Energy storage as new investment frontier in Sub Saharan Africa

A massive growth is being witnessed in the world energy storage industry as it is projected to reach $250 billion by 2040 according to a Bloomberg New Energy Finance study published in June this year.The study reveals that batteries capable of storing power at utility scale will be as widespread in 12 years as rooftop solar panels are now, revolutionizing the way consumers use energy.

Already a $100billion market, it is expected that 25 gigawatts of the devices will be deployed by 2028, about the size of the small-scale photovoltaic industry now.

“Batteries will get a boost as costs drop and developers see the chance for lucrative new revenue streams,” said Julia Attwood, storage analyst at BNEF.

The study states that the trend will pose challenge to the traditional utility business model, where power generation and distribution are monopolized in a single company or through a controlled value chain as it is in parts of Africa.

Energy storage can be used to smooth out variable power flows from intermittent renewable resources and to smooth out demand peaks, reducing or deferring the need to build new power plants.

The spread of electric cars is said to be one of the main drivers of this trends and is creating demand for lithium-ion batteries, the main technology for storage devices that are attached to utility grids and rooftop solar units.

As electric vehicles become more widespread, manufactures are scaling up production and slashing costs. BNEF forecasts that the technology will cost $120/kWh by 2030 compared with more than $300/kWh now and $1,000/kWh in 2010.

It also estimates 35 percent of all light vehicles sold will be electric in 2040, equivalent to 41 million cars, about 90 times the figure in 2015.

The future is now

Energy storage technologies are designed to help avoid drawing energy from the grid during peak hours, instead charging it during regular hours when energy is cheaper.The objective is to increase efficiency through balancing peak power demands.This subsequently reduces demand charges, reduces capital expenditures for service upgrades, and improves the planet by decreasing the usage of power plants.

Already some companies are breaking new grounds when it comes to deepening the penetration of energy storage. US-based Green Charge Networks founded in 2009 by Vic Shao designs and installs commercial energy storage systems and is set to transform the market.

“The problem is that utilities and governments simply don’t have the capital to deploy at scale. The opportunity, and the main idea behind Green Charge, is that energy storage requires collaboration on both sides of the meter,” Shao told Forbes in an interview.

He continued, “And why would the private sector customer want anything to do with storage? Because it has a business case – there’s a known ROI to an energy storage project. The trigger for customer benefits is the idea of reducing demand charges. But, fundamentally, storage is a technology that increases the efficiency of the distribution grid, and if we can build it at scale, then everyone benefits – from ratepayers to the utilities.”

In Sub-Saharan Africa energy storage is still in infant stages providing a new frontier of investment opportunities as the sub-continent increases the adoption of renewable energies.

The United States Agency for International Development (USAID) says that in South Africa, for example, current installed electricity generation capacity is around 45 gigawatts (GW). As the country shifts away from coal-fired power, it is expected to add 13 GW of renewable electricity generation capacity by 2025.

The majority of this capacity will be from intermittent sources – such as solar and wind power – that present challenges in balancing energy supply and demand. This provides opportunity for an energy storage means that will help address this gap.

Energy storage technologies have the potential to substantially strengthen South Africa’s grid by offsetting the need to use fossil fuels for peaking power, providing grid balancing and resiliency, improving power quality, and increasing the ability to successfully integrate renewable energy resources. Energy storage will improve flexibility of the electrical grid and an increased diversification of energy sources as storage can provide power when it is needed, rather than when it is best generated.

To help its South African partners begin to address this need, the US Trade and Development Agency (USTDA) has commissioned an assessment of the feasibility and market potential of energy storage technologies in the country. California-based Parsons Corporation is working with the Industrial Development Corporation (IDC), a South African development finance institution, on a roadmap for the adoption of energy storage technologies through 2030.

Aid and donor agencies that are helping to curb the impact of climate change in Africa, the continent that is seen as the least polluter but suffers the most impact from climate change would help this cause if they look critically at addressing gaps in capacity development and regulatory framework militating against energy storage.

Sub-Saharan African governments would increase energy access for the over 600 million people a World Bank estimates say is without grid connected power in the sub-continent by lowering tariffs and duties on batteries. In Nigeria for example, the duty on batteries is 20 per cent and there are subsidies for fossil fuels. Nigeria along with Ghana and others agreed to curb emissions in the recent Paris Agreement signed in New York. This is a clear example of how not to match rhetoric with action.

The growth of companies like Tesla and Solar City, are showing the world the earning potential of clean energy. Google has announced plans to source 100 per cent of their power through renewable energy and many other companies will soon join the fray.

This provides opportunities for companies in the energy storage sector in sub-Saharan Africa where government policies are being crafted to aid growth of renewable energy. Energy storage is still seen as a huge problem on the sub-continent and recent investments have been directed towards renewable energy generation.

According to the Association for energy storage in Africa, outside of pumped hydro storage, the storage of electrical energy has long been considered too costly or technically difficult to implement on a wide scale. “The widespread deployment of intermittent renewable energy generating sources as well as recent technological advances in the methods of storing electrical energy, have created an opportunity to incorporate energy storage in the supply of electricity on a much greater scale,” says a statement on the company’s website.

It further said, “As the continent with the greatest number of people without access to electricity, AESA believes that Africa has the most to benefit from the potential of energy storage. If deployed effectively in Africa, energy storage can make the provision of off-grid energy a reliable and cost effective option for millions of Africans.

“In addition, if integrated into African electricity grids, energy storage can help the continent integrate more renewable energy into its grid supply, improve the reliability of the current electrical supply and defer significant investments in new transmission and distribution capacity.”

ISAAC ANYAOGU