The capacity requirement for battery storage technology significantly impacts its cost. This impact can be analyzed through two main metrics: power capacity (measured in $/kW) and energy capacity (measured in $/kWh).
Power Capacity ($/kW)
- Power-Oriented Systems: These systems are designed for short durations and provide high instantaneous power output. They have lower costs per kilowatt but are used for applications requiring rapid power adjustments, such as frequency regulation. Costs in $/kW increase as the system’s duration decreases because the same power capacity is spread over fewer hours of energy storage.
Energy Capacity ($/kWh)
- Energy-Oriented Systems: These systems are optimized for longer durations, offering more energy storage relative to their power capacity. They have higher costs per kilowatt but lower costs per kilowatt-hour. This makes them suitable for applications like peak load shaving. For longer-duration systems, the cost per kWh decreases because the cost of additional battery cells is amortized over more hours of energy storage.
Impact on Cost
- Duration and Cost Tradeoff:
- As the storage duration increases, the cost per kWh typically decreases because the fixed costs are spread over more stored energy.
- Conversely, the cost per kW increases with longer durations because the same power capacity is required for longer periods, necessitating more battery cells at a fixed power rating.
- Optimization at 4 Hours:
- Lithium-ion batteries are often optimized at a 4-hour storage duration, which balances power and energy costs effectively for many grid-scale applications.
- Future Cost Reductions:
- The overall cost of battery storage is expected to decrease due to advancements in technology and economies of scale, primarily driven by reductions in battery pack costs.
In summary, the capacity requirement for battery storage technology impacts costs by influencing whether systems are optimized for power or energy storage. Long-duration systems tend to be more cost-effective per kWh but less so per kW, while short-duration systems are cheaper per kW but more expensive per kWh. As technology evolves, costs are expected to decrease across both metrics.
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