BATTERY MARKET OVERVIEW

Olympe

Installed capacity of energy storage is continuing to increase globally at an exponential rate. Global capacity
doubled between 2017 and 2018 to 8 GWh (IEA, 2018). Pumped hydro storage still makes up for the bulk of energy
storage capacity accounting for 96.2% of the worldwide storage capacity. The electro-chemical storage (batteries)
follows with the most potential. Massive potential also exists for electro-mechanical storage such as flywheels.
However, it needs to be developed further (TAWAKI, 2018).

Global installed energy storage capacity behind and In-front-of-the-meter by country (IEA, 2019)

Last year, South Korea’s installed energy storage capacity grew to be the largest of any single nation (excluding
those with pumped hydro) (IEA, 2019). The large regulatory reform and incentives both in front and behind the
meter have been cited as being a large driver for the uptake in energy storage in this area (Byuk-Keun Jo, 2019).
However, the rapid uptake has not developed without some issues, with a number of storage related fires occurring, potentially due to hasty installations and relaxed oversight (IEA, 2019).

The World Energy Council projected that there could be as much as 250 GW of energy storage installed by 2030
(World Energy Council, 2016). Indeed, the market for energy storage is growing at a rapid rate, driven by declining
prices and supportive government policies (Eric Hittinger and Eric Williams, 2018). Furthermore, by 2030, the
installed costs of battery storage systems could fall by 50-66% (IRENA, 2017). In fact, a Greentech Media (GTM)
Research report suggested that the cost of energy storage systems will reduce by an annual rate of 8% until 2022
(EESI, 2019).

Behind-the-meter energy storage has now taken over the installed capacity of utility scale storage with the largest
growth seen in Korea, Australia, Japan, and Germany (IEA, 2019). It is expected that 70% of all renewable
generation installed behind-the-meter will be paired with some level of energy storage over the next decade (Wilson, 2018). Energy storage is improving the ability for customers to consume more of the energy they are producing from distributed generation which in turn is improving the return on investment (Deloitte, 2015). As incumbent distributers move towards more cost-reflective pricing and potential feed-in tariffs, this may further improve the business case for pairing energy storage with behind-the-meter generation (Wilson, 2018).

Technology Mix in Storage Installations, excluding Pumped Hydro (IEA, 2019)

In terms of technology mix in energy storage installations, IEA shows in its 2019 publication that lithium-ion batteries dominate among all storage technologies excluding pumped hydro through the year 2016 (see Figure 2). This was paired with a sharp decline in the number of flywheel installations after having a share of around 25% in 2012. The prevailing lead-based batteries have also decreased dramatically in market share from 40% in 2011 to 5% in 2018.

Despite rapidly falling costs, energy storage systems remain expensive and the significant upfront investment required is difficult to overcome without governmental support and/or facilitated financing schemes (ESMAP, 2017).
Ultimately, the future is bright for both renewables and energy storage. Together, the two are proving to be a powerful combination in the global energy market. Industry growth, access to new markets, and continued regulatory reform will help to make stored power highly competitive (IRENA, 2017).

Jean

Large, grid-scale battery systems are vital to the future of renewables because they make it possible to store surplus energy and create sustainable power supply from inconsistent and varied sources. Currently, for example, the lack of efficient and effective electricity storage systems means wind turbines have to be turned off when demand drops, or when the grid becomes overloaded. Batteries would allow renewable energy projects to act more like conventional power stations, with the option to provide a constant output if required.

Australia is already taking this approach to cope with ongoing energy supply issues. For example, Tesla is building the world’s largest lithium ion battery (100MW/129MWh) in South Australia, to be paired with Neoen’s Hornsdale Wind Farm. The battery will provide stability services for the wind farm, providing emergency backup power if a shortfall is predicted.

In October 2017, Australian renewable energy company, Windlab, announced that it was working with Danish battery storage experts Vestas to create “the world’s first utility-scale, on-grid wind, solar and battery energy storage project”. This will provide a consistent supply of electricity that will help meet power demand in Australia. As Clive Turton, president of Vestas Asia Pacific said at the time, “Hybrid solutions combining wind, solar and storage hold a huge potential for Australia.”

“Battery storage is a game-changer,” says the managing director of an Australian bank. “It’s the next step towards using clean energy efficiently.”

When considering an investment in future renewable energy projects, 98 percent of respondents say the inclusion of battery storage is important, including 57 percent who find it very important.

Regulatory and contractual considerations add to the complexity. Although the idea of hooking up a wind or solar farm to battery storage is sound in theory, the ability to store energy and sell it on may be subject to limitations imposed by energy offtake contracts, subsidy mechanisms and financing agreements.

“Battery storage is costly to add to projects and the additional burden of inefficiency exists. I believe it will take a little more than a decade to achieve the goals we’ve set today,” says the investment director of a Japanese fund.

Asked when they believe renewable projects with battery storage will start to deliver uninterrupted energy at grid parity, 31 percent of respondents think it will be 5 to 6 years. However, a significant proportion — 38 percent — believes that grid parity is between 9 and 16 years away.