The beginning of the end for peaker plants?

The beginning of the end for peaker plants?

Peaker power plants also known as ‘Peaker Plants’ have played a vital role across the globe in managing the intermittent demand for electricity for approximately the last 20 years.

Whether you reside in a country where you need air conditioning for sweltering summer temperatures, a country where temperatures can plummet or even where a popular TV show can cause a spike in usage (i.e. half time in the England game or the Superbowl Final), the demand for electricity is seasonal and can sometimes be unpredictable.

This extra demand though is usually at predictable times throughout the day and is met by peaker plants. Peaker plants are traditionally powered by gas turbines that burn natural gas and emit harmful pollutants into the atmosphere but without them, our most populated metropolitan areas would be limited in their ability to service the additional needs of millions of their citizens.

However, over the last half a dozen years the impressive rise of the EV industry has partly led to much needed advances in the capacity and efficiency of battery storage technology with subsequent reduction in cost to produce BESS en masse and at utility scale. This is something that many thought was not possible for some time.

With the global push to reduce carbon emissions at the forefront of the Biden administration’s policy as well as several other key governments worldwide, it has further fuelled the increased uptake of BESS to help mitigate the intermittent demand from carbon emitting resources, such as peaker plants. If this trajectory continues, will we see the peaker plant made completely redundant?

According to a report produced by the EIA (U.S Energy Information Administration) “The average energy capacity cost of utility-scale battery storage in the United States has rapidly decreased from $2,152 per kilowatthour (kWh) in 2015 to $625/kWh in 2018”. The most recent report by The National Renewable Energy Laboratory (NREL) forecasts dramatic cost reduction trends for battery energy storage to continue on a rapid trajectory to 2030 with reductions continuing at a slower pace through to 2050.

(See image above, Capex reduction curve for a utility-scale 10-hour battery storage system under conservative (blue), moderate (orange) and advanced (green) scenarios, accounting for market and policy dynamics as well as R&D. Image: NREL dataset screenshot).

According to PV Magazine Australia, a new paper published by the Clean Energy Council (Australia) claims the race is already over with ‘Battery storage systems 30% cheaper than rival gas peaker plants for firming renewables’.

There have been major successes around the world in the application of battery storage technology at utility scale. Notably, Vistra Energy’s 300MW Moss Landing BESS Project, which is currently operational and they have already proposed and approved an additional 100MW to add to their capacity. This project is a prime example of utilising existing or retired peaker plant sites and grid infrastructure to facilitate battery storage projects.

At a Greentech Media's Energy Storage Summit in December Shayle Kann, a senior adviser to the energy research firms GTM Research and Wood Mackenzie, said "I can't see a reason why we should ever build a gas peaker again in the US after, say, 2025,". With the scale of battery storage projects servicing the grid (particularly in the US) set to sharply increase from 1.5GW today to tens or hundreds of gigawatts in 2030 the future for battery storage looks exceptionally bright, especially given the number of other technological energy storage projects both new and old coming online such as flow batteries, compressed air, pumped hydro and green hydrogen projects.

One particular project which is aiming to combat one of the largest consumers of energy on the grid: Commercial Air Conditioning is Israeli based Nostromo Energy who are pioneering Ice Thermal Energy Storage technology. With similar costs to lithium-ion storage, their IceBrickTM technology is empowering businesses to reduce their carbon emissions and energy costs. It is innovation like this that will allow the energy storage market to be more diverse and accessible to the wider commercial market.

That said, according to Elena Krieger at PSE and the Peaker Plant Replacement Project, the US currently relies on more than 1,000 natural gas and oil-fired peaker power plants to meet the infrequent peaks in electricity demand. In my view, to replace the need for this many peaker plants will certainly take a long time. However, on a global spectrum the US and UK are in a privileged position as the cost of energy storage projects on a whole depends on a number of factors such as the availability of investment, geography and favourable governmental policy.

Lets consider the wider picture, these factors are hindering the energy storage efforts of other less economically developed nations worldwide and their ability to implement energy storage projects to replace their peaker plants. Although significant efforts are being made, the lack of investment opportunities or return on capital for major international companies to invest in projects within less economically developed economies will continue to stifle the growth of energy storage projects in these areas. A fine balance is required to achieve both the reduction in carbon emissions in compliance with the Paris Climate Accord and simultaneously achieve critical economic growth.

That said, there are a number of major economies around the world such as India, Brazil and China whose deployments of energy storage systems are increasing. However, with the current demand from an ever-growing population and in particular the demand from a booming industrial sector, they need peaker plants to continue to support their rapid economic growth. An IEA report suggests in India, “The rise in demand for electricity brings with it much greater variability in both supply and demand….On the demand side it is related in large part to a six-fold increase in peak daily electricity consumption for air conditioning to 2040; higher efficiency standards for this equipment could remove the need for $9 billion to $15 billion of investment in peaking plant capacity”. Taking this into account it is likely India will need to make significant investments into its peaking plant capacity even if greater efficiencies are achieved.

There is also very promising news coming out of The Central Electricity Regulatory Commission that India are preparing to open up the ancillary services market to energy storage. AES have argued that large battery systems could play a much-needed role in preventing blackouts such as one that disrupted transport networks in Mumbai and left millions without power in October 2020.

Overall, I think we have seen a significant positive shift in the energy dynamic away from the focus on fossil fuelled peaker plants particularly in the US and Europe. However, with the number of limiting factors at play affecting the uptake and development of energy storage projects, I think it would be fair to say that the need for peaker plants on a global scale will remain for a little while longer even with the significant advances and developments we have seen over the past few years.?I believe the end for peaker plants is in sight however there is still work to do and I think if we work as a collective - we will get there.?