Storage is the hottest thing in energy now. Batteries like Tesla’s Powerwall for home installation are getting really cheap really fast. The super-sized batteries that power companies use are getting even cheaper even faster. Tesla CEO Elon Musk promised last year to build the world’s biggest battery installation in South Australia in less than 100 days, or it would be free. He delivered and got paid.
If the U.S. wants to maintain its lead in this essential industry, innovators must continue working to seize the initiative.
The attention paid to such feats is well-warranted. Cheap storage of electrical energy is the key to sustaining the extraordinary growth of renewable energy. It will also improve grid reliability, make it easier to recover from blackouts, and quite possibly cut energy bills. Such benefits have made cheap storage the holy grail of electrical engineers going back to Thomas Edison. But despite the technological leaps forward we are seeing today, policymakers should be careful not to lunge for the grail too soon, lest they inadvertently lock society into a technology that is superior today but may not be tomorrow.
Unfortunately, the current path of energy storage innovation may not lead directly to the promised land. Today’s grid-scale battery market is dominated by a single family of technologies, built around lithium-ion chemistries. Lithium-ion batteries are great for consumer electronics, where they got their start. They are great for electric vehicles, too, which is the main reason why Tesla makes them. They are even great for near-term applications on the grid like balancing the ups and downs of solar panel output on partly cloudy days.
But lithium-ion batteries may not be able to meet longer-term challenges on the horizon. Meeting these challenges, which will demand storage units that are enormous and last a very long time, will be critical to unlock all the benefits of clean energy. Policymakers should take note of this risk and take steps to diversify.
Locking in to a suboptimal standard is common in the history of technology. A technology that meets immediate needs well can box out future alternatives that meet future needs better. The most famous example of technology lock-in is the QWERTY keyboard on which we are typing this article. It was devised so that the hinged arms of a 19th century mechanical typewriter would not get tangled as they swung past each other to stamp letters onto the page. Letters that frequently appeared next to one another in English words were placed far apart on the keyboard to avoid that problem. Electronic keyboards solved the issue by doing away with mechanical arms altogether, but QWERTY maintained its dominance into the 21st century because so many of us are so used to using it. Our children have become used to it, too. That’s lock-in!
Typing habits, of course, would not explain technology lock-in for energy storage. A more apt precedent is the crystalline-silicon solar panel, which dominates that industry today. Its dominance was locked in by a glut caused by massive investments by Chinese solar panel manufacturers in the early 2010s. The Chinese cut prices below their costs, bankrupting American companies that were seeking to develop next-generation solar panel materials and designs. The next generation, which would have been more efficient and might ultimately have been cheaper than today’s panels, never had a fair chance to prove its value.
The next generation of energy storage innovations could meet a similar fate. The Korean government has set a target of controlling 30 percent of the global market in 2020, while cutting costs by half. China’s central government has published a plan that would make it a “technologically independent storage superpower.” The consulting firm Wood McKenzie projects that capacity for making lithium-ion batteries, the vast majority of it in Asia, will be two and a half times larger than demand in 2020. Such an imbalance would likely trigger a repeat of the solar panel story.
Early signs of lock-in are already apparent. Lithium-ion batteries made up 98.8 percent of the U.S. storage market at the end of 2017. Aquion Energy, a spin-out company from Carnegie-Mellon University in Pittsburgh that developed a nontoxic, long-duration alternative to lithium-ion technology based on saltwater, went bankrupt, was purchased by a Chinese-affiliated investor, and moved its factory to China in September 2017. VIZn Energy, another much-heralded developer of long-duration storage technology, laid off almost all its staff and suspended operations in March 2018.
Such failures are not universal. There are still many energy storage companies trying to commercialize alternatives to lithium-ion batteries. Perhaps those that failed adopted bad business strategies or were poorly managed. But the stakes in this industry are so high that it would be foolish for policymakers to wait until all of the alternatives disappear, as they did in the solar panel industry, before concluding that the problem is systemic and taking the relatively modest actions needed to fend off lock-in and preserve future options.
To this end, we recommend that federal and state policymakers support a robust and diverse array of demonstration projects that would allow alternative energy storage technologies to prove their value in real-world conditions while providing services to installations like military bases and hospitals. States that have adopted energy storage mandates for their utilities should reserve a small portion of this market for alternatives. Federal policymakers should work with allies to ensure that international trade in batteries is fair and doesn’t undercut innovation at home.
The deployment of energy storage must be accelerated to hasten the transition to a cleaner, more reliable, more resilient energy system. To make sure the world finds a viable path to this promising future, policymakers should make sure that the storage industry avoids the cul-de-sac of technology lock-in.
David M. Hart is senior fellow for clean energy innovation policy at the Information Technology and Innovation Foundation and professor of public policy at the Schar School at George Mason University. William B. Bonvillian is a lecturer at MIT and previously served as the director of MIT’s Washington Office. Nathaniel Austin will graduate from the Johns Hopkins School of Advanced International Studies in May 2018 and will join Deloitte’s Risk and Financial advisory practice this summer. Their working paper on innovation in grid-scale energy storage was recently published by the MIT Energy Initiative.