Justin Chiu and Felipe Gallardo of the Energy Department of KTH Royal Institute of Technology discuss the importance of creating a circular economy for energy storage.
Energy storage (ES) is a key factor in transitioning from a fossil fuel-based economy to a renewable energy-focused society due to its intermittent availability. However, integrating the EU into our cities and industries in a socially, environmentally and techno-economically optimal way poses challenges.
At The Energy Department of KTHwe are looking at these issues from a circular economy perspective as part of the project Circular Feasibility Analysis of Energy Storage – Joint Coordination of Application to IEA, funded by the Swedish Energy Agency. As shown in fig. 1, this project develops holistic methodological approaches for performance assessment – with innovative metrics to optimize the selection, sizing and performance of ES technologies, as well as new business models with a special focus on life cycle and interoperability.
Energy storage in a global context
In a global scenario of a severe anthropogenic climate crisis, complex geopolitics and macroeconomic international relations affecting the dynamics of the global energy matrix, the role of energy storage as a key factor in the energy transition – capable of allowing further penetration and functionality of renewable energy sources – has is largely recognized by international organizations such as the International Energy Agency (IEA). Despite the current enthusiasm for ES, however, when it comes to actual practical project development, some questions remain unclear and challenging to answer for stakeholders and policy makers. What ES technology should be chosen and how should it be sized? How do border conditions affect EU projects technically and economically? How can we minimize the technical, social and environmental impacts of an ES project while maximizing the wide range of value it can create?
Associate Professor Dr Justin NW Chiu and his team at KTH Royal Institute of Technology’s Department of Energy are working to provide a clear framework for stakeholders to answer these questions through the Circular Feasibility Study of Energy Storage project. This project also represents the Swedish contribution to the international collaboration initiated by IEA Task 41 – Energy Storage Technology Cooperation Program (IEA ES TCP) “Economics of Energy Storage (EcoEneSto)”, where researchers from Germany, Denmark, Austria and the Netherlands, among other countries, cooperate. In particular, KTH’s contribution to sub-task 1 focuses on the evaluation of old and new “Methods for the evaluation of the EU economy” from a holistic, circular perspective within the international project.
The goal is to develop methods to evaluate the economics of energy storage, addressing the challenge of ES selection, design, and operation, as well as innovation for industry and policy makers to holistically evaluate ES systems for future business scenarios. For this, it is essential to keep in mind that the economic driver or optimization objective will not be exclusively the cheapest delivery solution, but high reliability, low carbon footprint, little financial uncertainty and global social acceptance are taken into account. Currently, it is impossible to optimize these aspects based on conventional indicators such as levelized cost of storage capacity, so new economic evaluation indicators of ES have been developed, incorporating circularity embedded through life cycle analysis (LCA).
Circular economy and circular energy storage
In the context of energy storage, the concept of circular economy (CE) is quite widespread. As stated by Kirchherr et al. (2017), “The circular economy concept has gained momentum among both academics and practitioners. However, critics argue that it means too many different things to different people.
The concept of CE can be traced back to 1950 (Ghisellini et al. 2016). However, Pease and Turner proposed one of the first formal conceptualizations in 1989 in Natural Resource and Environmental Economics, and since then the concept has been widely used and redefined many times.
yuan et al. (2008) provides a clear simple definition stating, “The core of CE is the circular (closed) flow of materials and the use of raw materials and energy through multiple phases.”
UNIDO highlights four main drivers of the circular economy: reducing the environmental footprint, generating increased income, reducing resource dependence and minimizing waste, as well as their interrelationship (Fig. 3).
Among several possible definitions of CE, in the context of this project, the one proposed by Kircherr et al. (2017), “Conceptualizing the circular economy: An analysis of 114 definitions”, is widely cited. It describes CE as “An economic system that replaces the ‘end-of-life’ concept with the reduction, alternative reuse, recycling and recovery of materials in production/distribution and consumption processes.” It goes on to say: “It operates on a micro level (products, companies, consumers), meso level (eco-industrial parks) and macro level (city, region, nation and beyond), in order to achieve sustainable development, thereby simultaneously creating environmental quality, economic prosperity and social justice for the benefit of present and future generations. This is possible through new business models and responsible consumers.”
In the Swedish Energy Agency-funded Energy Storage Circular Feasibility Analysis project, these drivers are present horizontally in all work packages and in the methodological framework, which aims to provide a set of techniques and metrics to improve the Feasibility Assessment (TEA ) of ES technologies to identify opportunities for circularity and potential actions to be implemented. We argue that this methodological framework is not only interesting, but also necessary to improve design efficiency and resource utilization, and to reduce the value at risk for ES projects under high uncertainty scenarios. Based on the definitions given for the circular economy, we propose a suitable application strategy for circularity in energy storage in three (see Table 1).
In practice, several studies are conducted by the authors on various ES technologies, including electrochemical storage, for which bottom-up cost structure studies from a cradle-to-cradle point of view show the different impact points of scenarios such as the COVID-19 pandemic in the value chain of battery production. In addition, a comparative life cycle assessment study shows the difference between the production of batteries with recycled materials compared to virgin raw materials. It is intuitive and in most cases correct to assume that recycling is always better from an environmental point of view, but the environmental and economic benefits and impacts of recycling need to be properly quantified in order to be properly accounted for in new business models . In addition, recycling processes must consider various impacts in addition to the carbon footprint. For example, the impact on human health, the ecosystem, the water footprint or the scarcity of natural resources – which are impact categories also affected by the EU production process. From a life-cycle perspective, there are some impact categories where the use of recycled materials for the production of lithium-ion batteries is more polluting than the use of virgin raw materials. Categories of high societal importance include, but are not limited to, ‘land use’, ‘water consumption’ and ‘fossil fuel consumption’.
Considering the drivers proposed in Table 1, an important part of the research group’s work focuses on defining new metrics for optimal sizing and operational control strategies of ES technologies. Here, in addition to conventional economic indicators such as levelized storage costs, indicators with a cradle-to-cradle life cycle perspective, social and environmental impacts and revenue accumulation are considered. Indicators containing information on real economic “values” other than apparent costs and the life cycle horizon instead of the project’s funding horizon are proposed. This benchmarking is heavily based on advanced simulation techniques, optimization and techno-economic models that consider the joint life cycle2 footprint or lifecycle revenue of installed capacity focused on ES assets and not solely on their energy output. The latter is valuable in projects where energy arbitrage is not the only or primary service provided by ES assets.
Energy storage technologies that are attracting increasing attention are thermal energy storage (TES), with interoperability between heating and cooling networks and ammonia/hydrogen in transport applications and power generation. The authors recently published a new methodology and a new set of metrics for optimal sizing of solar hydrogen systems (Fig. 4). In this work, the optimal sizing ratios of system components for holistic system optimization are actually different compared to optimal subsystem optimization—the vectors leading to this discrepancy are due to component interactions.
There is a strong need for new business models and optimization mechanism to translate the value offered by energy assets in the energy matrix into tangible benefits, considering the sustainability of society as a whole. For example, project developers working with revenue accumulation schemes need to provide multiple services with the same assets, thereby increasing economic viability with optimal design and operation of such models. This project aims to propose such designs and work schemes through a holistic systems approach to bridge the cost-benefit and economic viability gap.
One of the business models proposed by the group is the provision of energy storage as a service (ESaaS), where opportunities have been identified to minimize risk and maximize the distribution of know-how by considering the service, development and business chain of the infrastructure. In this business model, developers deploying ES assets are rewarded for capacity on a take-or-pay basis, where consumers or third-party retailers optimize the performance of the assets according to their needs. In this way, the risks of the development and operation of the project are diverted.
Our ultimate goal is to contribute to the alleviation of the climate crisis by integrating ES into energy systems through participation in Task 41 ES-TCP and through cutting-edge research projects. ES technology is, generally speaking, mature, where the limiting factor for its widespread implementation is the lack of techno-economic methodologies and business frameworks. By collaborating with industry experts to ensure feasibility, the developed prototype models received positive feedback, guiding the development of the project. The research team is now in the process of establishing new EU design optimization metrics and optimal circular economy applications for EU technologies and vectors such as lithium-ion batteries, hydrogen and ammonia, among others.
Please note that this article will also appear in the eleventh edition of our quarterly publication.