Long-duration energy storage to get $350M boost from Dept. of Energy

Companies designing long-term storage for clean energy have struggled to break into the power sector despite years of trying. Now, an unprecedented investment from the Department of Energy could help them finally succeed.

On Monday, the Biden administration opened up $350 million in funding for ​“demonstration projects capable of delivering electricity for 10 to 24 hours or longer,” referring to the emerging field of long-duration energy storage. This suite of technologies can take cheap wind and solar generation and make it available for the many hours when renewables aren’t pumping electricity onto the grid. The pairing of long-duration storage with renewable power is seen as vital to maintaining a reliable grid while minimizing carbon emissions.

But to help decarbonize the grid, long-duration technologies need to radically reduce their cost compared to the lithium-ion batteries that dominate the field today (the DOE wants to see grid storage costs fall 90 percent from 2020 to 2030). And the new types of storage need to establish a track record of actually working in the field so customers will want to invest in them.

That’s where the DOE’s new funding comes in, as called for in the Bipartisan Infrastructure Law. It will cover up to half the cost of construction for 11 different projects.

The deadline to submit an application is not until March 3, 2023, so it will be a little while before the awards are announced and construction can commence. In addition to meeting technical criteria, applicants need to make the case that they can fulfill various policy requirements, such as high labor standards and the directive that 40 percent of the benefits from federal investment go to disadvantaged communities.

If this call had gone out a decade ago, it might have been hard to find 11 applicants capable of delivering on the challenge. But in the last few years, venture investors and incumbent energy players have heaped cash on long-duration startups, and several leaders in the sector have built out manufacturing capabilities to deliver on their early contracts.

Here’s just a small sampling of companies making headlines in this field:

• Form Energy has yet to build a grid storage plant with its proprietary iron air design, but it just raised another $450 million and has begun site preparation for its market-entry project in Minnesota.
• ESS runs a real working factory outside Portland, Oregon, churning out iron flow batteries for paying customers, including the municipal utility in Sacramento.
• Italian startup Energy Dome stores energy by pressurizing and depressurizing carbon dioxide gas. It built a demonstration plant in Sardinia, Italy and is working on a full-scale power plant for late 2023 or 2024.
• Hydrostor stores energy by compressing air into underground caverns. It raised $250 million from the likes of Goldman Sachs early this year and is developing massive projects in California and Australia to help absorb the soaring renewable generation.

These companies and their competitors confront a dilemma: They’re convinced that long-duration storage will soon be incredibly valuable to a low-carbon grid, but they need to find places to sell these products now. And power markets aren’t particularly good at valuing power plants with operational profiles that have never been seen before.

California is getting around the market-design problem by simply decreeing that utilities in the state must purchase a certain amount of long-duration storage by 2026. But when a group of local power providers handed out the state’s first competitive contract for this type of power plant, it chose good old lithium-ion batteries. All the exciting new technologies had to wait for another chance to show off their stuff.

In the habitually cautious utility space, track records count. No utility wants to bet its grid reliability on some new gadget only to see it fail to reach completion or fall apart at a crucial moment. And financiers hesitate to fund projects when it’s hard to model what their returns will look like. DOE funding for half the construction cost will get projects running and showing off what they’re capable of, potentially speeding up the pace of market acceptance.

Some of these may go nowhere. The Japanese government subsidized half the cost of a Sumitomo vanadium redox flow battery outside of San Diego, which came online in 2017. Years later, utility San Diego Gas & Electric has yet to order a second round of the product, nor has any other U.S. utility.

DOE will be looking for projects that, with a little help from Uncle Sam, can gain real traction in the marketplace. The department has a better shot at finding some now than ever before.