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What is the cost of lithium energy storage system?

Mar. 07, 2024

/ CAPEX is the costs you will incur to buy, install and commission the battery safely. While CAPEX of newer technologies may be relatively high, it generally decreases over time as install base grows, supply chains expand and economies of scale are realized. CAPEX should also include permitting costs, civil works, and other installation costs beyond the DC batteries themselves.

/ O&M costs have both fixed and variable components. Fixed costs, for example, may include scheduled annual or bi-annual routine maintenance. Variable costs will typically vary with hours of operation or cycle count. And data costs are often overlooked: some lithium-ion manufacturers’ product warranties require operators to collect and maintain detailed operating data.

/ Augmentation or replacement costs represent a large chunk of lithium ion battery project costs today, but they are notably absent from non-degrading technologies such as vanadium flow batteries. With every cycle, a lithium-ion battery’s ability to hold charge degrades; to maintain battery capacity cells need to be replaced or added – a process called augmentation. This includes the cost of the new cells, the cost to swap them out, and the cost of any additional space.

/ End-of-life (EOL) costs may include include disassembly, transportation to a battery recycling facility and fees to safely dispose of lithium-ion cells. Some batteries have residual value when they reach the end of their useful life: vanadium electrolyte can be reused in a new battery, and NMC lithium ion batteries contain valuable metals that can be recovered and sold. Other chemistries like LFP have little residual value to offset EOL costs.

/ Efficiency Costs represent the cost of energy lost to round-trip efficiency (RTE). All batteries have an RTE less than 100%, but the figure varies across the range of available technologies available. This can dictate a battery’s ideal uses; for example, a vanadium flow battery requires a higher profit per cycle compared to lithium because of its lower RTE, but has better cycling capabilities making it ideal for high throughput regulation services.

We use LCOS in our model below, but if you prefer an LCOE model you would combine both charge and efficiency costs, yielding the total cost of energy delivered. As a reminder, charge costs are what it costs to get useful energy into your battery; if you’re charging the battery from the grid then wholesale prices are the other major driver of charge costs.

 

Battery Storage Cost Comparison: Vanadium Flow vs Lithium-Ion

Let’s look at an example of the LCOS cost breakdown for two different battery technologies performing the same duty cycle: a vanadium flow battery and a lithium-ion system. This is just one example, and different applications mean different inputs, but it demonstrates how relative costs can be quite different across technologies.

We’ll cover the formulas in a future article, but if you’d like to read more on how to calculate levelized cost of storage we’d recommend looking at the World Energy Council’s report on shifting from cost to value in wind and solar applications, the U.S. Department of Energy’s Energy Storage Grand Challenge Roadmap, the 2018 PV + storage cost analysis from NREL, or the University of Oxford study on the LCOE of PV & grid scale energy.

In this example we have modeled a grid-connected utility-owned battery co-located with a solar array, performing multiple daily cycles to serve deep wholesale and balancing markets. Such markets reward high-throughput systems: the more opportunity the battery has to do valuable work like solar shifting or performing energy arbitrage the more revenue it can earn.

Your scenario may be quite different, for example you may use a higher discount rate depending on your company’s cost of capital, or you might have a shorter project lifetime horizon; most utilities we speak to are using 25-40 year models today.

In this scenario, we assume a 10 MW / 40 MWh battery with a high throughput equivalent to 700 full depth of discharge cycles per year; that’s a little under 2 cycles per day with an availability of 96%. We’ve modeled a 6% discount rate over a 40 year project life.

The LCOS for the two systems are quite different ($111/kWh for the VFB vs $131/kWh for the Li-ion), and the composition of that cost varies as shown in figure 3.

Figure 3. Battery Storage Cost Comparison

As renewable energy becomes increasingly popular, the demand for efficient and cost-effective energy storage solutions is also on the rise. Large-scale battery storage systems are a critical component in enabling the integration of renewable energy into the grid. In this article, we’ll explore the costs associated with 1 MW battery storage systems and what factors contribute to these costs.

Key Factors Influencing 1 MW Battery Storage Costs

Several factors influence the overall cost of a 1 MW battery storage system. These include:

  1. Battery technology: The type of battery technology used in the storage system plays a significant role in the cost. Popular battery types include lithium-ion and LiFePO4, with varying costs and performance characteristics.
  2. System size and capacity: The larger the storage system, the higher the cost. However, economies of scale can lead to reduced costs per kWh for larger systems.
  3. Installation costs: The cost of installation can vary depending on factors such as site preparation, labor, and permitting.
  4. Balance of system components: In addition to the battery itself, other components like inverters, controllers, and monitoring equipment are needed for a complete energy storage system. These components can add to the overall cost.
  5. Maintenance and operation costs: Regular maintenance and operation expenses, such as battery replacements and system monitoring, can add to the lifetime cost of a 1 MW battery storage system.
  6. Incentives and subsidies: Government incentives and subsidies can help offset the costs of battery storage systems, making them more affordable for consumers.

Estimating the Cost of a 1 MW Battery Storage System

Given the range of factors that influence the cost of a 1 MW battery storage system, it’s difficult to provide a specific price. However, industry estimates suggest that the cost of a 1 MW lithium-ion battery storage system can range from $300 to $600 per kWh, depending on the factors mentioned above.

For a more accurate estimate of the costs associated with a 1 MW battery storage system, it’s essential to consider site-specific factors and consult with experienced professionals who can provide tailored solutions.

Reducing the Cost of 1 MW Battery Storage Systems

There are several ways to reduce the overall cost of a 1 MW battery storage system:

  1. Technological advancements: As battery technologies continue to advance, costs are expected to decrease. For example, improvements in cutting-edge battery technologies can lead to more affordable and efficient storage systems.
  2. Economies of scale: As the demand for battery storage systems grows, manufacturers can achieve economies of scale, which can help lower the cost of production and ultimately reduce consumer costs.
  3. Government incentives and subsidies: Taking advantage of government incentives and subsidies can help offset the costs of battery storage systems.

The cost of a 1 MW battery storage system is influenced by a variety of factors, including battery technology, system size, and installation costs. While it’s difficult to provide an exact price, industry estimates suggest a range of $300 to $600 per kWh. By staying informed about technological advancements, taking advantage of economies of scale, and utilizing government incentives, you can help reduce the overall cost of your battery storage system.

What is the cost of lithium energy storage system?

Costs of 1 MW Battery Storage Systems 1 MW

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