With energy storage considered to be the ‘new wave’ in the energy sector and increasingly becoming a reality, South Africa needs to prepare itself if it wishes to take advantage of the energy storage growth opportunities within the energy storage stationary value chain and the mobility value chain, says State-owned development finance institution Industrial Development Corporation (IDC) New Industries senior project development manager Bertie Strydom.
Presenting an overview of an energy storage technoeconomic study, in Johannesburg, last month, he stressed that South Africa should not try to “reinvent the wheel”, but “should understand its competitive advantages and the sustainable opportunities within the respective value chains, start exploiting opportunities and secure its position in collaboration with key international partnerships”.
IDC divisional executive for agroprocessing, infrastructure and new industries Lizeka Matshekga, however, emphasised that South Africa could not afford to become involved only when local demand really took off on the back of lower pricing.
“Energy storage is already on a similar cost path as photovoltaic and wind and some research indicates that the trajectory might be even quicker. If South Africa wants to be part of this lucrative industry, we need to act now,” she said last month.
Energy storage could unlock opportunities for South Africa in mining and beneficiation, research and development, commercial exploitation and local industry development, as well as opportunities for South Africa in global market player aspirations, Strydom highlighted.
The energy storage technoeconomic study was sponsored by the US Trade and Development Agency (USTDA). The IDC, which chairs the Energy Steering Committee, approached the USTDA for support in conducting the study.
US-based architectural and engineering firm Parsons, which has experience in renewable energy and energy storage technologies, was appointed to perform the assessment and collaborated with the University of Stellenbosch and engineering consultancy Gibb Engineering & Architecture as the local partners.
The study highlights that, although there are instances where the energy storage solutions can be implemented economically, the development of a local energy storage industry requires a market ‘push’ approach, rather than a market ‘pull’ approach, Matshekga noted.
The USTDA study only considered the stationary power-to-power energy storage market, with power-to-power energy storage being the process of converting electrical energy from a power network into a form that can be stored for converting back into electrical energy when needed with as-low-as-possible energy losses as a result of inefficiencies.
The study, which was aimed at stimulating engagement for the development of an energy storage industry and projects in South Africa, comprised seven sections, including technology, economic and financial assessments, a high-level developmental impact, an environmental-impact assessment (EIA), and a legal and regulatory assessment, as well as a proposed way forward.
In terms of the technology assessment, more than 16 different power-to-power technologies, (excluding pumped storage) were identified and reviewed. The study provided a view and comparison of the technologies, which have different performance criteria, such as maturity, risks, barriers, advantages and disadvantages, as well as best use applications.
While energy storage is net electricity and can work as generation or load, as well as provide lots of flexibility, the study noted potential grid infrastructure services benefits and potential customer energy management services benefits in the economic assessment section.
“Energy storage on a system level provides value in combination with other resources deployed in the system, and the best use of system storage and its value depends on storage’s highest-value use cases in that context,” according to the study.
The study also evaluates “several different resource futures agreed upon by the study steering committee, examining the value of storage and the funding gap that might persist between its value in that future and the cost of the storage”.
Strydom underscored the funding gap, which is the difference between the forecast price in 2030 and the price at which storage adoption is triggered, as a challenge.
The financial assessment, meanwhile, covered dimensions such as technology and project bankability, as well as commercial readiness.
Commercial finance challenges included energy storage projects that, to date, have not been built using project finance. Further, it was critical to identify energy storage projects that were financially robust enough to be bankable, Strydom said.
“While the financial community is aware of the ability of an energy storage system to provide multiple revenue streams through the stacking of benefits for one or more customers, there is some concern as to whether there is adequate experience in developing and demonstrating the control systems capable of implementing these potentially complex algorithms,” he noted.
There is also some concern about the lack of experience in developing energy storage agreements to provide for multiple revenue streams.
The EIA section, which focused on preconstruction, construction, operations and decommissioning, found that energy storage technology presented environmental impacts in varying degrees, depending on the specific technology, design and materials of construction. A net impact is dependent on how the systems are operated and integrated with the grid.
Strydom added that issues relating to the South African environmental regulatory framework also had to be understood and considered.
In terms of the regulatory assessment, the study identified several shortcomings within the larger context. These included that improvements and amendments to existing legislation, regulations, policies and incentives in relation to energy storage are required.
Shortcomings include a lack of procurement targets related to specific use cases that can be provided by energy storage, as well as a lack of specific financial “incentives and subsidies” and a “tariff structure” for energy storage.
“There is also a lack of demonstration and pilot projects that will enable the evaluation of the different use cases and for the country to understand the learning curve,” Strydom pointed out.
As a way forward, the study suggests future focus areas, while initiatives should include role-players gaining an understanding of their role and being willing to play their part; the achievement of public- and private-sector collaboration; the demonstration of storage abilities; and the quantifying of stacked benefits, with industry stakeholders to experience and understand the learning curves associated with energy storage.
The stakeholders should also assist in the development of an energy storage agreement, Strydom noted.
However, demonstration projects were an essential instrument to achieve the requirements, Strydom asserted, pointing out that, despite current pricing, some commercial opportunities might already exist. These were, however, to be developed within distribution networks, the hybrid, mini or smart grids, and within security of supply.