Despite the challenges that arose in 2020, clean energy has maintained an upward trend that will likely continue throughout 2021, fueled in part by last year’s turning points: The Biden administration is about to enter office and it promises a strong reinforcement of renewables, while China has made a commitment to reach carbon neutrality by 2060, which puts the world’s biggest market for solar and wind power on the path to invest in, and promote, these technologies. However, the sun does not always shine, and the wind does not blow every day. So, how can we rely on energy of an unmanageable nature? The answer is energy storage.
Energy storage could play a very important role in every step of the value chain, including generation, ancillary services, transmission and distribution. The latter would also experience an increase in energy independence. Additionally, energy storage will result in enormous social benefits because it has the ability to integrate energy generation from renewable and variable energies into regions that are geographically marginalized and do not have access to electricity. Unlike fossil fuels that may be used over a long period of time with no major difficulty if and only if the primary resource is available, renewables may be a better solution when there is an efficient way of storing the energy surplus that is generated when conditions are favorable.
For this purpose, batteries are certainly the most widely used technologies, representing 90 percent of storage patents, according to the International Energy Agency. Wood Mackenzie and the U.S. Energy Storage Association say that new battery-storage capacity in the U.S. doubled in the third quarter of 2020 due to a boom in projects of this nature in California. Additionally, the cost of lithium-ion batteries will drop in the coming years beyond even the 85 percent reduction that occurred between 2010 and 2018, according to a recent study by Bloomberg. Specifically, it is expected that costs related to lithium-ion batteries per kWh will be halved by 2030.
Lithium is one of the smallest elements in the periodic table and it has a high electrochemical potential that can accumulate large amounts of energy. It also presents low weight and high efficiency, which are all desirable features. However, we must review the disadvantages as well, such as its extremely reactive nature. Lithium also has important environmental and social impacts that must be reexamined in order to ensure sustainability in every aspect of energy storage. There are many issues that must still be navigated to make storage a catalyst for the green energy transition.
In Mexico, we lack regulation on the matter and, therefore, the convenience of energy storage has not been exploited yet. Public policy must focus on this issue to encourage investors, entrepreneurs and institutions to develop a well-functioning energy storage sector. Until then, it will not be possible to store energy in a practical, easy and cheap way.
It is true that batteries are not yet ready to be an overall solution in Mexico regarding renewables, but we can focus our efforts on their enhancement through policies that integrate the financial, social and technological aspects of batteries. The key lies in the development of a strong legal framework that regulates every actor involved in energy storage. As soon as we have this framework, markets will start to move and adjust, with better prices that will make batteries and other related technologies more accessible.
Legal frameworks translate into certainty that allow investors and enterprises to gain trust in any emerging field. Energy storage is no exception and implementing regulations in this segment would set the ground rules to start promoting batteries and different technologies that may alleviate the issue of availability of renewable energy. As of November 2020, there is only one lithium battery (11.5MW / 7MWh) for electricity grid services, which is located in La Paz, Baja California Sur (BCS), at the Aura Solar III plant. Because BCS is the only interconnected electricity system where the Wholesale Electricity Market (MEM) operates and a region rich in solar irradiation, the use of electricity storage is attractive compared to the rest of the country. If we start pushing for a legal framework that allows the private and public sectors to feel comfortable in the energy storage segment, batteries will become part of the energy system across the entire national territory, creating a more stable and reliable green energy market.
In a world that is rapidly evolving from fossil fuels to renewable sources such as wind and solar energy, the development of energy storage technologies is essential for creating the smart electrical grids of the future. These technologies will become the key pillars of the energy transition, since they allow the enhanced use and efficiency of renewable energy and guarantee the integration and competition of renewables into the energy system, ensuring that we make the most of every green megawatt generated.
The emerging market of energy storage must be regulated appropriately in Mexico, establishing the obligations and benefits of each element as soon as possible. The result will be confident investment in batteries, as well as fair competition of renewables against conventional fuels. This is key to achieving a truly green future for our country by improving the reliability of renewable energy integration, providing safety, continuity and quality in the electrical system.