One More Time, With Feeling: GE's Latest Approach to Energy Storage

Century-old electric technology company GE kicked off 2019 with yet another reorg.

The workhorse Power division was split up, to start. Though still a top supplier of the world's natural-gas turbines, the division had turned into a money-loser as renewables adoption surged. Meanwhile, an expanded Renewable Energy division materialized with some 40,000 employees and billions of dollars in revenue. And GE's up-and-coming energy storage business took up residence in that new division under the Renewable Energy Hybrids brand.

Previously, energy storage had nestled under Power, and before that it lived in the ill-fated Current unit, catering to commercial energy services. Years earlier GE tried and then abandoned a sodium-nickel-chloride battery manufacturing play called Durathon.

As the first year under the new arrangement draws to a close, GTM sat down with GE Renewable Energy Hybrid Solutions CEO Prakash Chandra to hear how the industrial giant is leveraging energy storage to grapple with a changing energy market.

"There's never been a lack of commitment to storage," Chandra said. "I think we've tried to muddle through what is the best way to play in the space so we can add the most value in the entire value chain of storage."

The Durathon effort, which looks quixotic from today's perspective, developed as an effort to turn GE locomotives into diesel electric hybrids. Since then, Chandra said, the company has come to appreciate the importance of being battery-agnostic and positioning itself to adapt as the battery supply chain evolves.

Now GE has taken up the mantle of system integrator, using its electrical equipment know-how to vet all the components in the containerized Reservoir product and backstop its system performance.

"This is where you provide the performance guarantees; this is where you wrap everything up," he said. "This is what customers will come to you for and stay with you for over 20 years. You need companies that can stick around for another 20 years to be able to provide these wraps."

GE's longevity speaks for itself, even if its energy storage business has shifted every few years. But the company also hopes to differentiate itself based on its experience in developing power electronics and its historical leadership in gas turbines.

The market for renewables paired with batteries has advanced since GE first constituted its storage business within Power back in 2018. These days, solar developers at least consider storage, and many plan for later battery additions even if they don't install them right away. But the population of contracted solar-plus-storage plants has grown, and wind-plus-storage is starting to emerge as well.

"The way we think about [hybrid renewables] is it's part of a broader investment in power electronics capability that's going to be critical to win in all these spaces," Chandra said.

Power electronics provide the linchpin that ties solar, wind or hydro to batteries. But even as the utility-scale renewables market blossoms, several of the biggest names in solar power conversion have given up, which could give GE a strategic opening.

In July, ABB paid $470 million to get rid of the solar inverter business it acquired in 2013, citing a drop in sales. Schneider Electric pulled out of utility-scale inverters in March to focus on distributed solar markets. Kaco unloaded its central and string inverter businesses earlier in the year.

Chinese manufacturer Huawei leads the global solar inverter market, but it ran into political opposition in the U.S. this year and exited that national market.

GE has long operated a Global Research Center in Schenectady, New York that specializes in advanced inverter development, among other things. Besides confidence in its own equipment, GE hopes to leverage the fact that it's more than just an inverter vendor.

"If you think about players that have exited the solar inverter space...in the past year or two, they don't have this value chain," Chandra said. "We're an equipment player as well, to some extent, as much as we are in digital and software and all of that stuff. But we're focused on the wing-to-wing spectrum when it comes to renewable energy."

Indeed, that expansion of the value chain may be necessary to maintain a power electronics business.

GE's global market share for central photovoltaic inverters has been dropping in recent years and registered at 2 percent for 2018, according to data from Wood Mackenzie.

In the market overall, total inverter shipments have increased even as total revenue drops, said Lindsay Cherry, a WoodMac analyst tracking the space. It's difficult to differentiate utility-scale inverters, except on price; connecting inverters with other offerings presents a possible escape from those headwinds.

"Margins for inverters are tight. Particularly for a company like GE, which only has a central inverter, it's very difficult to differentiate a product, so this is probably a smart move for them," she said of the integrated renewables strategy.

Though the storage business sits under the Renewable Hybrids moniker, GE still advocates for a different battery pairing: natural gas plants.

This sort of hybrid taps into GE's long-running turbine expertise. GE hooks up a battery to a peaker plant, and then runs the battery first for short bursts, saving the gas asset for longer calls.

On one level, this is a recipe for giving gas plants a new lease on life in an otherwise difficult market. But pairing even a 30-minute duration battery can improve the environmental impact of the plant compared to business as usual. The first instance of this setup, for Southern California Edison, reduced the plant's greenhouse gas emissions by 60 percent, cut water usage by 2 million gallons per year and lowered the number of gas starts by 50 percent, Chandra said.

"If you take a market like California, I think to [assume] all of the thermal is going to go away is wishful thinking," Chandra said. "That may happen, I don't know, 50, 60, 100 years from now, when we’ve figured out a lot of other things. But between now and then, you have all these assets you've invested in."

With battery costs coming down, it doesn't take a lot of money to add a battery and then save the gas units for when they are absolutely necessary, he added.

GE maintains a strategic advantage in this product, Chandra said, because of the company's understanding of gas turbine controls.

"I haven't seen anyone do it as well as we are, which is why we're in discussions with a lot of players," Chandra said.

GE can also add batteries to turbines manufactured by other companies, although it hasn't yet done so for a customer, he noted.

The challenge there is that investors tend to look with suspicion at new ideas that only one company is touting. The market is coalescing around solar-plus-storage, but storage-plus-gas remains a GE specialty. And even GE hasn't closed many deals: It built two for Southern California Edison, is working on another two in the Los Angeles Basin, and recently announced a deal with utility Enmax for a power plant in Alberta, Canada.

"It's taken us a while to convince regulators, convince the [utility commissions], the entire ecosystem if you will, to...bring them on board," Chandra said, when asked for evidence of uptake of the gas hybrid. "I think the Southern California Edison project has been a huge home run in that sense."

"If we're having this conversation three months from now, I think you'd see your questions probably answered," he added.

Energy storage is often talked about as a vessel for clean, renewable energy, but it can accompany any power source. With California regulators looking askance at new gas construction, batteries could help existing gas plants operate more efficiently and thereby extend their competitive life.