The starting gun has sounded for the global storage market, which is set to grow from approximately 4 GW of annual deployments in 2019 to more than 15 GW in 2024, according to Wood Mackenzie. Costs have fallen, direct incentives and clean energy targets are proliferating and competitive markets and vertically-integrated electricity providers are beginning to recognize the potential of energy storage.
In the next decade, the already consolidating web of manufacturers, developers, investors and integrators will compete for their slice of this burgeoning industry, carving out mature supply chains and propelling cost reductions. As they do, continued policy and regulatory efforts will be key to driving upside in the market. The end of the decade will benefit from stabilizing supply chains and mature and experienced players, however there will be even more potential for disruption from new technologies and policies.
What are the biggest trends to watch in the global energy storage market in 2020 and beyond? Daniel Finn-Foley, Wood Mackenzie Head of Energy Storage, sees six key themes:
• Offsetting corporate emissions
• Promoting economic potential
• Behind-the-meter (BTM) resiliency
• Accelerating the energy transition
• Reshaping the finance world
• Supply chain constraints
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“The energy storage industry is in the enviable position of juggling growth gamechangers from multiple directions,” Finn-Foley said. “Plunging costs drove speculation in the first scaled markets but as price declines enter a steadier rate, further recognition of storage’s value – rather than cost – will be the key factor in determining growth.”
As with all renewable energy technologies, energy storage has an important role to play in the energy transition.
“Oil major Total and automaker Opel announced a collaboration on electric vehicle (EV) cell manufacturing earlier this year, potentially investing as much as $5.5 billion in up to 47 GWh of manufacturing capacity. Total, already investing in stationary storage applications, and Opel clearly see batteries as a key element of the future,” said Finn-Foley.
Companies like Microsoft, Google and Facebook have blazed a trail for scores of companies seeking to shrink or eliminate their carbon footprints.
“When Google announced a partnership with NV Energy for significant solar-plus-storage investment to power data centers, they were not just breaking new ground in a key market but were pioneering a new way corporations value renewable energy,” added Finn-Foley. “Rather than simply offset consumed electricity, Google seeks to time-match consumption with availability and that requires storage. If this catches on among other climate-forward corporations, the upside could be huge. Daimler’s commitment to procure renewables in real-time shows that this trend may become global.”
In 2019, the European Commission launched a €10 billion innovation fund targeting low-carbon technologies, including energy storage. On top of this, the US Department of Energy’s Energy Storage Grand Challenge represents the US federal government’s largest-scale action to date. With millions behind this technology globally, innovation efforts have the potential to encourage alternatives to lithium-ion and potentially shift the market, according to Wood Mackenzie.
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Behind the meter
While solar and wind can displace carbon-emitting forms of energy supply, storing energy will be critical when renewable generation is not prolific. Energy storage can play a role in balancing supply with demand on the electric grid and opportunities for BTM residential and non-residential energy storage are growing.
Cost management has been a key driver for BTM applications globally, including in Australia, South Korea, Japan and the Philippines.
“Now, following the deadly and costly wildfires in California in recent years, regulators and policymakers are seeking every lever they can to mitigate risks to the public. One such lever is the Self-Generation Incentive Program (SGIP), which will redirect 63% – or half a billion dollars – of its budget towards projects enhancing critical facility resiliency,” said Finn-Foley.
The drive towards renewable technologies, including energy storage, cannot happen without the necessary investment.
“Massive investment from international development entities, such as the World Bank and the Asian Development Fund, have already begun reshaping the relationship between finance and cleantech and this is quickly moving into the private sector,” Finn-Foley said. “Blackrock expects a fundamental reshaping of finance and decided to end investment in thermal coal. The company also redesigned its investment strategy and put sustainability front and center. Storage has emerged as a potential focal point for the focus on sustainability, with significant investment from a new multi-billion renewable energy fund set to flow into the storage space.”
While momentum behind the storage industry has continued to build, the past several years have been marked by delays caused by safety concerns, the inevitable logistical hiccups that occur when transitioning from pilot to scale and uncertain market participation rules.
“The supply chain question exists for any nascent industry but the energy storage market has the benefit and complication of overlapping supply chains with the EV and consumer electronics industries. Risks in the supply chain became evident late last decade as policies in South Korea drove deployments to that market, sucking the oxygen out of other international markets. Uncertainty goes even further up the chain, encouraging vendors to pursue alternative chemistries or push towards low-cobalt systems.
“Securing adequate supply to meet growing demand is an immense challenge and while vendors are scaling up with support from the energy and automotive industry, it is not immediately clear that supply can meet surging demand. Complications in key commodity availability, delays in manufacturing scale-ups and the gradually diverging priorities of the EV and stationary energy storage space could all throw sand in the gears, though there is significant potential for upside through second-life and battery recycling programs that will emerge over the next 5-10 years.”
As the decade progresses and further incentives accelerate the energy storage market, the dynamic of the industry pushing stakeholders to recognize the technology for its potential will quickly flip, says Wood Mackenzie.
“Stakeholders are already pulling, rather than being pushed, and turning to storage rather than being forced to consider it. The timing and speed of this push/pull shift and the speed with which the industry can react will define its potential,” said Finn-Foley.