This is the future: Better batteries accelerating sliding electricity price

At a recent gathering, South African President Jacob Zuma chided business community delegates for their public criticism that the country lacks leadership. “Look around you,” he said pointing to the stuffed shirts and dresses of assembled cabinet colleagues, “Here is the leadership. How can you say it doesn’t exist?” A single gesture which illustrates the concerns of rational folk more forcefully than a 100-page analysis. Putting warm bodies into lofty positions does not automatically make them leaders. Especially not in a system where the Party rather than voters, decides which individuals are tapped. Leadership requires vision, and vision comes after you possess sufficient humility to appreciate that as the facts change, so must your approach. South Africans are already paying heavily for its Government’s ill-starred bet on an Inga Falls project that prevented Eskom from timeously building new power plants. And its reputation as a safe destination for foreign investment was tarnished by a short-sighted decision during the electricity glut to lure global companies, especially in the aluminium sector, with since broken promises of low-priced electricity. Now Zuma’s “leadership” team is hell-bent on forcing through an investment the country cannot afford in electricity producing plants that technology is making increasingly uncompetitive. The nuclear lobby’s biggest criticism of Renewables is their reliance on sunshine or wind. But it is not just the cost of this green energy that’s now firmly locked into the benefits of Moore’s Law. The cost of storage, too, is falling exponentially. Helped, ironically, by a globally admired South African whose own Government prefers to seek advice from the very people selling them the outdated equipment. Someone in the Union Buildings should put pride in their pocket and ask Elon Musk what he thinks of the $100bn Russian Nuclear proposal. Now that, Mr Zuma, would be leadership. – Alec Hogg

By Mark Chediak and Jim Polson

(Bloomberg) — Batteries that let large users lower their reliance on the most expensive electricity threaten to cripple sales for U.S. independent power producers and utilities, posing credit challenges, according to Moody’s Investors Service.

Lithium-ion batteries sold by companies including Tesla Motors Inc. are on a path to becoming economically competitive for some applications in three to five years if prices continue to fall, Moody’s analysts led by Swami Venkataraman wrote in a report published Thursday.

The technology offers the potential to curb commercial demand for electricity during high-use periods and will help integrate large wind and solar plants with the power grid, the authors said. That may drive down revenue from selling power at independent power producers and utilities including Calpine Corp., NRG Energy Inc. and Dynegy Inc.

Read also: SA renewables programme is global role model – why obsession with nuclear?

“It is likely to result in lower capacity prices and lower energy prices,” the authors wrote. “More widespread use of batteries will be credit negative” for power companies.

Businesses in states like New York that pay fixed fees based on their peak power use stand to benefit from battery storage, Moody’s said. They will be able to charge batteries at night when electricity is cheapest and tap into that power when prices rise.

Gas-Price Slump

“Expectations for a recovery in power markets have faded,” Bloomberg Intelligence Analyst Stacy Nemeroff said in research published Sept. 23. Power prices have fallen with natural gas while cheap oil makes exports of U.S. gas less competitive, potentially extending the gas-price slump, she said.

Read also: Tesla ups use and storage of battery energy for home

Shares of power producers dropped a fifth consecutive trading day on Thursday. The Bloomberg Intelligence North America Independent Power Producers Valuation Peers Index fell 2 percent at the close in New York and is down about 13 percent for the week.

Dynegy fell 4.1 percent to $19.68, it’s fifth consecutive day of declines. Calpine Corp. fell 1.4 percent. NRG rose 0.3 percent.

Falling Prices

Meanwhile, batteries are poised to take off in the power sector. Installations in 2019 may reach 858 megawatts, up 13- fold from 2014 according to GTM Research.

That’s driven in part by falling prices for batteries, down more than 50 percent since 2010, according to the Moody’s report.

For independent power producers, wider use of battery storage may lead to lower payments to keep capacity available for periods when demand climbs, as well as lower prices as businesses use less, according to the report.

“We’re probably eight years to 10 years away from that stuff actually happening,” Jay Rhame, who helps manage $2.6 billion including utility funds at Reaves Asset Management in Jersey City, New Jersey, said Thursday in an interview. “In 10 years, it will make a lot of sense for commercial and industrial customers.”

Rate Increases?

For regulated utilities, batteries can reduce monthly bills for commercial and industrial customers, forcing utilities to raise prices for other customers to make up the difference, Moody’s said. That’s an issue that state regulators will eventually have to address.

“A lot of commercial and industrial customers, they pay very high demand charges for their peak load,” Venkataraman said in a phone interview. “They can put in a battery, charge it at night and use that to serve a part of their load during the day. The peak load will be cut.”

Markets poised to take advantage of batteries include New York City and other locations in the U.S. Northeast, California, and Hawaii, Venkataraman said. Pairing batteries with home solar installations likely won’t be economically competitive to grid power for at least a decade, he said.

“The credit impact won’t be immediate,” Venkataraman said. “Battery penetration will have to be material for it to have an impact.”

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