Newsletter 10: Heat, Limited Supply Resources, and the Texas Power Grid; The Deployment of Used EV Batteries
view from my boat
now who's ready for an explosion
Hey everybody, the next three issues of the newsletter will cover lifecycles of the energy transition. Need an apt visual metaphor for what I mean by lifecycles? I took this from the ferry I was on (access acquired via writing for Forbes. Journalism has its perks!) Try this on for size:
Oh wait, that's not it. Here we go-
so is it a view from my boat or...
what took four years and $570 million to build, was in service for five years, and then went boom?
How’s that for a mind boggling set of numbers… There’s something about destruction that is simply fascinating to many of us. While the story of Brayton Point is a heartwarming story of a ‘swords to plowshares’ major polluting coal plant to offshore wind staging ground... seeing the towers implode was visceral, and felt momentous. It’s also a sign of more to come. To see the end of an era, I got on the water and saw firsthand the demolition and took this video myself.
Some of you may remember I wrote a Forbes piece in March of last year about Brayton Point. The coal towers collapsing in mere seconds was the most compelling example I have seen of how quickly market forces change - in this case, fracking killed coal. There is a real need to be more flexible, nimble, and modular in one’s energy investment strategy. It’s the best (and perhaps only) way to survive in a world of accelerating change. But you hear that all the time in this corner of the interwebz...
underCurrent
house party
You know how you start digging into a topic and all of a sudden it turns into a mild obsession? My two key areas of focus lately have been Texas and Cyber. Both of these two topics are important, with important implications. Here’s some recent news on both.
Texas update- Entering summer in Texas, the reserve margin has fallen to 8.6% (*and that’s bumped up from 7.4% thanks to NRG bringing a plant out of mothballs). Texans seem to think they invented the joke about, “if you don’t like the weather here, wait five minutes and it’ll change.” (They didn’t. It’s a joke from Mark Twain about New England). Nonetheless and Mark Twain aside, if weather does change that much, it means you have to have a lot of energy scenarios planned for, and calculated.
“Learning with PKD”- If you don’t follow reserve margins, consider this a “Learning with PKD” session that you shouldn’t share with underage kids. It goes something like this: You’re having a big party - the proverbial ‘whole town’ knows about it. So... how much extra cold beer do you get when planning for a big party that miiiight get out of hand? In the grid, these reserve margins are the spare capacity that generators deliver and coordinate with the grid operators in case something goes wrong - akin to calling everyone, even crazy Uncle Hank to see if they can pick up some more beer on the way over to your li’l soiree.
Fun fact - the Electric Reliability Council of Texas (ERCOT) ‘likes’ to carry a reserve margin of 13.75% because of big parties like the kind you find in Texas lately. That preferred reserve amount would be reasonably expected to withstand this summer, ‘no sweat’. Unfortunately, since the actual reserve is a lot smaller coming into this summer (currently at 8.6%), ERCOT is preparing for some scenarios before reaching for the phone to call FERC and Mexico for backup.
Two scenarios ERCOT looked at this year for the summers’ resource adequacy report:
An epic heat wave (big AC load drives demand) and the loss of critical generating units
A lot of rain in March to May leaves Texas with not as much wind as expected in June to August (just a scenario, but parts of South Texas did have 600% of average rainfall for April).
Back to the beer. Imagine throwing that big party where you think you have a hefty reserve margin: Two kegs and three extra cases of beer – just in ‘case’ (Ed. note - zing!) Then two things happen: Your son’s friends show up; oops – increased demand. And one of the taps breaks; oops - key infrastructure down. That kind of rolling brownout meant resorting to calling Uncle Hank, so maybe not an extreme hardship. Unless Ol’ Hank hasn’t driven in a while and needs to get his clunker revved up in order to get there in the first place. Some of these margins are made up by using mothballed generation… heck at this point I’d imagine ERCOT would take whatever they could get.
Texas this summer? They will probably make it through the party. But if they have an extended heat wave driving demand (if the friends of your son’s friends show up), things get out of hand one begins to wonder; How long does it go on like this for ERCOT participants? Is every summer supposed to be a cliffhanger? Does it need to be? And what do we have to change to avoid that level of apprehension in the future?
Cyber update: The latest since our most recent newsletter is that E&E News broke a story on April 30th about a filing in the U.S. DOE OE-417 Electric Emergency and Disturbance Report listing a “cyber event” affecting a utility serving five counties in three western states. The event lasted from 9:12 AM to 6:57 PM and was listed as “System Operations,” with the Alert Criteria of “Cyber event that caused interruptions of electrical system operations.” Two days later, a DOE official was quoted as saying that it was a “denial of service condition” (an attack aimed at rendering the system or network unavailable) related to a known software vulnerability that had not been patched.
Be Smart: Although operations were disrupted, no generation or transmission was affected, and electricity service continued as normal. The DOE did not clarify what communications equipment had been targeted.
E&E News speculated that the DOE reporting requirement would only have been triggered if a critical asset had been attacked. In that regard, it appears we have stepped over a significant threshold in the utility cybersecurity arena. Or not.
A spokesperson for the North American Reliability Corporation, which is conducting a root cause analysis, indicated to the industry publication Utility Dive, "Currently, there is no information that would lead us to believe the March 5 event — which had no impact to generation — had malicious intent. Whenever a loss of visibility occurs, a root cause analysis is done." So, insert the fingers crossed emoji here.
The journey of this story: This… whatever ‘this’ is…is just getting started. More velocity and variety of events will occur. Not if, but when. This story will likely not end in my lifetime but only grow larger with more on the line. Adversaries keep evolving and there’s plenty of opportunity to cause trouble.
bright idea
used batteries can accelerate the clean energy revolution:
or one man’s trash is another man’s stationary storage application
We could spend more time ruminating on cyber-safety. But let’s not. While that broader narrative is only beginning to form, there is another chapter ending elsewhere in the Grid…I speak of course about Electric Vehicle batteries.
The lifespan of the first few thousand sold in the US are beginning to end. We will only see more batteries going to trash heaps… what are we doing with them!?
In this issue of ButWhyPKD? we look at the other end of the lifecycle - hand-me-downs. I’m from a big family of five boys so I know all about the topic of hand-me-downs, but in this case EV batteries don’t stay in the family like Andy's Wranglers. Haven’t covered EVs at length in the newsletter yet, but since I have two EUCI workshops coming up on batteries and energy storage, my head is full of this stuff. And it’s my newsletter, so I’m going to put the cart before the horse, or the battery before the car.
A large and useful depreciated resource: The basic premise is this: when an electric vehicle is fully depreciated, the lithium-ion battery still has 80% of its useful life left. That number may even be greater: a 2017 post in Green Car Reports looking at data from Tesla Model S vehicles indicated a trendline suggesting most car batteries would be north of 90% at 100,000 miles, and the few cars that had traveled even longer distances looked pretty robust. The used battery can thus be deployed in a host of different applications for stationary storage on the utility grid, on either side of the meter. With millions of electric cars and buses whizzing quietly on our planet’s roads, and aging as they go, there will soon be a fairly large stock of very cheap batteries coming our way. And some of these are pretty big, too. A Tesla SP100D holds 100 kWh - enough energy in its battery pack to supply the average U.S. home for three days.
I first started looking at this issue in early 2014, when I was puzzling through the possibilities for a Forbes post. A few companies like Sumitomo and BMW were already at work on the potential, but the industry has grown a good deal since then, and the pieces seem to be falling into place. Last July, when I interviewed John Jung- the head of Greensmith ,a battery management software company that had been acquired by Wartsila – he characterized used batteries as a “main source of future storage supply” that might be acquired at “20 cents on the dollar.”
A (used and useful) tsunami of batteries: Perhaps the best way to conceptualize this is like a tsunami. Every vehicle sold today represents an offshore tectonic event whose wave will not crash onto the shore for another eight to ten years. But we have an idea of the magnitude: just over two million sold worldwide in 2018. And we know it's coming. This year, about 55,000 battery packs wash ashore. By 2025, Bloomberg estimates that number at 3.4 million.
Today we already see the forces aligning and business models being developed, such as Finnish generator company Wartsila teaming up with Hyundai, Nissan working with Eaton, and a company – Mobility House – whose storage solutions are often premised on used EV batteries. The company’s project to put 3 MW of storage in Amsterdam’s ArenA made headlines, and it’s currently working on a 13 MW project in Lünen, Germany. For its part, Renault is planning a 60 MW installation by 2020. Not bad. And then there’s China. The country’s companies plan to dominate the second-life battery space, and have already begun significant efforts to make this happen.
Be Competitive: Perhaps the most astounding data point that I stumbled upon in Xinhuanet three months ago was Nanjing Electric Power Company’s 268 MW/500 MWh storage facility of both new and used batteries. Although the article’s author (or translator) doesn’t appear to be very facile with energy storage, it seems that the plant will contain 45 MW of lithium iron phosphate (probably from buses, which often carry 300 kWh batteries – and China has 421,000, while the U.S. has a few hundred) and 30 MW of lead acid batteries. The remaining 193 MW appears to be from new lithium ion batteries. To date, I haven’t been able to find a corroborating source. But even aside from that, it’s clear from the evidence to date that China will rule the roost here, with roughly 12 GWh out of an estimated global 17 GWh resource being controlled by Chinese companies.
Let’s keep the resources in the U.S economic ecosystem: Circular economies make sense by their nature, but markets aren’t natural. To be clear, not all batteries will be capable of being reused. An estimated 25% will be recycled, though the technologies for doing so are still very much in their infancy. To that end, the US DOE is working to ensure that the country establishes a domestic recycling capability, a stance that has little to do with the environment and a lot to do with ensuring that critical minerals stay within the domestic economic loop. Early in January the DOE announced a recycling prize and a new Battery Recycling R&D Center, intended to reclaim lithium and cobalt. Secretary Perry commented, “America’s dependence on foreign sources of critical materials undermines our energy security and national security.” Today, according to the Financial Times, most processed lithium and cobalt (50% and 80% respectively) come from China.
Tesla, by the way, intends to recycle all of its batteries from the get-go. At a panel I moderated last year in Miami, the Tesla representative indicated that the process of qualifying batteries for re-use was difficult and its investment in recycling would pay back in well under a year. However, Tesla (whose cars have the lowest cobalt content in the biz) seems to be the only one major EV player moving in this direction.
Tesla aside, there’s one other element that may eventually tip the balance further in the direction of re-use before any recycling, and that’s the declining cobalt content which makes the batteries components ultimately less valuable.
That has to do with the elastic function occurring in response to the issue of cobalt content in widely nickel-manganese-cobalt NMC batteries (Tesla uses extremely low cobalt nickel-cobalt-aluminum NCA batteries which charge about 1,000 cycles, vs 2,000 for NMC). Largely sourced in the (un)Democratic Republic of Congo, and occasionally using child labor, cobalt is also relatively expensive. A doubling of cobalt price would increase overall battery prices of a 1:1:1 NMC battery by about 10%. In response, companies have begun migrating to 5:3:2 ratios (cobalt as the 2), and are moving towards 8:1:1. At the end of May, Korea’s SKI commented that it would eventually deliver a 9:½;½.
When batteries have less expensive innards, their recycling value declines, which may push even more companies to re-use rather than immediate recycling (the recycling technology exists, but is still immature - a conversation for another day).
Factors for consideration: A May 2019 report from McKinsey on the topic of re-use indicates four major hurdles:
Numerous battery pack designs meet the specifications of each automaker, with variations in shape (cylinder, prism and pouch), size and chemistry. With 15 different major manufacturers and up to EV 250 models by 2025, the separation and qualification task will be significant. Good thing AI is coming along just in time (I knew there was something good about that technology besides tracking my every move and forecasting what I will do next).
The plummeting cost of new batteries. Every doubling in global manufacturing capability results in a cost decline of roughly 18%.So as new batteries become cheaper, the relative value of used batteries declines. McKinsey forecasts that advantage to drop from today’s 30-70% advantage to 25% by 2040 (this forecasting stuff? At some point, somebody just needs to get out the board and the darts – that’s 20 years from now, while the EV industry is really only three or four years old, so it’s no more than a good guess premised on what we know today).
There are few standards for second-life batteries, or state-of-health issues and performance guarantees. These are concerns that UL has been working with a number of manufacturers, and insurance companies to address. Last October it published UL 1974 to address these issues. (sidenote: I was invited to attend UL’s annual meeting in May. One session was on lithium ion batteries and fire safety, where we were all treated to a sobering video on thermal runaway.)
An “immature regulatory regime,” where there is no clear assignment of responsibility for recycling or re-use, creating market uncertainty.
With evolving EV markets and technologies, there are a lot of moving parts to consider, but it does appear inevitable that used EV batteries will play an increasing role in stationary storage markets for some time. Key takeaway for me: The major question is: Who seizes the opportunity and how does this eventually play out long-term?
where in the world is PKD?
have you seen me on a plane? if you've flown lately it's possible
The last couple of months have seen my carbon footprint further expand, as I had the opportunity to lead a 3-hour workshop on evolving tech and power markets at a pretty distinguished gathering - the American Public Power Association’s CEO Roundtable in Phoenix. That was followed by a similar offering at Austin Energy, a session intended to get everyone on the same baseline prior to the kick-off of the utility’s strategy session. I was trying not to be star-struck at both events. I have admired AE for decades, for their cutting edge approaches to so many different aspects of the electric ecosystem, so it was a real honor to be asked to discuss the global trends and changes I track. And in both discussions, there were great questions asked by participants. For me, that’s professionally as close to breathing pure oxygen as it gets. Coming out of the APPA Roundtable, I have already booked another workshop in Minnesota, so I guess I passed the test(!?).
And next trip is off to the annual TREIA GridNEXT event at the end of June, this time in San Antonio. Hat tip to DREW H. JOHNSTON for mustering the move to San Antonio over a year ago… the city and region are really exciting and so much can be done to build the region further. Drew brought me in to TREIA about 2 years ago to do a workshop and emcee their annual event and it’s been a blast ever since. You just know Texas has characters but what they don’t tell you is how savvy everyone is. I have the privilege of offering the 3-hour Annual Industry Briefing on day one, as well as emcee the event this year with friends and colleagues that come every year. Then to Toronto and Westchester (!) in July to offer the 12-hour death march course on Fundamentals of Battery Storage. Poor souls.
almost forgot! hey, kinda sorta big news for ol’ PKD
So, after I had written about 200 posts for Forbes, I was speaking at some conference when all of a sudden out of the bookshelves a witch came out and cursed me with the immortal words, “You should write a book.”
Maybe it was a warlock, nevertheless it’s a plainly very stupid and sisyphean endeavor to try and write a book on technology and markets intersecting with energy smack dab amidst global energy transformation. The changes continue to accelerate, duh (The Only Constant I am Sure of is the Accelerating Rate of Change). We are in a change that dwarfs the most recent industrial revolution that aligned the communications regime (telecom) w/ the transportation (internal combustion engine), and few writers have attempted to make sense of it, especially the ‘Why.’ This book concept has refused to let go of me for the past five years. Think about how much has changed in 5 years! (Ed. note - Brayton Point!)
So you’re saying any book will in some sense be obsoleted - perhaps before it is published? Its like my own miniature Brayton Point...
Hopefully without the implosion. What I Believe in my gut and what I see in my travels is this: Even though the facts on the ground will change rapidly, the underlying dynamics of the energy revolution will remain the same (the 3Ds of decarbonization, digitalization, and decentralization get to most of it). So if I can tell the stories on the surface that explain what’s going on with the underlying tectonics, perhaps the endeavor will be of some use.
At any rate, I hired a former editor from the Wall Street Journal, Bloomberg, and St. Martin’s Press to help me whip a 30-page proposal into shape in the hopes of convincing an agent to accept it. Lo and behold, thanks to a good editor, the agent gave me the green light in May!!!
So now – fingers crossed – she finds a publisher. Then the hard work of writing begins. And then, if published, the really hard work of selling begins. Or, she may get nothing but rejections and save me the trouble. I’ll tell folks how it’s coming along in future newsletters.
'til next time...
and the award goes to you
Before I go off, a huge thank you to all you ButWhyPKD? Readers that come up to me at conferences telling me you actually read this thing and get something or other out of it … I hope to hear from anyone who wants to share a comment, question or feedback will email me at butwhypkd@gmail.com! (And I do keynotes btw...) I always reply and look forward to hearing from you, yes you! It’s been fun, let’s catch up more soon!
Ciao Bella,
