IDEAS home Printed from https://ideas.repec.org/a/eee/enepol/v183y2023ics0301421523004214.html
   My bibliography  Save this article

System price dynamics for battery storage

Author

Listed:
  • Schauf, Magnus
  • Schwenen, Sebastian

Abstract

While steep learning curves have been documented for lithium-ion battery packs, little evidence exists on whether total system prices for end-users reflect this decline. We use project-level data from California to estimate system price dynamics and experience rates for battery storage systems. We document low experience rates of about 1.3%, i.e., with every doubling in cumulative projects, system prices fall by 1.3%. Larger systems show higher experience rates of up to 11%, while smaller systems show slightly negative experience rates. We find that limited competition among installers is restraining price declines for small systems. Moreover, learning is driven by industry (rather than firm) experience and is significantly lower for balance-of-system prices. In sum, our results suggest that price dynamics relevant to end-users fall behind the pace of reported cost declines for battery packs, and warrant policy focus on installer competition and balance-of-system costs.

Suggested Citation

  • Schauf, Magnus & Schwenen, Sebastian, 2023. "System price dynamics for battery storage," Energy Policy, Elsevier, vol. 183(C).
    • Handle: RePEc:eee:enepol:v:183:y:2023:i:c:s0301421523004214
    DOI: 10.1016/j.enpol.2023.113836
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301421523004214
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.enpol.2023.113836?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. D. M. Davies & M. G. Verde & O. Mnyshenko & Y. R. Chen & R. Rajeev & Y. S. Meng & G. Elliott, 2019. "Combined economic and technological evaluation of battery energy storage for grid applications," Nature Energy, Nature, vol. 4(1), pages 42-50, January.
    2. Jonathan T. Lee & Duncan S. Callaway, 2018. "The cost of reliability in decentralized solar power systems in sub-Saharan Africa," Nature Energy, Nature, vol. 3(11), pages 960-968, November.
    3. Zerrahn, Alexander & Schill, Wolf-Peter & Kemfert, Claudia, 2018. "On the economics of electrical storage for variable renewable energy sources," European Economic Review, Elsevier, vol. 108(C), pages 259-279.
    4. Jaiswal, Abhishek, 2017. "Lithium-ion battery based renewable energy solution for off-grid electricity: A techno-economic analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 72(C), pages 922-934.
    5. Nemet, Gregory F. & Lu, Jiaqi & Rai, Varun & Rao, Rohan, 2020. "Knowledge spillovers between PV installers can reduce the cost of installing solar PV," Energy Policy, Elsevier, vol. 144(C).
    6. Schill, Wolf-Peter, 2020. "Electricity Storage and the Renewable Energy Transition," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 4(10), pages 2059-2064.
    7. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
    8. K. J. Arrow, 1971. "The Economic Implications of Learning by Doing," Palgrave Macmillan Books, in: F. H. Hahn (ed.), Readings in the Theory of Growth, chapter 11, pages 131-149, Palgrave Macmillan.
    9. Kenneth Gillingham, Hao Deng, Ryan Wiser, Naim Darghouth, Gregory Nemet, Galen Barbose, Varun Rai, and Changgui Dong, 2016. "Deconstructing Solar Photovoltaic Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    10. Björn Nykvist & Måns Nilsson, 2015. "Rapidly falling costs of battery packs for electric vehicles," Nature Climate Change, Nature, vol. 5(4), pages 329-332, April.
    11. Strupeit, Lars & Neij, Lena, 2017. "Cost dynamics in the deployment of photovoltaics: Insights from the German market for building-sited systems," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 948-960.
    12. Shum, Kwok L. & Watanabe, Chihiro, 2008. "Towards a local learning (innovation) model of solar photovoltaic deployment," Energy Policy, Elsevier, vol. 36(2), pages 508-521, February.
    13. O'Shaughnessy, Eric & Nemet, Gregory F. & Pless, Jacquelyn & Margolis, Robert, 2019. "Addressing the soft cost challenge in U.S. small-scale solar PV system pricing," Energy Policy, Elsevier, vol. 134(C).
    14. O. Schmidt & A. Hawkes & A. Gambhir & I. Staffell, 2017. "The future cost of electrical energy storage based on experience rates," Nature Energy, Nature, vol. 2(8), pages 1-8, August.
    15. Noah Kittner & Felix Lill & Daniel M. Kammen, 2017. "Energy storage deployment and innovation for the clean energy transition," Nature Energy, Nature, vol. 2(9), pages 1-6, September.
    16. Maryam Arbabzadeh & Ramteen Sioshansi & Jeremiah X. Johnson & Gregory A. Keoleian, 2019. "Author Correction: The role of energy storage in deep decarbonization of electricity production," Nature Communications, Nature, vol. 10(1), pages 1-1, December.
    17. Neij, Lena & Heiskanen, Eva & Strupeit, Lars, 2017. "The deployment of new energy technologies and the need for local learning," Energy Policy, Elsevier, vol. 101(C), pages 274-283.
    18. Hsieh, I-Yun Lisa & Pan, Menghsuan Sam & Chiang, Yet-Ming & Green, William H., 2019. "Learning only buys you so much: Practical limits on battery price reduction," Applied Energy, Elsevier, vol. 239(C), pages 218-224.
    19. Seel, Joachim & Barbose, Galen L. & Wiser, Ryan H., 2014. "An analysis of residential PV system price differences between the United States and Germany," Energy Policy, Elsevier, vol. 69(C), pages 216-226.
    20. Maryam Arbabzadeh & Ramteen Sioshansi & Jeremiah X. Johnson & Gregory A. Keoleian, 2019. "The role of energy storage in deep decarbonization of electricity production," Nature Communications, Nature, vol. 10(1), pages 1-11, December.
    21. Mallapragada, Dharik S. & Sepulveda, Nestor A. & Jenkins, Jesse D., 2020. "Long-run system value of battery energy storage in future grids with increasing wind and solar generation," Applied Energy, Elsevier, vol. 275(C).
    22. Neij, Lena & Nemet, Gregory, 2022. "Accelerating the low-carbon transition will require policy to enhance local learning," Energy Policy, Elsevier, vol. 167(C).
    23. Schauf, Magnus & Schwenen, Sebastian, 2021. "Mills of progress grind slowly? Estimating learning rates for onshore wind energy," Energy Economics, Elsevier, vol. 104(C).
    24. Stephen Comello & Stefan Reichelstein, 2019. "The emergence of cost effective battery storage," Nature Communications, Nature, vol. 10(1), pages 1-9, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Neij, Lena & Nemet, Gregory, 2022. "Accelerating the low-carbon transition will require policy to enhance local learning," Energy Policy, Elsevier, vol. 167(C).
    2. Gao, Xue & Rai, Varun, 2023. "Knowledge acquisition and innovation quality: The moderating role of geographical characteristics of technology," Technovation, Elsevier, vol. 125(C).
    3. Nemet, Gregory F. & Lu, Jiaqi & Rai, Varun & Rao, Rohan, 2020. "Knowledge spillovers between PV installers can reduce the cost of installing solar PV," Energy Policy, Elsevier, vol. 144(C).
    4. Javier L'opez Prol & Wolf-Peter Schill, 2020. "The Economics of Variable Renewables and Electricity Storage," Papers 2012.15371, arXiv.org.
    5. Renaldi, Renaldi & Hall, Richard & Jamasb, Tooraj & Roskilly, Anthony P., 2021. "Experience rates of low-carbon domestic heating technologies in the United Kingdom," Energy Policy, Elsevier, vol. 156(C).
    6. Zhang, Hongyan & Gao, Shuaizhi & Zhou, Peng, 2023. "Role of digitalization in energy storage technological innovation: Evidence from China," Renewable and Sustainable Energy Reviews, Elsevier, vol. 171(C).
    7. Helm, Carsten & Mier, Mathias, 2021. "Steering the energy transition in a world of intermittent electricity supply: Optimal subsidies and taxes for renewables and storage," Journal of Environmental Economics and Management, Elsevier, vol. 109(C).
    8. Strupeit, Lars, 2017. "An innovation system perspective on the drivers of soft cost reduction for photovoltaic deployment: The case of Germany," Renewable and Sustainable Energy Reviews, Elsevier, vol. 77(C), pages 273-286.
    9. Schauf, Magnus & Schwenen, Sebastian, 2021. "Mills of progress grind slowly? Estimating learning rates for onshore wind energy," Energy Economics, Elsevier, vol. 104(C).
    10. Ma, Huan & Sun, Qinghan & Chen, Lei & Chen, Qun & Zhao, Tian & He, Kelun & Xu, Fei & Min, Yong & Wang, Shunjiang & Zhou, Guiping, 2023. "Cogeneration transition for energy system decarbonization: From basic to flexible and complementary multi-energy sources," Renewable and Sustainable Energy Reviews, Elsevier, vol. 187(C).
    11. Xaviery N. Penisa & Michael T. Castro & Jethro Daniel A. Pascasio & Eugene A. Esparcia & Oliver Schmidt & Joey D. Ocon, 2020. "Projecting the Price of Lithium-Ion NMC Battery Packs Using a Multifactor Learning Curve Model," Energies, MDPI, vol. 13(20), pages 1-18, October.
    12. Hsieh, I-Yun Lisa & Pan, Menghsuan Sam & Chiang, Yet-Ming & Green, William H., 2019. "Learning only buys you so much: Practical limits on battery price reduction," Applied Energy, Elsevier, vol. 239(C), pages 218-224.
    13. Tan, Jiawei & Chen, Xingyu & Bu, Yang & Wang, Feng & Wang, Jialing & Huang, Xianan & Hu, Zhenda & Liu, Lin & Lin, Changzhui & Meng, Chao & Lin, Jian & Xie, Shan & Xu, Jinmei & Jing, Rui & Zhao, Yingru, 2024. "Incorporating FFTA based safety assessment of lithium-ion battery energy storage systems in multi-objective optimization for integrated energy systems," Applied Energy, Elsevier, vol. 367(C).
    14. Dan Tong & David J. Farnham & Lei Duan & Qiang Zhang & Nathan S. Lewis & Ken Caldeira & Steven J. Davis, 2021. "Geophysical constraints on the reliability of solar and wind power worldwide," Nature Communications, Nature, vol. 12(1), pages 1-12, December.
    15. Liebensteiner, Mario & Haxhimusa, Adhurim & Naumann, Fabian, 2023. "Subsidized renewables’ adverse effect on energy storage and carbon pricing as a potential remedy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 171(C).
    16. Aghahosseini, Arman & Bogdanov, Dmitrii & Barbosa, Larissa S.N.S. & Breyer, Christian, 2019. "Analysing the feasibility of powering the Americas with renewable energy and inter-regional grid interconnections by 2030," Renewable and Sustainable Energy Reviews, Elsevier, vol. 105(C), pages 187-205.
    17. Englberger, Stefan & Abo Gamra, Kareem & Tepe, Benedikt & Schreiber, Michael & Jossen, Andreas & Hesse, Holger, 2021. "Electric vehicle multi-use: Optimizing multiple value streams using mobile storage systems in a vehicle-to-grid context," Applied Energy, Elsevier, vol. 304(C).
    18. Ricks, Wilson & Norbeck, Jack & Jenkins, Jesse, 2022. "The value of in-reservoir energy storage for flexible dispatch of geothermal power," Applied Energy, Elsevier, vol. 313(C).
    19. Ruixue Liu & Guannan He & Xizhe Wang & Dharik Mallapragada & Hongbo Zhao & Yang Shao-Horn & Benben Jiang, 2024. "A cross-scale framework for evaluating flexibility values of battery and fuel cell electric vehicles," Nature Communications, Nature, vol. 15(1), pages 1-14, December.
    20. Thomassen, Gwenny & Van Passel, Steven & Dewulf, Jo, 2020. "A review on learning effects in prospective technology assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 130(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:enepol:v:183:y:2023:i:c:s0301421523004214. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/enpol .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.