Battery prices are falling steadily, but at what point does battery energy storage become truly financially viable? This is one of the challenging questions addressed during a Digital Energy Festival session hosted by Eaton.
During the session, a panel of industry experts highlighted that the majority of energy storage projects in Africa are currently not utility-scale but rather run by commercial clients.
This is in line with the outcome of the poll conducted during the session, in which 39% of the audience anticipates the biggest opportunity within energy storage to be by commercial customers.
Where do you anticipate the biggest opportunity being with energy storage?
- 22% – Commercial
- 39% – Utility scale
- 22% – Mini grids
- 17% – All of the above
- 0% – None of the above
Factors driving the adoption of battery energy storage by commercial clients include:
#1 The need to reduce operational and energy costs
For instance, in South Africa, Eaton has deployed a microgrid at its Johannesburg factory to cut the costs of energy. The microgrid comprises a 330KW solar PV, battery storage system which uses a Nissan second life battery, an inverter, and a diesel genset.
“Rates are very high during winter, especially during peak demand. Between 7 – 9AM and 3 – 7 PM tariffs are higher 3 to 4 times than the normal level,” said Seydou Kane, managing director, Eaton Africa, South Africa, who was a speaker during the session.
The deployment of the mini-grid has resulted in a 30% overall energy cost reduction and a decline in diesel cost by 26%.
#2 Energy resilience and reliability
The solar and energy storage system deployed by Eaton is helping the company to avoid disruptions due to Eskom’s planned and unplanned power outages.
Eskom has been facing failing to meet demand on its grid network during the second and third quarter of 2020 due to the utility’s failure to conduct maintenance operations at its main power plant, the Medupe power station in Johannesburg.
The power utility blamed its failure to implement maintenance operations at its plant to COVID-19 disruptions. However, some senior officials within the utility lost their positions as a result.
#3 Decarbonisation and sustainability goals
The project has also enabled Eaton to reduce its carbon footprint since the firm is now able to leverage pure clean energy generated using the onsite solar pv system.
Since the installation of the minigrid, the overall carbon emissions declined by 11,812 tonnes.
Since operation in February 2018, the project has resulted in a 56% reduction in expenses related to energy at the factory.
Other energy storage benefits for Africa
By scaling up its energy storage adoption, Africa would lay a foundation for accelerated adoption of renewable energy, highlighted webinar speakers.
This in turn would help utilities in the region to improve customer services through the provision of cheap and affordable energy to consumers.
Energy storage would also provide utilities with variable grid stabilisation mechanisms such as frequency regulation.
Energy providers would also be able to introduce new revenue streams by converting consumers into prosumers and through the introduction of tariffs such as Time of Use.
Improving access to electrification, especially for the rural population, is another advantage highlighted in the webinar that would result from energy storage rollouts.
Moreover, storage would offset the expenses required by utilities to build new distribution and transmission lines to connect rural residents.
With only 81% or urban areas and 37% of rural areas in Africa having access to electricity, energy is vital for economic development and as such fast-tracking storage and renewables adoption can accelerate economic development as it is cheaper and faster to deploy.
“There are no utility-scale projects in sub-Saharan Africa at the moment but a lot of conversations have started. For example, South Africa has a tender for battery storage,” says Katrien Hinderdael, power Africa country manager for East Africa and Central, USTDA.
There are still a lot of questions such as how this affects utility tariffs and who will control the battery, she said.
“There is a variety of directions the discussion is moving. One of them is how to make the projects financially viable and to ensure whoever is providing the services are getting paid,” added Hinderdeal.
Factors hindering adoption
The main challenge identified during the webinar is the lack of regulation supporting the energy storage market.
A poll asked whether regulation would impede or support the development of energy storage in Africa.
0% – Neither
18% – Impede
71% – Support
12% – Both
According to the speakers, regulation in Africa lacks transparency.
Katrien Hinderdael said: “there is a need for the development and implementation of a regulation that creates a system in which batteries can be paid for, a regulation that allows the development of pricing mechanisms.”
Regulatory frameworks must attract foreign investment and regulators must understand technology to play a key role to catalyse deployment, she said.
However, this lacks in most African governments as regulators are mainly politicians.
“Regulation must instil a lot of market competition and increase local, private and government investments into innovation,” added Hinderdael.
However, Eaton’s Seydou said regulation in Africa is evolving.
The lack of finance has also been identified as a key barrier to energy storage adoption in Africa.
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