Assessing the economic feasibility of utility-scale electrical energy storage technologies for South Africa

Abstract

Increased electrical production from renewable energy technologies, such as solar photovoltaic (PV) and wind plants, is at the forefront of the global energy transition to environmentally sustainable economic growth and development. The variability and intermittency associated with their resources, however, entail growing risks to the stability of electricity systems as their share in total electricity generation capacity rises. Energy storage systems provide an opportunity to overcome the risks associated with renewable energy technologies, although uncertainty regarding their technical capability and cost competitiveness has limited their application at the utility scale. The purpose of this study is to assess the competitive ability and economic feasibility of utility-scale energy storage systems for South Africa in 2016 and projected for 2020. The research method to achieve this general objective is divided into a literature review and empirical analysis. Background is provided on the role for energy storage in electricity environments characterised by rising shares of variable and intermittent renewable energy electrical production plants. Context is offered by clarifying the utility-scale energy storage concept, need, system components, selection criteria, various technologies, technical characteristics, value applications, costs and related considerations. Literature regarding the economic feasibility of energy storage technologies is reviewed and the relevance of such technologies to economic theory is explained. Existing methods to analyse and forecast the economic feasibility or cost competitiveness of energy storage systems is improved upon and applied in practice. A novel contribution of this study is the development, description and use of a techno-economic levelised cost of energy storage (LCOS) model and its extension to the weighted average levelised cost of energy storage systems coupled with solar PV plants (LCOS-PV). The LCOS articulates the comparable present value cost per kilowatt hour (kWh) over the lifetime of an energy storage system, while accounting for all lifecycle cost and technical performance parameters. The methods are applied to estimate, project and assess the cost competitiveness of utility-scale energy storage systems with one another and alternative electrical generation options. The technologies selected for the empirical analysis include lithium-ion, vanadium redox flow (VRFB) and sodium-sulphur (NaS) batteries. This is due to their modular scalability to provide high energy and/or electrical power capacity and capability to perform the primary utility-scale application investigated, namely renewables integration with solar PV plants. The application requires the select technologies to discharge electrical energy for four hours at a 50 megawatt (MW) power rating for 350 days a year to overcome solar resource variability and intermittency, supply electrical energy during peak demand periods, enable electricity price arbitrage and integrate more renewable generators into the electric grid. These services are important for economic growth and development by supporting electrical energy security, reliability, flexibility, access and relative affordability. The modelling results are evaluated under four scenarios as a function of either one or two charge-discharge cycles per day and 10- or 20-year project contract lifetimes. The outcome of this study confirms the economic feasibility or cost competitiveness of the select utility-scale energy storage technologies for South Africa. It is demonstrated empirically that the select energy storage systems coupled with solar PV plants offer improved investment alternatives in comparison to concentrating solar power (CSP) plants with thermal energy storage capability. More specifically, under the most cost competitive scenario, which requires two daily cycles over 20 years, the collective average LCOS-PV is approximately 20.8% and 27.2% lower than the levelised cost of electricity (LCOE) for CSP plants with thermal energy storage capability in 2016 and projected for 2020, respectively. The select technologies coupled with solar PV plants could conceivably further be economic alternatives to some fossil fuel-based electrical generation options within the South African context. The cost competitiveness of energy storage and renewable energy technologies will continue to improve and increasingly displace the need for conventional electricity generators. This study involves academic, practical and policy recommendations, as well as suggestions for further research. -o0o- JEL classification: C02, L94, N77, O00, O33, P18, Q01, Q42, Q43, Q47, Q48, Q55