Utility-scale batteries are as expensive as nuclear power

Running the numbers is a real eye-opener.

Dec 02, 2024

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UPDATE: On January 16, a massive fire broke out in the Moss Landing Energy Storage Facility that I described in detail in this article. The fire:

Destroyed 80% of the batteries
Released plumes of smoke and hazardous gases
Forced the evacuation of up to 1500 people

So do you still think that utility-scale batteries are much safer than nuclear power plants?

In recent articles, I wrote about the disadvantages of solar power and wind power. While both energy technologies are appropriate and cost-effective in certain situations, those numerous disadvantages make it very unlikely that either technology will be able to displace fossil fuel usage at scale.

One of the biggest disadvantages of wind and solar is their intermittency. Simply put, both energy technologies generate electricity at different times and places than humans need that electricity. The need to overcome this disparity imposes very substantial “system costs” of solar and wind on the rest of the grid.

This is why the LCOE (Levelized Cost of Electricity) figures that you often see (most commonly from Lazard financial investment firm) dramatically underestimate the actual cost of deploying solar and wind at scale. In addition, Lazard’s LCOE estimates start with optimistic assumptions that conflict with real-world data. When realistic assumptions (capital costs, lifetime, capacity factor) are made that conflict with real-world data, the LCOE for wind is much more expensive.

The

Energy Bad Boys

, who despite their snarky name and graphics, are serious energy analysts. They have written some really good article on this subject. I would highly recommend subscribing to their column if you are interested in energy issues and do not mind getting into the data.

This is exactly why every nation and American states that has substantially scaled up solar and wind see increasing electricity prices.

So what are these system costs?

As I mentioned earlier, “system costs” are the financial costs imposed on the rest of the electrical grid to overcome the cost of intermittency and geography. Based on current technologies, there are five strategies for paying for system costs. Each has very serious disadvantages, and four of them are very expensive (far more expensive than the cost of constructing solar and wind power stations).

Overbuilding + curtailment.
This means constructing far more solar and wind power stations so that they always produce enough electricity. This inevitably means that the vast majority of the electricity generated will not be needed by consumers. The grid will “dump” the electricity by not introducing it into the grid because otherwise, the entire electrical grid will collapse.
Utility-scale batteries or some kind of electrical storage.
This one is simpler: install so many utility-scale batteries that the excess electricity can be stored for later use. Notice that this will require a certain amount of over-building to generate enough electricity to put into the batteries in addition to the current demand.
Construct a vast network of long-distance electrical lines to transport the electricity from the area that it is generated to the population centers. Note that this problem does not deal with intermittency. It only deals with geography (which the first two do not).
Rely on some blend of coal, nuclear, natural gas, and hydro to load balance and generate electricity near population centers. This is effectively what virtually all electrical grids with substantial amounts of solar and wind power do today.
Some blend of all four of the above.

For this article, I will focus on the second option: utility-scale batteries and I will briefly mention other means of storing electricity.

First the good news

As you probably have heard, the cost of batteries is rapidly declining. This is a very good thing. The cost of batteries is one of the key bottlenecks for many products. Electric appliances that plug into electric wall ports are incredibly inexpensive. This has a dramatic effect on the standard of living of nations that are wealthy enough to have a modern electrical grid.

The problem is portability. Plug-in electric appliances are only useful when they are near electric wall ports. This is particularly a problem with transportation, which by definition involves movement over long distances.

Essentially, every product that runs on electricity will become significantly cheaper or more portable when cheap batteries become viable. Now, we already have cheap batteries for portable consumer devices, but they are far too small for many uses.

Now for the bad news

The bad news is that even after this very steep drop in prices, utility-scale batteries are still extremely expensive, as expensive per unit of electricity as nuclear power stations. And nuclear power plants are notoriously expensive to construct.

The cost of storing electricity is still very expensive compared to storing fossil fuels. Storing one barrel of oil costs around $1. Storing the energy equivalent of one barrel of oil in Tesla batteries, however, costs a whopping $200. This cost means that the widespread deployment of utility-scale batteries would dramatically increase the costs of our electrical grid (FEE).

To give one example, to store just 3 days of global electrical usage using Tesla megapacks would cost $590 trillion or six times the world GDP. And if we tried to do so within just a few decades, it would cost significantly more. Worse 3 days storage is far less than is needed to maintain a stable grid throughout the entire year (Epstein).

Even today, batteries make up about one quarter of the cost of an electric car. If you do not believe me, look at the cost of electrical cars compared to identical ICE models. Electric cars typically cost one-third more than their ICE version. That is why the federal government believes that it is necessary to give a $7,500 tax rebate for purchasing an electric car. Now apply those additional costs to our electrical grid, which powers over 300 million people, and you can see the cost issue.

But how can that be when I buy batteries all the time?

What matters for batteries is not really the price, so much as the price per unit of energy stored. And for transportation, the weight of batteries per unit of energy stored is very important as well. So the batteries that you buy for consumer products are cheap, but they also are stored tiny amounts of energy compared to an electrical grid.

So to get an idea of how expensive utility-scale batteries are, let’s use the world’s largest lithium-ion battery energy storage system: the Moss Landing Energy Storage Facility in Monterey California as an example.

I have been there several times as I have family in the area. The installation is massive.

The Moss Landing energy storage system consists of more than 110,000 battery modules in 122 containers. Its total capacity is 750 MW/3,000 MWh. If I understand the units of measurement correctly, the entire battery system can output 750 MW of electricity for a total duration of 4 hours (3000 / 750 = 4).

This means that even the largest battery storage system in the world:

Cannot even store enough electricity to replace a typical fossil fuel or nuclear plant (1000 MW), and
It can only approximate the output for 4 hours.

This means that it cannot even store enough electricity to replace one typical power plant through a summer night (realistically, the shortest duration that is useful for a fully renewable electrical grid). To be functional, an electrical grid needs to run 24/7/365. Anything less threatens blackouts. Anything significantly less, sabotages the entire economy. So realistically, you would have to triple the size of the world’s largest battery storage facility to get it to 12 hours. And that would still not leave enough excess capacity for cloudy summer days, let alone dramatically longer winter nights.

If we assume that we want to replace just one 1000 MW power plant with 12 hours of battery storage (enough for a solar plant to produce enough electricity to get through the night) then that would require 12,000 MWh of utility-scale batteries. Using Tesla’s advertised prices for Megapack, which cost $5,055,940 for a mere 19.3 MWh, then that would cost a whopping $3.1 billion.

That is more than the cost of a 1000MW South Korean nuclear reactor… except that the South Korean nuclear reactor actually produces electricity!

And that is just for the batteries. You still have to pay for the solar and wind farms to produce the renewable electricity in the first place. And most likely, you will still need some blend of coal, natural gas, nuclear or hydro to replenish the batteries at night or cloudy days.

Meanwhile, the construction costs for an extremely-energy efficient Combined Cycle Gas Turbine would cost roughly $722 million, and natural gas is extremely cheap thanks to shale gas fracking. This is about half the cost of the construction cost of solar ($1.588 billion) or wind (1.451 billion) without the batteries.

So adding up all the numbers, you can pay almost $5 billion for a solar/wind/battery project versus $722 million (14% of the price tag) for a CCGT plant with:

one third the carbon emissions as an existing coal plant,
virtually no air pollution, and
a tiny land footprint compared to solar and wind.
In fact, the new CCGT plant can literally be dropped inside the footprint of the old coal plant with plenty of space left over.

To me, that is an easy choice (Note: these numbers will be very different in other nations). Regardless of whether you focus on economics or protecting the natural environment, natural gas makes more sense than solar or wind. This becomes particularly obvious once you add on the cost of utility-scale batteries.

Operating coal plants in 2024 (Global Coal Plant Tracker)

And this is just one coal power plant. There are currently 6526 coal plants in the world with a total capacity of 2,045,000 MW! This would boost the price to a staggering $6.2 trillion just for the 12-hour batteries. And again, you still have not paid for the solar and wind power stations to generate the electricity in the first place.

Worse, more coal plants keep coming online every year, particularly in Asia. And outside of the Gobi desert, Asia has very few solar and wind resources.

Asia coal plants under construction, planned or permitted (Global Coal Plant Tracker)

And we still have not gotten to replacing natural gas power plants or nuclear power plants (if you are an anti-nuke Green, as most are). Nor have we added the extra electricity needed to electrify transportation, as almost all Greens desire. Nor have you added the excess electrical storage to deal with bad weather or natural disasters.

And the dropping prices may be bottoming out

Many studies predict that declining battery prices will continue for the foreseeable future, but there is no guarantee. Already since 2020, we have seen a slight increase in prices over the last 4 years. This may be a temporary bottoming out or it may be a permanent plateau. We will not know for a few years.

As I argued in my article on solar power, all new technologies go through a process where, the technology starts out expensive, unreliable, and not very useful. Most technological innovations remain in that stage and never become a viable product at scale.

Engineers for some of those products figure out how to make them less expensive, more reliable, more performant, and more useful. As demand begins to take off, manufacturing can then be scaled up and the price gradually drops. This creates a price transition, which radically cuts the cost of production. Batteries are obviously following that trajectory. The optimists assume that this trend will continue.

What they are ignoring is that virtually all products get to a price point that is difficult to decrease. All the initial design, technological, and manufacturing optimizations have been discovered. The price then stabilizes relative to other goods. That does not mean that the price cannot be lowered, but it means that the dramatic drops are a thing of the past, at least until the next transformative technological innovation.

This phase of pricing will very likely hit batteries, but no one has any idea when including those who make optimistic predictions. No matter how sophisticated the mathematical calculations or the assumptions, no one knows for sure.

Not too long ago, supporters of wind were cheering rapidly declining wind costs only to see substantially increasing PPA prices in the past few years. The same appears to be happening to solar prices as well, at least in the United States. The Purchase Price Agreement (PPA) is the actual cost for a solar or wind project paid by the utility, and it has doubled in the US since 2020. In a competitive market, PPA prices roughly approximate LCOE minus government subsidies.

This may be a temporary blip, but it is more likely that wind turbines have hit that price transition. Batteries will one day do the same.

These two price transitions (expensive prices to decreasing prices to stable prices) were once widely assumed by business managers and engineers. I think the reason that we often forget about these price transitions is that so many of our cutting-edge products are based on digital technologies, which have zero manufacturing, labor, and material costs. This makes it easy to forget that the two price transitions are normal.

Utility-scale batteries are not a software project, although software plays some role in its optimization. Utility-scale batteries are hardware products, so battery production must include the cost of materials, labor, and manufacturing. This gives us every reason to believe that, at some point, the price declines for batteries will level out.

Batteries are carbon-intensive

Advocates of battery storage also neglect the fact that the entire supply chain for battery production involves large amounts of carbon emissions, air pollution, and water pollution. The battery supply chain consists of:

Mining production
Transportation of raw materials to the refining site
Refining the raw material into final form
Transportation of refined materials to the manufacturing site
Manufacturing of battery cells and modules (essentially battery cells grouped together)
Transportation of battery modules to final assembly site
Final assembly of the final product
Transportation of final product to end customer.

Every one of these steps generates large amounts of carbon emissions, air pollution, and water pollution.

The mining of raw materials for batteries is typically done in developing nations with very lax environmental standards. Here are the most important:

Lithium (Australia, Chile, and China),
Graphite (China),
Nickel (Indonesia and Philippines)
Cobalt (mainly Congo)
Manganese (South Africa, Gabon, and Australia)
Copper (Chile, Peru and Congo)
Silver (Mexico, China and Peru)
Bauxite (Australia, Guinea, and China).

And dependent upon China

In addition, the vast majority of the refining of these raw materials is done in China. China made a strategic decision to focus on this low-profit refining in order to keep as much of the industrial supply chain within its borders. It worked. Now virtually the entire world is dependent on Chinese refining.

China’s electricity and industrial heat are powered by coal, which is the worst carbon emitter (other than wood). Coal is also very high in air and water pollution. And this step in the process is very energy intensive, particularly refining bauxite into aluminum.

The next step of the battery cell and module manufacturing process is also dominated by China and powered by coal.

And since each of these steps are typically in different locations, fossil fuels are needed to transport between each step. This transportation often involves moving heavy materials across the globe (typically to and from China)

So, to cut carbon emissions (from fossil fuels), we must produce carbon emissions (from materials extraction, refining, and battery manufacturing). It just does not make sense.

Greens ignore the scale of what we need

Advocates of utility-scale batteries also seriously underestimate the scale necessary to keep the electrical grid stable. Typical estimates that I see are 2-3 hours of battery storage.

This is fine if solar is just being used as a summer supplement to a fossil fuel/nuclear/hydro electrical system, but that is the opposite of what Greens want. If you have a solar-dominated electrical grid in tropical regions with high levels of solar radiance, it needs to be at least 12 hours.

The reality is that in temperate latitudes such as North America, Europe and Asia , it will need to be an order-of-magnitude higher. My guess is that many renewable advocates know this and deliberately underestimate the scale, so as not to undermine their cause. Otherwise, politicians would balk at the cost.

A 12-hour worth of electricity storage would work fine on most late-spring and summer days (assuming no recharging electric vehicles at night). One only needs a few hours of electricity to get through each night as electricity use is less. But when there is a cloudy day, suddenly you need more storage.

If the entire electrical grid (and worse also the transportation grid) is reliant on battery storage, it is far less expensive to have too much battery capacity than too little. Too little causes blackouts that paralyze the economy, and with electrified transportation, it paralyzes the transportation system as well.

Moreover, the size of battery storage needs ramp up enormously when one factor in declining solar power capacity factors outside of the summer in temperate latitudes. Solar power generates far less electricity during the winter. It is also very inefficient during the early spring and late fall.

Wind power can pick up some of the slack, but wind is inherently less predictable. So the actual amount of electricity that would need to be stored must be measured in weeks, not hours.

In addition to daily and seasonal variations, there are also very sizable annual variations. An entire winter with slow wind production and very low solar production is not at all uncommon. To mitigate the damage to the economy, one would need to store weeks and maybe even over a month's worth of electricity, not hours.

Manufacturing capacity is limited

While it is conceivable that we could produce that many utility-scale batteries, this would be a massive ramp-up in world battery production. Very little of our current capacity consists of utility-scale batteries. To produce enough batteries for the world’s electrical grid, production would have to scale up something on the order of 100-fold. That is just not realistic to expect.

Batteries produced annually by the Tesla Gigafactory, the largest battery factory in the world, can store three minutes worth of annual U.S. electrical demand. To increase that time to just 2 days, far less than is needed, would require 1000 years of full-scale production at that plant (FEE).

Utility-scale batteries compete with EVs

And remember that we also already need to radically increase battery production to electrify transportation. So realistically materials needed for utility-scale batteries will compete with vehicle batteries. I believe that electrifying transportation should take priority over utility-scale batteries because CCGT can better fill the gap.

Nor are batteries a one-time purchase. Current batteries wear out after 7-15 years and degrade in capacity during that time, so those batteries will need to be replaced periodically. And all of this leads to massive carbon emissions to manufacture the batteries.

For the foreseeable future, utility-scale batteries produced in enough volume to make a 100% renewable electrical grid are just not viable from an economic or environmental perspective. Only nations with widespread hydroelectric or geothermal resources can hope to achieve that goal within one to three decades.There is another fundamental trade-off that is not acknowledged by the Greens. The world is already struggling to produce enough batteries for electric cars and portable devices. Materials costs are spiking, and this is likely the main cause of why battery prices are leveling out. It is not at all clear that the world can undertake a massive expansion of utility-scale batteries in addition to a massive expansion of electric vehicles.

I do not believe that there is a hard limit imposed by natural resources, but it seems likely that increasing demand will push up supply. It is always possible to open up new mines, but environmental regulations and substantial construction periods extend the process into a decade.

So where can solar + batteries work?

The main problem with the solar + batteries strategy is that:

Solar power has the lowest capacity factor of any electricity generator.
Solar power produces no electricity at night, which is 50% of the time.
In Temperate latitudes, solar produces relatively little electricity even during the day in the winter, early spring, and late fall.

Despite all these disadvantages, I can see solar + batteries potentially being cost-effective in regions of high solar radiance, such as:

The American Southwest (which is the region that solar aficionados focus on)
Parts of Mediterranean Europe
Mexico
Northern Africa and the Middle East
Australia
The Andes mountains
Southwest Africa
The Himalayas and the Gobi desert

But even in those regions, it is going to take a dramatic decrease in the costs of BOTH solar and batteries. Green energy subsidies and mandates will not overcome these price disadvantages. They will only shift the cost to taxpayers.

The following regions are very unlikely to see cost-effective solar + batteries at scale anytime soon (and maybe never):

The Eastern half of the United States, where 80% of the US population lives.
Almost all of Europe (with a population of roughly 700 million)
Almost all of South American and Central America (with a population of roughly 400 million)
South Asia (with a population of roughly 2 billion)
East Asia, except for the Gobi desert (with a population of roughly 1.6 billion)
Southeast Asia (with a population of roughly 700 million and a high likelihood of future rapid economic growth)
Russia
Canada

The total population in this second group of regions is approximately 5.8 billion or roughly 70% of the total global population. So solar + batteries aficionados have no solution for most of humanity.

So where can wind + batteries work?

The main problem with the wind + batteries strategy is that wind is very spiky over short time-spans, and electricity generation is unpredictable. In comparison to solar, however, wind:

has significantly higher capacity factors
blows both day and night
does not vary as much by season
has shorter time periods when no electricity is being generated

Because of these lesser disadvantage, I can also see wind + batteries potentially being cost-effective in regions of steady and high wind speeds, such as:

The Atlantic seaboards of Europe (which is where wind aficionados focus)
The Great Plains of North America (ditto)
The Gobi desert in China
Patagonia
Greenland
Scattered parts of the Saharan desert, particularly Mauritania.
The coastline of the Horn of Africa
Tasmania
Parts of Central Asia and Iran
Parts of Northern Siberia.

But even in those regions, it is going to take a decrease in the cost of wind and a dramatic decrease in the cost of batteries. And based on the current price trajectory of wind, I think this is quite unlikely. Green energy subsidies and mandates will not overcome these price disadvantages. They will only shift the cost to taxpayers.

The following regions are very unlikely to see cost-effective onshore wind = batteries at scale anytime soon (and maybe never):

The vast majority of the populated regions in North America, Central America, and South America
The interior of Europe
The vast majority of the populated regions in Africa.
The vast majority of the populated regions in the Middle East.
South Asia (with a population of roughly 2 billion)
East Asia, except for the Gobi desert (with a population of roughly 1.6 billion)
Southeast Asia (with a population of roughly 700 million and a high likelihood of future rapid economic growth)

The second list likely includes 90% of the global population. So wind + batteries aficionados have no solution for most of humanity.

So where can wind + solar + batteries work?

In reality, regions that are good for solar and regions that are good for wind are very far apart from each other. The regions where solar + wind + batteries can become cost-effective are extremely limited:

Texas
the Gobi desert in China
Scattered desert regions with very low population densities

Other regions may be able to sprinkle in a little bit of solar power to a wind-based electrical grid or the opposite, but they do not fundamentally change the problems of cost and geography. And like the previous two categories, this model will still be dependent on dramatic price drops for all three: wind, solar, and batteries.

The usefulness of utility-scale batteries

Despite all this, utility-scale batteries can potentially serve a very important supporting role in the electrical grid. Battery storage is one of the key technologies that we need to improve over the next century. Innovation in this domain has been one of the most exciting developments over the last few decades. Every few years, new battery chemistries are invented and production costs keep dropping.

Every electrical grid needs to balance consumer and business demand with supply. They also need to shut their electricity generators periodically for maintenance and deal with unexpected weather and natural disasters. It is quite possible that within a few decades or sooner, utility-scale batteries will be the most cost-effective means to do so. But that is clearly not true now.

This makes utility-scale batteries potentially useful regardless of the scale of solar and wind power. But I am extremely skeptical that utility-scale batteries will drop in price enough to truly solve the intermittency and geographical limitations of wind and solar. And that is to say nothing about the many other disadvantages of solar power and wind power. The biggest disadvantage is geography, which batteries do nothing to overcome.

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