Eguana Technologies (TSX: EGT.V) designs and manufactures high performance power electronics for residential and commercial energy storage systems.
Power electronics are considered "the brain of an energy storage system" as they manage the power flow of the entire system, enable the grid connection and host or communicate with the energy and battery management.
According to leading research firm Navigant, the market for distributed energy storage systems (DESS) will grow from less than 200MW in 2014 to more than 12,000MW of installed capacity by 2024, which represents a total market opportunity of $16.5B
Chart: Installed DESS Power Capacity by Application, World Markets 2014-2024, Navigant 2014
Increasing Solar Penetration
A recent study states that by 2025 the cost of producing power in central and southern Europe will be between 4₵ -6₵ per kilowatt hour.
Already a cost-efficient power source in sunny places, the study shows a large decline in cost for solar energy. Solar, along with wind energy, will become a major source of energy, due to the lowering costs and favourable impact on the environment.
In 2014 alone, global solar panel installations have hit more than 40 gigawatts, the equivalent of 12 nuclear power plants worth of solar capacity. The European Photovoltaic Industry Association (EPIA) has forecasted a total global installed global capacity of between 288GW and 422GW by 2017. In the US, every 2.5 minutes a new solar system gets connected to the grid and the number of installed systems is expected to hit the 1 Million mark by latest 2016.
Chart: Historical and forecasted growth of solar PV (in MW), EPIA 2013
Chart: Solar PV installations per Minute in the USA, GTM 2014
However, the increasing penetration of solar energy creates stress on the dated grid infrastructure in increasing jurisdictions.
"Germany now has a problem of curtailment of renewables power, meaning that at times the grid cannot absorb 100% of (especially wind) output on surges following weather changes." (HSBC, Energy Storage - Power To The People, 2014)
In Hawaii, many of the feeders have already reached their capacity:
"This is a circuit-by-circuit, feeder-by-feeder type of problem. While most U.S. utilities aren’t close to having enough solar on the grid to worry about it, Hawaii Electric Co. is already seeing many of its feeders overflowing with solar power at midday, and utilities in California, New Jersey and Arizona are starting to see it happening in pockets across their PV-rich grids." (Source: Greentech Media, 2014)
Multiple studies have shown that distributed energy storage can reduce the solar induced stress on the grid and can significantly expand the grid capacity, which can be a more economic alternative to investments into upgrading the grid infrastructure:
"Decoupling generation from consumption can reduce the need for peak generation capacity by 40% and can increase grid capacity by up to 66%” (Fraunhofer Institute, Freiburg Germany, 2013)."
Decreasing Battery Costs
Lithium-ion battery costs have dropped by an average of 23% each year since 2010 and energy storage balance-of system costs have dropped by an average of 14% each year during the same period, resulting in total installed commercial system costs dropping by 17%, from $3,400/kWh in 2010 to $1,600/kWh in 2014 for a 2- to 4-Hour lithium-ion energy storage system.
Battery cost reductions will continue as manufacturing capacity accelerates to accommodate the electric vehicle (EV) market and stationary storage. The EV market will continue to grow at a fast pace, leading to more manufacturing expansion. The energy storage market will both benefit from and cause further cost reductions and technology improvements.
By 2020, experts expect battery costs to reach $250/kWh- $300/kWh, and commercial system costs to decline under $600/kWh, which is expected to further fuel the mass scaling deployment of stationary storage.
More ambitious initiatives are underway at Tesla Motors with a publically announced path to $100/kWh cost target for the Lithium-ion batteries, manufactured at their "Gigafactory" in Nevada, so the cost by 2020 could even be lower than assumed today.
Continued decreasing system cost for battery applications will improve the cost effectiveness and obviate the need for subsidies and are already cost effective in certain jurisdictions such as Germany and Australia. This is particularly true for Germany, where the spread between grid electricity rates and solar feed in tariffs continues to widen while in California, commercial ratepayers can already achieve double digit rates of return by reducing their demand charges.