French oil and gas company Total S.A.’s announcement in early May that it would spend about US $1.1. billion to acquire Saft Groupe S.A. may signal a new era of opportunity in the energy storage market.
“Energy storage has been the thing that’s coming for a long time, but it’s here now,” says Thomas Timmins of Gowling WLG in Toronto. “Existing technologies are achieving scale, the price is dropping regularly – much more quickly than expected —and new technology is evolving rapidly.”
It makes sense. One of the primary difficulties with getting renewable energy on a grid is that it is intermittent.
“Wind power creates wind when it’s blowing outside and the sun creates heat when it’s shining,” says Michael Barrett of Bennett Jones LLP in Toronto. “But these things don’t necessarily happen when we actually need the energy, and that’s what drives the need for storage.”
The global market for energy storage technology was estimated to be $24 billion in 2015. In the US alone, a recent study shows that the country’s energy storage market grew by 243 per cent during the same period. Meanwhile, a branch of the US Department of Energy says it has attained the “holy grail” of energy by developing a new generation battery storage system that it claims will transform America’s electrical grid.
Throughout Canada, there have been more that 30 grid-scale energy storage projects in Canada, either in development or fully operational. The technologies used have included pumped hydro, compressed air energy storage, flywheels, lithium ion batters and hydrogen power to gas storage.
According to Norton Rose Fulbright energy lawyers Simon Currie in Sydney and Matthijs van Leeuwen in Amsterdam, writing in a recent firm bulletin, the current emergence of the energy storage market is different from the “short lived booms” of the past.
“The difference now is that developments are not being led solely by the suppliers, inventors and VC investors but by the buyers and users,” they state. “Large utilities and retailers are supporting the roll-out of energy storage devices and governments are looking to kick start the industry in the same way as they fostered solar and wind power generation.”
It's a global story. Panasonic and GE are developing energy storage projects in India; South Korea has successfully deployed the world’s largest Lithium energy storage system; Mitsubishi recently delivered a high-capacity energy storage system to Japan.
In Europe, Engie and SUSI Partner AG, an investment adviser, are investing about US$50 million to promote energy storage projects. The UK’s RES has signed a four-year contract with National Grid to provide 20MW of frequency response from battery storage. Danish investor Recharge is the majority stakeholder in a hybrid renewal storage project on the Azorean island of Graciosa in Portugal.
Things aren’t quite as far along in Canada.
“It’s mostly pretty small scale in this country and the large scale projects are still a ways off,” say Mark Rodger of Borden Ladner Gervais LLP in Toronto.
Keith Spencer of Fasken Martineau Dumoulin LLP in Vancouver agrees that the Canadian energy storage industry is at an “early stage” in the cycle.
“But we are starting to see more and more companies being formed and financed and new products being tested with early adopters,” he says.
Spencer represents Avalon Battery Corporation, a two year-old Vancouver-based company that is into its second round of financing. Avalon has two products deployed at US companies who are storing excess power for off-cycle use.
Other leading Canadian companies in the space include Mississauga’s Temporal Power Ltd., which has designed one of the world’s leading flywheel energy storage technologies, and Hydrostor Inc., which has just launched its underwater hydrostatic pressure storage facility near Toronto Island.
“The pieces, including the regulatory pieces, are coming together here,” Timmins says. “In fact, Ontario, has already issued an RFP for energy storage technology, and the province is, along with New York and California, leading regulatory reform in North America.”
Indeed, Ontario’s Long Term Energy Plan has the government examining opportunities for net metering and conservation policies to support energy storage. The government has also directed the Ontario Power Authority to include a pricing structure that will allow storage assets to integrate with large renewable projects.
As Total’s acquisition demonstrates, the oil companies will likely be big players in this market. Saft is a French firm that makes batteries for industrial use by telecommunications, railway and aerospace companies. Its purchase is a key part of Total’s plan to create a renewable energy and power trading unit intended to diversify the company’s revenue away from volatile oil prices.