow, for similar reasons, especially if there is risk of
maintained (Exhibit 10). Batteries are of sufficient weight that snow melt.
they would not be dislodged by even the strongest hurricanes
or typhoons. However, damage caused by combinations of Earthquake zones do not necessarily exclude battery storage.
wind or waves, including a tsunami, is not easily predictable. For example, most battery installations in Japan are in
areas of high seismic activity, where they provide reliable
Water damage is severely hazardous for batteries and as a power supplies in the event of local power system failure.
minimum, systems should be built above the credible flood Earthquake damage can be limited by suitable design in
levels. Some batteries, such as sodium types, could react accordance with local requirements, and building design
violently with water in the case of submersion. However, the codes for seismic regions. Adequate foundations, for
high potential for damage due to water also extends to mature example, together with racks for the batteries, which are of
technologies such as lead-acid, as the high DC voltages can sufficient strength to prevent over-toppling during periods of
cause high short circuit currents, fires and consequent damage seismic activity, have been shown to be effective. However,
to both batteries and PCS. In the event of submersion, even the greatest danger is when an earthquake occurs during a
for a short period, most electrical components will fail or no period of installation or maintenance.
longer be safe to operate. Hence, if the flood level

Exhibit 10: Risk profile card: Natural events assessment of a battery storage project
COMPONENT SUB-ELEMENT RISK POTENTIAL IMPACT QUESTIONS TO ASK RATING
NATURAL External fi e • Loss of electrical • Damage to batteries • Provisions for self-
EVENTS supply through being cut-off supply of reserves

Storm • Loss of electrical • Batteries themselves largely • Design of building

supply unaffected and provision for self-
• Damage to • Damaged if lose connection supply of reserves
buildings • Cost of replacements
• Building repair

Flood, including • Damage to • Total loss of batteries • Location flood risk

rising water and chemical batteries • Potential fire and chemical • Elevation
snow melt pollution • Bunding protection
• Corrosion products
• Cleaning costs

Earthquake • Movement • Damage as per transport • Building design to

and installation withstand earthquake

Note: Rating is post-mitigation (assuming the recommended precautions have been taken from suppliers
and methods)
Key: Very low risk Low risk Medium risk High risk

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What mitigation options and strategies exist for storage?
Each type of battery storage system has its own specific risks by the UN. High temperature batteries, for example,
and different manufacturers have different approaches to are transported with the active materials in a solid state
mitigating them (Exhibit 11). The mitigation ethos for insured (i.e. frozen at shipping temperatures and hence do not
risk needs to consider the role of international standards for pose a hazard). Nevertheless, all batteries need to be
compliance, manufacturers warranties, combined with the handled with care and inspected before switching-on.
deployment history of a technology, which can provide a
proxy for the quality of design and product assurance. There are also some general mitigations that should be applied
as good practice whatever the technology. These are part of
Various mitigation methods can be used. These include, a comprehensive asset management programmed, good
for example, fusible links and fire suppression systems and operation and maintenance, remote monitoring, access control,
BMS. The battery could be placed in a low state-of-charge fast-response site-support, and the ability of systems to be
to minimise stored energy during transport and installation. robust and effect safe shutdown in the case of malfunction.
Shipping may require specialist procedures and compliance
with international regulations, such as those designated

Exhibit 11: Main risk mitigation measures by battery technology

BATTERY
TECHNOLOGY MAIN RISK MITIGATION MEASURES
LEAD-ACID Overcharging and high-rate charging can evolve • Mitigate by using passive or active ventilation and BMS
(MATURE) hydrogen. • BS EN 50272-2:2001 sets requirements

NICKEL-BASED As above • As above

SODIUM-BASED Liquid sodium reacts violently with water. Liquid • Mitigation by sealing modules from water ingress
metal from damaged cell could cause short-circuits • Packing in sand to absorb metal
and propagate faults through a module leading to • Use gas-detection systems for reaction products linked to a BMS
a fire.

LITHIUM-BASED Thermal runaway and a subsequent cascade • Mitigate using a BMS that controls the state and rate of charge of
affecting a module. each individual cell
• Mitigate using a gas detection and suppression system
Flammable gases can combust in low oxygen
conditions due to the breakdown of electrolytes.

FLOW Large quantities of very acidic electrolyte. • Mitigation using bund systems
• Shields to protect operators
• Leak-detection systems with redundancy as part of the BMS
• Keep spill kits and acid neutralising equipment on-site

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V. CONCLUSIONS
The continued uptake of battery storage technologies
will further grow the knowledge and evidence-
base needed to promote confidence in the energy
Battery storage is an exciting and potentially a
industry. This is a journey that needs continued
‘game-changing’ technology to help facilitate the
government investment and support from more
transition of electricity networks from centralised
countries worldwide. In Australia, for example,
power grids to more distributed ones globally.
support for battery storage is moving towards a
One of the biggest drivers for this has been the
market-led roll-out, but there is still an urgent need
need to deploy storage applications throughout
for demonstration projects to help boost confidence
the electricity value chain to enable greater
within the energy industry.
penetration of variable renewable generation.
A common misconception of the storage industry,
is that battery storage must be implemented at the
site of generation and can only be used to time
The versatility of battery storage and the rapid shift energy. In reality, the market mechanisms to
advances in technology innovation are providing support time-shifting are not in place for much of
numerous other operational benefits in parallel, such the industrialised world, although other services
as load shifting and power quality, improved system such as standby power, fuel saving, tariff avoidance
flexibility, and more efficient utilisation of electricity and ancillary services are possible.
networks. Battery storage has matured in recent years
and is expected to continue to grow, although this
is not a universal picture. Cost reduction is one of the
major barriers to achieving widespread deployment There is an opportunity for countries willing to
and is falling faster for some technologies (e.g. adopt effective policies and regulations, and
lithium-ion and flow batteries) compared to provide the necessary support for projects, to
others. take a leading role in the transition towards a
future of decentralised renewable electricity
Clearly, the international energy markets
by embracing the uptake of battery storage
are anticipating big things from the battery
technologies.
storage sector and may be looking at
batteries as the panacea for all their problems.
Whist it is true that energy storage offers a suite of
applications to fulfill multiple roles, across both
supply and demand-side activities, applications
need to be considered on a case-by-case to
ensure technical and commercial risks are
adequately considered.

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VI. REFERENCES
1 U.S. Energy Information Administration (2016). International Energy Outlook 2016. Report: Chapter 5.
2 Decarbonisation is the reduction of carbon dioxide from energy sources.
3 Institute, S. E. (2013). Leading the Energy Transition: Electricity Storage.
4 According to the UK National Grid, this phrase describes a power source that doesn’t produce a constant amount of
energy (e.g. a wind farm, which will vary according to how windy it is).
5 The Japanese government has set an explicit target of capturing 50% of the world’s projected global storage
battery market by 2020, which the plan estimates to be valued at ¥20 Trillion. (see Ministry of Economy, Trade and
Industry (METI), (2014), Fourth Strategic Energy Plan).
6 According to the UK National Grid, balancing the system to make sure that demand is met by supply is one of the
most important they do and it is becoming more challenging as intermittent generation, such as wind power,
becomes a bigger part of the overall energy mix.
7 Malhotra, A., et al. (2016). Use cases for stationary battery technologies: A review of the literature and existing
projects, Renew. Sustain. Energy 56: 705–721.
8 Boicea, V. (2014). Energy storage technologies: the past and the present, Proc. IEEE 102, 1777–1794.
9 Poulikkas, A. (2013). A comparative overview of large-scale battery systems for electricity storage, Renew. Sustain.
Energy Rev. 27 778–788.
10 AECOM (2015). Energy storage study: funding and knowledge sharing priorities. Australian Renewable Energy
Agency.
11 Institute, S. E. (2013). Leading the Energy Transition: Electricity Storage, and.
12 Alotto, P., et al. (2014). Redox flow batteries for the storage of renewable energy: A review. R. S. En. Reviews 29:
325-335.
13 Curtailment is a reduction in the output of a generator from what it could otherwise produce given available
resources. It is used to address issues on the electricity supply system (e.g. transmission congestion). For a wind
farm or solar project owner, it could impact scheme economics, but an energy storage facilities could provide the
ability to store power during curtailment.
14 Agency, I. E., (2014). Technology Roadmap Energy storage.
15 Used to reduce electrical power consumption during periods of maximum demand on the power utility. Thus
saving substantial amounts of money due to peaking charges.
16 Submission to the Independent Review into the Future Security of the National Electricity Market, Baldwin K and
Franklin E, Australian National University Energy Change Institute (6 Mar 2017).
17 Ribiere, P., et al. (2012). Investigation on the fire-induces hazards of li-ion battery cells by fire calorimetry, Energy
Environ. Sci., and Horn, Q. (2014). Failure modes unique to large format cells and battery systems, in: NAATBatt
Annual Meeting and Symposium.
18 PCS’s are used to convert between AC to DC and vice versa, similar to that used in HVDC applications. Transformers
are used to change the AC voltage from the network voltage to the operating voltage of the PCS. Modern PCS
are assembled from semiconductor components, unless the system is thermo-dynamic such as compressed-air
energy storage.
19 Muñoz, A., et al. (2016). Overview of storage technologies. Horizon 2020 research and innovation programmed
under Grant Agreement No. 645963.

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