Energy Transition Financial Services

Long-duration energy storage | The hurdles ahead

byEvan MacDonald

Energy storage is gaining traction as an essential component for maintaining load-generation balance in the modern electricity market. Viewed as a promising solution to a widespread challenge, long-duration energy storage (LDES) may be the key to counteracting the pitfalls of variable renewable power generation, especially as we look toward the industry’s aspiration of a zero-emission world. However, these technologies are enduring their own challenges to mass adoption compared to some of the more traditional lithium-ion storage technologies. These include a lack of a revenue-generating framework to drive capital deployment, an undefined long-duration reserve framework forcing competition with short-duration project markets and a lack of commercial-scale development on which to lean to prove successful implementation.

If dependent on a pure energy arbitrage business model, the major needle movers on a project’s balance sheet become capital cost, average spread per cycle and the yearly cycle frequency. Assuming a $72,000/MWh capital cost for a 10 MW/1,000 MWh iron-air project, Enverus Intelligence® | Research (EIR) can derive the required breakeven arbitrage spread required for a 10% return on equity (at various cycle counts per year) and the maximum spread achievable in each market over the past five years. Figure 1 reveals that even with low capital costs, the energy arbitrage model fails to produce a financially promising project across all ISOs, irrespective of cycle count. Thus, EIR looks to a significant widening of seasonal location market pricing spreads or the addition of alternate revenue streams to justify confident investment in these 100+ hour LDES projects.

Click here to read more about how concrete could be used to store energy.

Highlights from Energy Transition Research

  1. Green hydrogen – Pathways to paradise – This report explores the key drivers behind green hydrogen production costs and demonstrates how inputs impact project returns when paired with U.S. incentives.
  2. CCUS project tracker – Make it (CO2) go away – The Energy Transition Research team illustrates the use cases of project trackers in following CCUS activity around the world.
  3. Advancing Canada’s green future – Emissions reductions, CCUS and DLE – This slide deck explores the three frontiers particularly relevant to Canada’s energy transition: the current state of GHG emissions, CCUS and direct lithium extraction.

Energy is changing. Connect weekly with the ideas that are leading the way.

About Enverus Intelligence®| Research
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations, and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies, and capital providers worldwide. EIR is registered with the U.S. Securities and Exchange Commission as a foreign investment adviser.  Click here to learn more.

Picture of Evan MacDonald

Evan MacDonald

Evan MacDonald is a senior geology associate at Enverus, working on the Subsurface Innovation Energy Transition team. His major focus is split between developing and maintaining components of the Enverus Energy Transition geology product and producing topical research for institutional and corporate clients with his team members. Evan graduated from University of Alberta with a specialized degree in Geophysics in 2013, and returned shortly after to complete an Integrated Petroleum Geosciences masters degree in 2016 at the same institution.

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