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The Global Outlook for Energy Storage

Peter Kelly-Detwiler

Global energy storage markets are about to pop. Use cases are proliferating in multiple countries, demonstrating the value of energy storage for numerous applications on both sides of the meter.

The global energy storage industry is poised for takeoff. Storage applications in the field are set to proliferate as costs continue to decline. This dynamic is driven largely by electric-vehicle sales volumes that create economies of scale in the lithium-ion battery supply chain. As a consequence, analysts project breathtaking growth in coming years.

Bullish Forecasts Meet Factors Affecting Growth

Analyst firm GTM recently tallied 1,400 MW and 2,300 MWh of global energy storage projects installed in 2017, and projects that these numbers will soar to 8,600 MW and 21,600 MWh by 2022. Taking a somewhat longer view, Bloomberg New Energy Finance posits numbers of 125,000 MW and 305,000 MWh by 2030, with 70 percent of installations in just eight countries, led by the US and China.

Given the relatively small numbers of installations to date, these forecasts are highly speculative, as they depend on so many shifting dynamics and moving parts. Chief among them are four critical concerns:

  • Cost of installed storage. This, in turn, is dependent on the cost of lithium batteries and balance-of-system costs. These costs are affected by the EV market and efficiency of the resulting supply chains.
  • Level of global renewable resources deployed, and the degree to which these renewables are combined with, or otherwise supported by, storage.
  • State-level policies. These include direct policies like taxes, mandates, and rules that will put storage on solid footing for participation in energy markets, as well as indirect policies like carbon taxes that could bolster renewables and increase the need for storage.
  • Development and commercial viability of improved batteries, such as solid state, and the possible development of competing technologies, such as flow batteries. With today's rapid pace of technology development and deployment, nothing is a sure bet.

Deployment Grows Behind and in Front of the Meter

With the experience of the past several years, it is quite likely that storage will find a home in many locations across the grid. Behind the meter, storage will continue to grow in its role of both firming up on-site solar installations and providing reliability solutions. Many of these deployments will also be aggregated to provide grid services like resource adequacy, ensuring enough capacity is available on the grid when needed.

In front of the meter, it's already clear that storage may become a go-to partner to improve performance, economics, and dispatchability of advanced hybrid renewable projects, according to Utility Dive. Numerous companies are already pairing storage with wind and solar projects today, and this trend will only grow.

In addition, storage will increasingly be used at the grid level to avoid or forestall new investments in transmission and distribution facilities. Storage is also expected to challenge the need for gas-fired peaking plants within the next five years—it has already been proposed as a way to displace an existing and high-emitting peaking plant in Oakland, California, according to GTM Research.

Australian Projects Abound; South Korea Leads Asia

While the US currently leads in MWs installed, Australia has deployed hundreds of megawatts of projects, including the famous 100-MW Hornsdale project installed by Tesla within 100 days, according to Quartz. The nation is also a leader in residential installations, with an estimated 20,000 home battery installations just in 2017 (up three-fold from 2016), according to RenewEconomy.

Meanwhile, South Korea was the clear 2017 leader in Asia, according to figures released mid-April by IHS Markit, exceeding even the US. Japan was a distant second on the continent. The South Korean energy storage market shows no signs of slowing down, as Hyundai Electric recently announced plans to build a 150-MW system for 2018 delivery, according to Digital Journal.

By comparison, although China is a lithium-ion manufacturing powerhouse, it's not a big consumer yet. According to the China Energy Storage Alliance, the country installed 121 MW of battery storage in 2017, a 15 percent increase over the prior year, with 70 MW behind the meter. Unlike most other countries where lithium-ion dominates, half of this was lead acid.

In Europe, Germany and the UK Are Taking the Lead

Meanwhile, Germany holds the household storage title, with an estimated 85,000 residential installations totaling 280 MW, according to GTM. GTAI projects annual installation volumes of 50,000 household systems by 2020. While Germany has relatively fewer grid-scale installations, it is notable for its focus on second-life electric-vehicle-battery projects. In addition, large automobile manufacturers are developing three projects totaling 30 MW, according to GTAI.

The UK is also making rapid progress. A parliamentary group recently issued a report calling for 12,000 MW of storage by 2021. In its Capacity Market pre-qualification register, Clean Energy News reports almost 8,000 MW of storage projects entered the pipeline, while approximately 500 MW of projects sit at the ready-to-build stage—ready to join the 200 MW already deployed.

Globally, the energy sector is poised for explosive growth. With steadily declining battery costs, a growing body of actual experience in the field, and a flow of developers and money to the sector, we are in the very early stages of this exciting time for the industry.

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