The demand for renewable energy sources is increasing, which means there is a growing need for back-up energy. When the sun goes down or the wind dies out, renewable battery technology is there to save the day.
That's the theory, anyway.
California is already in the midst of transforming its state power grid with giant batteries used for back-up power.
We can liken these batteries to energy sourced out from a power plant. When the battery is charged, it becomes a source of energy, and holds value. Owners of these batteries want to buy electricity to charge these batteries when the price of electricity is low, and turn around and sell the electricity when the price is high.
But it's not so easy. Batteries for the most part are inefficient and waste as much as 25 percent of their energy during the charging and discharging process. That's just not a sustainable solution, and considering it costs as much as $10 million to create a set-up using this type of battery system, many improvements need to be made.
That being said, batteries are proving to be an asset for the overall electric power grid. With a little fine tuning it could prove essential to the future power of America.
Following California's Lead
California is leading the charge (no pun intended) and changing how we view energy. They're betting on renewable energy and leaving all the chips on the table.
The California Public Utilities Commission has called on state utility companies and others to install roughly $5 billion worth of batteries and other storage devices to help with the up and down power supplies provided by wind and solar energy.
More wind, more solar – if that happens then renewable battery technology will be behind it every step of the way.
While California does tinker around with its power grid and incorporates more renewable energy, time is becoming increasingly important. The state has already laid out plans to rely on wind and solar to provide one-third of its electricity by 2020.
The main problem: uncertainty of power.
That's where the battery can help. Wind and solar cannot yield a constant flow of energy, but a good back-up power source is always there in time of need.
Utilities in California like Pacific Gas & Electric Co. (NYSEMKT: PCG-A) have set the wheels in motion. They're experimenting with enough battery power in one of their substations that can sustain power generation for as long as seven hours. It's not much, but as more and more of these batteries are put to work, the grid will become more connected.
The $5 billion California has planned over the next seven years will call for hundreds of these large scale batteries. As that happens, utility companies will continue to fall back on gas-fired power plants and import energy from out-of-state.
But one way or another, California is determined to see a third of its electricity come from renewables in the next decade. That's where companies like Stem (who offers a product that reduces electricity bills for businesses), Tesla Motors (NASDAQ: TSLA), and SolarCity (NASDAQ: SCTY) come into play.
SolarCity and Tesla are teaming up to give some homeowners a lithium-ion battery pack that can store electricity generated by their rooftop photovoltaic set-ups. Stem's battery pack is aimed at businesses and helps save on utility rates of electricity.
Batteries are undoubtedly useful, but they're still costly. The same way solar has come down in price – about 75 percent – something similar will need to happen with battery power.
It has to happen fast if California is to meet its renewable energy goals. Not only will the battery need to be refined, but it will need to prove practical as energy storage in order to take on an entire grid.
But it is happening – slowly – and as demand goes up, costs are driven down.
Right now, state subsidies pay 60 percent of the cost of the Tesla battery pack being offered to SolarCity customers, according to Quartz. So far SolarCity has signed up 300 customers, with an additional 667 applications on hand.
In the next five years, I see this technology spreading like wildfire, and eventually it will hit more states and make its way east.
Renewable energy is our future.