We have made the case since 2002 that batteries play a crucial role in electric-grid stabilization. In WILTW July 17, 2008, we underscored that energy storage will increase grid reliability, driving mass deployment of utility-scale renewable energy generation.
Most recently, in WILTW November 7, 2019, we argued that grid-scale energy storage is ripe for mass adoption as the technology improves and costs decline, challenging fossil-fuel-based electricity generation. An increasing number of countries are ramping up renewable energy deployment to decarbonize their economies to meet the Paris Agreement’s climate goal. The result is a favorable regulatory environment that is helping to increase investment and speed innovation.
Long-duration, low-cost energy storage is a new multi-billion-dollar market in the making for utilities, microgrid developers and behind-the-meter applications. Global-energy storage deployments are on track to grow 13-fold to a 230 gigawatt per hour (GWh) market by 2025, with total investments rising from $18 billion last year to $100 billion in 2025, estimates Wood Mackenzie. In the U.S. alone, battery storage deployments are expected to increase six-fold to nearly 7 gigawatt (GW) by 2025 from about 1.2 GW this year, which itself is up two-fold from 2019.
We are initiating a series of articles with this memo that will take an in-depth look at promising new battery chemistries that are beginning to move from the laboratory to commercialization. These technologies include flow batteries, thermal batteries, and gravity-based systems. An array of technical and economic factors will create a market for several battery types and chemistries. The chart below summarizes where different battery technologies would fit into the storage technology ecosystem going forward.
Lithium-ion is currently the mainstay of energy storage. However, there are challenges in scaling lithium-ion batteries on electric grids. For example, it is difficult to provide energy for longer than four hours at a time; there are risks in the supply chain, which make lithium expensive; there are human rights concerns around sourcing of materials for Li-ion manufacturing; there is a tendency for lithium batteries to overheat, which creates the risk of fire; and there are challenges to safely recycle retired lithium batteries. Although improvements in lithium battery compositions are making them safer and more scalable, several new energy storage approaches are emerging, and among them are zinc-battery technologies.
Zinc battery chemistries are by far the ripest for mass adoption at grid-scale as it has overcome the drawbacks of lithium-ion storage systems. Key advantages of zinc include:
- Availability – In contrast to limited resources of lithium, zinc is mined in over 50 countries around the world. Zinc reserves, at 250 million tons, are nearly 15-times greater than lithium’s at 17 million tons. The U.S. currently has five percent of global zinc reserves and seven percent of production.
- Safety and cost competitiveness - Zinc mining and handling does not involve toxic elements, whereas lithium can be dangerous to a person’s eyes, skin, and respiratory tract.
Zinc also does not pose a risk of “thermal runaway,” causing batteries to overheat and possibly explode, a key drawback of lithium. Across 2018 and 2019, South Korea saw over two dozen fires at Li-ion battery storage systems, while one occurred at the McMicken Li-ion facility in Arizona in early 2019.
Lithium is a rare earth element, with its associated geographic concentration and difficulties in mining.
- Recyclability - Zinc battery chemistry utilizes materials that are non-toxic and easy to dispose of compared to lithium-ion batteries, which are highly toxic when they break down. Furthermore, current end-of-life recycling methods for Li-ion remain under developed and inconsistent, whereas zinc-based batteries have simple end-of-life recycling procedures.
Several companies are accelerating efforts to bring zinc-based batteries to market. Eos Energy Storage is at the forefront of challenging lithium-ion systems and has been developing its stationary zinc battery for 12 years. The stationary battery market is expected to reach 155 GW over the next decade from just 23 GW currently, creating a $30 billion market, notes James Frith, an energy-storage analyst at Bloomberg New Energy Finance. Eos Energy, which has raised over $160 million, is on track to go public in 4Q20 through a Special Purpose Acquisition Company (SPAC) named B. Riley Principal Merger Corp. II (BMRG).
Eos Energy Storage is already putting projects in the ground and building out its deal pipeline with marquee customers. A key competitive advantage of its flagship “EOS Aurora” battery system is the ability to operate in a wide range of temperatures (-4 to 131 degrees Fahrenheit) without additional heating or cooling. Aurora batteries are estimated to last 5,000 charge cycles over a 15-year calendar life. The Eos battery is 100% recyclable and has a proprietary non-flammable electrolytic conductor that is non-hazardous and non-corrosive. The Eos Aurora is able to discharge in a range of 3-10 hours, far wider than any Lithium-ion system.
Eos batteries are modular, which allows for increased capacity by stacking multiple units, each integrated into a standard 20-foot ISO shipping container. The system does not require expensive pumps or catalysts like flow batteries, while also avoiding costly HVAC required for lithium-based systems.
Eos’s manufacturing facility is located in Pittsburgh, PA. Eos sources over 70% of its battery components in the U.S., with most components sourced within a few hours’ drive of the Pittsburgh factory, which reduces supply chain risks. The batteries produced at its Pittsburgh factory are cost-competitive with incumbent stationary storage technology. EOS continues to invest in R&D. A key objective is cost reduction by ramping up industrial-scale manufacturing. This will ensure scalability in utility, commercial, and industrial applications. The company targets 10% to 20% energy density improvements annually over the next several years.
Other zinc battery companies include Zinc8 Energy Solutions (ZAIR CN), a Canadian firm, which recently won a contract from the New York Power Authority to deploy a zinc-air battery system capable of storing energy for 15 hours. Similarly, NantEnergy, a private company, is helping provide energy to remote microgrids with its zinc-air batteries. So far, the company has helped bring electricity to over 200,000 people across Indonesia and Africa. Another company, e-Zn, a Canada-based private energy-storage developer has developed a long-duration zinc battery, which the company claims to be 80% cheaper and can scale at a capital cost one-tenth of lithium-ion batteries.
Grid-scale mass deployment of zinc batteries will be a game-changer for solar and wind energy, supercharging widespread adoption. We underscored in WILTWs January 16, 2020 and June 11, 2020 that unsubsidized solar and wind energy accompanied by inexpensive energy storage is now entering a new phase of disruption, where it will be cheaper to build new renewable energy capacity-plus batteries than to keep existing coal and natural gas plants operating. Already 39% of the world's thermal power capacity is more expensive to operate than it is to build new renewable energy capacity including battery storage, concludes a recent analysis by RMI. The share of uncompetitive coal capacity is on-track to increase to 60% by 2022 and 73% by 2025.
The disruption of the $6 trillion global energy sector remains in the early innings. We recommend that investors accumulate positions in our previous recommendations, including:
- Orsted A/S (ORSTED DC, 887.80 DKK) - up 37.5% since our WILTW January 16, 2020 recommendation compared to 1.9% for the S&P 500 index.
- Nextera Energy (NEE, $284.59) - up 12.8% since our WILTW January 16, 2020 recommendation compared to 1.9% for the S&P 500 index.
- SolarEdge Technologies (SEDG, $215.18) - up 109.5% since our WILTW January 16, 2020 recommendation versus 1.9% for the S&P 500 index.
- Enphase Energy (ENPH, $71.19) - up 49.4% since our WILTW June 11, 2020 recommendation compared to 12.6% for the S&P 500 index.