Insight | Sustainable Solutions | Dec 10th 2024

Battery energy storage systems – Vitol’s view

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‘We need more baseload green energy, which battery storage tied to solar, wind or stand-alone can provide. Energy storage ensures grid stability and underpins the successful roll out of renewables as a significant source of power in the energy transition.’
-R. Andrew de Pass, Vitol’s head of renewables and sustainable investments, Americas

Renewables (mainly solar and wind) are an increasing proportion of the energy mix; between August 2023 and July 2024, nine EU countries saw solar share peaking at or above 80% of their hourly power demand,[1] a trend that is replicated in regions across the globe.[2] Collectively, developing countries have more than half of global renewable power capacity, and off-grid renewable technologies can provide a cost-effective and sustainable alternative to fossil-derived power.[3]

However, if net zero targets are to be met, the proportion of renewables needs to ramp up further within the context of continually increasing global energy demands, demands driven by a variety of use cases, not least the power needs from data centres for AI.[4] Bain estimates that meeting this demand in the US would require utilities to boost annual generation by up to 26% by 2028.[5]

Notwithstanding the uptick in global energy demand, the IEA forecasts an increase of the renewable energy share in the electricity sector from 30% in 2023 to 46% in 2030.[6] This is reflected in the draft National Energy and Climate Plans (NECPs) which signal an intent to triple EU solar capacity and double EU wind capacity (from 2022 levels) and reach a 66% renewable share in the yearly generation mix by 2030, just short of ambitious targets in the REPowerEU plan.

The projected increase in renewables paints a positive picture for net zero targets, but to have a sustained impact, the energy generated needs to be effectively harnessed for use when needed.

Challenges to harnessing renewables as a sustainable source of power

Whilst the availability of renewables is not lacking, there are challenges throughout the value chain from implementation through to generation and use.

Intermittency is intrinsic to all renewables – if the sun doesn’t shine, or the wind doesn’t blow, no power can be generated. The flip side of intermittency is curtailment; when the supply of power generated is higher than the demand. As the proportion of renewables generating power for the grid increases, so do rates of curtailment, from 2% in 2015 to 8% in 2022[7].

A more entrenched, grid-based challenge is the current lead time for connecting projects to the grid which, depending on location can be up to five years or more.[8]

These physical challenges – of the variable renewable energy system – are one of the 12 areas identified by McKinsey as requiring systemic change,[9] but as a more immediate solution, deploying battery energy storage systems (BESS) can provide an answer.

Both as baseload green energy storage tied to solar or wind, and at a larger scale, they allow for consumption to be decoupled from generation and provide grid-serving operation. This in turn stabilises and strengthens network infrastructure and enables more distributed energy sources to connect to the grid.

Battery energy storage systems (BESS) as part of the solution

BESS are usually lithium-ion phosphate batteries that store energy from renewable sources and can transition from standby to full power in under a second, supporting grid stability. Since 2019 battery power storage has typically been cheaper than open cycle gas turbine power for up to two hours.[10]

BESS address the intrinsic intermittency of renewables by storing the power generated in times of over-supply. As a result, grid curtailment is reduced, with excess power diverted to storage so that renewably generated power can be used when the sun is not shining or the wind is not blowing.

The speed, resilience and grid stability that BESS contribute to the renewable power puzzle is something that Vitol has been a long-time proponent of, and it’s widely recognised as a key component in the energy transition – the IEA cites that; global BESS capacity needs to reach 1500GW by 2030 to enable seamless grid integration of renewable energy to meet the net zero 2050 emissions scenario.[11]

Vitol’s ongoing commitment to BESS

We are already invested in BESS with solutions generating a reliable supply of green energy for our customers; financial instruments like BPPAs and environmental credits like RECs.

In the US, through our wholly-owned company, VCRenewables, we have over 300MWh battery storage in operation. Another 500MWh is currently under construction and once completed will be one of the largest standalone BESS in New England.

While in Europe, VPI – an independently run business that is backed by Vitol – is one of Ireland’s largest battery energy storage operators with 200MW/120MWh of battery energy storage in operation and with further opportunities for further investment including new renewable energy assets close by. It has also recently entered Germany to deliver 500MW/1GWh BESS over the next 3 – 5 years.

We are committed to continuing our investment in BESS, as Eduard Ruijs, Vitol’s head of transition commented,