Find ways to store the electricity generated from solar, wind and other renewables, and these technologies may cease to be ‘intermittent’ sources of power – a game-changer that is expected to transform Africa’s electricity supply industry in the next decade or two. “Storage will make a lot of difference to the shape of the grid,” observed Gravitricity managing director and co-founder Charlie Blair, predicting that networks will emerge “without big spines and instead more of a nodal system”. As these profound changes take hold, Africa will “leapfrog the old-fashioned grid”, in a process that is already seeing lots of interest from development finance institutions, he said.
But for all the talk of transformation, the contractual structures, pricing and business cases for the various storage technologies are still being developed. Serious thought is being put into the role of storage, whether as an integrated element of grid-tied renewable projects, or as a distribution technology that reduces outages and, potentially, the need for a reserve margin – or both.
According to sector specialist for energy project finance at Dutch development bank FMO Bernhard van Meeteren, “the challenge in Africa is to provide reliable electricity for days at a time”. Many outages are due to grid instability rather than a generation shortfall. “There are only a few possibilities to stabilise the grid. If you take out fossil fuels that leaves hydro or storage. Hydro can take years, whereas storage is a much quicker alternative,” van Meeteren told the DLO Africa Power Roundtable in London on 31 October.
As the technology is introduced, FMO expects to see a small number of batteries positioned around the grid to reduce outages. A model is emerging in South Africa, where in its first phase Eskom’s battery project seeks to have 800MWh of distributed battery storage installed at 47 sites across four provinces (AE 379/11). According to DNV GL senior consultant Matthew Rowe, one of the project’s main justifications is the savings Eskom can make on maintenance by not having to make up as much of the generation shortfall as units are taken offline.
Despite prices falling substantially in recent years, new storage technologies are unlikely to be widely rolled out until a number of conceptual issues have been resolved. “You can’t use the least cost of energy to make a business case for storage,” Rowe said. “It is about quantifying the value of being able to release power when it is needed and this entails a discussion with regulators to quantify the value of storage.”
Putting a value on storage is made more difficult by the varying capabilities of different technologies. This has ramifications not just for the situations in which storage makes sense, but also for contractual structure. Many renewables-plus-battery projects at present use separate power purchase agreements for the project’s generation and storage components. Some use capacity payments for the storage component; some battery developers add in fees for use as each charging cycle reduces the life of a chemical battery.
This structure has worked well for off-grid projects, but it has limitations when applied to grid-connected projects. “We did an analysis with offtakers earlier this year and found that there was no value yet in having solar photovoltaic plus battery where there is a grid connection in South Africa,” Cresco Project Finance director Robert Futter said. “But we are looking at a project in Malawi where the grid is not able to provide availability 100% of the time, where solar-battery will be much more commercial.”
Storage providers say that contractual arrangements should recognise the many different roles that storage technology can play before business cases can really be made. “We think that batteries really need to be doing several different things, providing useful services to the grid as well as for the site,” Gravitricity’s Blair said. “You need to stack several different revenue streams.”
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