April 4, 2019: The falling levelized cost of electricity for lithium ion batteries has made the technology a challenger to fossil fuel when it comes to delivering flexibility and dispatch generation, according to research company Bloomberg New Energy Finance’s New Energy Outlook 2018 report published on March 26.
The latest analysis by BNEF shows the benchmark LCOE for lithium-ion batteries has fallen 35% to $187 per megawatt-hour since the first half of 2018.
The report found that batteries co-located with renewable projects are starting to compete, in many markets and without subsidy, with fossil fuel generated power for the delivery of dispatchable power, especially in storage+renewable projects.
The report found that falling LCOE for lithium ion and renewable generation was posing an unprecedented challenge to fossil fuel power in the dispatchable generation, and flexibility roles it performs in the energy supply mix.
At present, flexibility is provided mainly by a combination of peaking plants, pumped hydro storage, interconnectors, and large-scale coal and gas plants.
The report noted: “Renewables plus batteries operating together as virtual dispatchable units allow deeper renewables penetration and eat into the remaining market for coal, gas and nuclear.”
Elena Giannakopoulou, head of energy economics at BNEF, said: “Our team has looked closely at the impact of the 79% decrease seen in lithium ion battery costs since 2010 on the economics of this storage technology in different parts of the electricity system. The conclusions are chilling for the fossil fuel sector.
“Looking back over this decade, there have been staggering improvements in the cost-competitiveness of these low-carbon options, thanks to technology innovation, economies of scale, stiff price competition and manufacturing experience.”
Tifenn Brandily, energy economics analyst at BNEF, said: “Solar PV and onshore wind have won the race to be the cheapest sources of new bulk generation in most countries, but the encroachment of clean technologies is going well beyond that, threatening the balancing role that gas-fired plant operators, in particular, have been hoping to play.”
The report analysed 7,000 projects in 46 countries across 20 technologies from coal to renewables.