Surge in Utility Scale Battery Projects

Three massive battery storage plants—built by Tesla, AES Corp., and Altagas Ltd.—are all officially going live in southern California at about the same time. Any one of these projects would have been the largest battery storage facility ever built. Combined, they amount to 15 percent of the battery storage installed planet-wide last year.

The new battery projects were commissioned in response to a fossil-fuel disaster—the natural gas leak at Aliso Canyon, near the Los Angeles neighborhood of Porter Ranch. It released thousands of tons of methane into the air before it was sealed last February.

In its wake, Southern California Edison (SCE) rushed to deploy energy storage deals to alleviate the risk of winter blackouts. There wasn’t any time to waste: All of the projects rolling out this week were completed within 6 months, an unprecedented feat. Tesla moved particularly nimbly, completing in just three months a project that in the past would have taken years.

Tesla built the world’s biggest battery power plant in just three months.Source: Tesla

The battery storage industry—a key part of the plan if wind and solar power are to ever dominate the grid—is less than a decade old and still relatively small. Until recently, batteries were many times more expensive than natural gas “peaker” plants that fire up to meet surging demand in the evening and morning hours.

But prices for lithium-ion batteries have fallen fast—by almost half just since 2014. Electric cars are largely responsible, increasing demand and requiring a new scale of manufacturing for the same battery cells used in grid storage. California is mandating that its utilities begin testing batteries by adding more than 1.32 gigawatts by 2020. For context, consider this: In 2016, the global market for storage was less than a gigawatt.

California’s goal is considerable, but it’s dwarfed by Tesla’s ambition to single-handedly deliver 15 gigawatt hours 1 of battery storage a year by the 2020s—enough to provide several nuclear power plants–worth of electricity to the grid during peak hours of demand. Not everyone, however, is that optimistic.

But for the most part, according to a BNEF analysis, the costs of new projects would need to drop by half in order to be profitable on a wider scale in California, and that’s not likely to happen for another decade. The total installed cost of a battery plant would need to fall to about $275 per kilowatt hour. While Tesla declined to provide its pricing data, the similarly sized Altagas project was expected to cost at least $40 million, or $500 per kilowatt hour. It’s possible that with the remarkable scope of Tesla’s Reno operations, the company will be able to establish new floors for pricing, forcing the industry to follow, BNEF’s Sekine said.

AES has completed installation and is doing final testing of a 30 megawatt/120 megawatt hour plant that’s even bigger than Tesla’s 20 MW/80 MWh. AES is also working on a longer-term project that will be five times the size of Tesla’s project when complete by 2021