Energy Storage – Challenges And Opportunities

High costs along with early stage technology challenges and market and regulatory constraints are barriers to wide-scale energy storage adoption.
Published: Fri 19 Sep 2014

Energy storage is expected to play an increasingly important role in the integration of increasing levels of renewable energy sources but several challenges remain to achieving large-scale storage deployment.

At a roundtable at the recent Fifth Clean Energy Ministerial in Seoul, South Korea, participants reviewed the barriers and potential solutions, and identified several action items and considerations for energy storage promotion.

According to the International Energy Agency (IEA), only 140GW of large-scale, grid-connected energy storage has been deployed worldwide, with 99% of this pumped-storage hydroelectricity. To support electricity sector decarbonization, an estimated 310GW of additional grid-connected energy storage capacity would be needed in China, India, Europe, and the United States by 2050.

Barriers to energy storage

Costs: High costs are the primary obstacle to widespread energy storage adoption. Although many storage technologies have low operating costs, upfront investment costs for most are often prohibitively high compared to other available options. Economies of scale have not yet been fully achieved for many energy storage technologies because of limited deployment.

Markets and financing: The market presents a range of obstacles. For example, storage solutions compete with other flexible energy provision technologies, as well as smart grids, and many alternatives currently have much lower costs. Financing is needed in many quarters, but financing approaches themselves are often barriers to energy storage research and adoption, with a lack of sufficient project financing for demonstration projects and deployment.

Perhaps the biggest challenge is the market’s lack of experience and confidence in energy storage performance and technical capacity at large scales. Market environments also have outdated compensation structures based on traditional power system technologies, which may not be relevant to storage solutions.

Technologies: Pumped-storage hydropower represents the overwhelming majority of deployed storage capacity, with the deployment of other technologies still relatively minimal. Though these technologies are quickly maturing, they are also widely diverse, resulting in difficulties understanding and categorizing solutions. Chemical battery storage is a rapidly growing area, but other technologies must be considered to increase flexibility and address the variety of market needs.

Standards and regulations: Regulatory constraints are holding back the market for energy storage systems. As with the market, regulators have had difficulty classifying and compensating the services provided by energy storage. In addition, international standards and schemes are lacking for certifying energy storage system quality, safety and operational performance.


Recommendations to promote energy storage

● The reduction of energy storage system cost is a top priority. Continued RD&D and, correspondingly, sustained attention and financial investment by governments and stakeholders are needed to make energy storage cost-competitive with other flexibility options.

● Through public–private cooperation, governments and manufacturers can reduce costs and encourage commercialization, but better coordination is needed.

● All types of energy storage technologies should be considered. Thermal storage and a variety of battery technologies hold great promise, sometimes in combined thermal electricity systems, but there are other storage options that can address different market needs.

● Optimization of systems integration and systems perspectives should be emphasized in technology development, market formation and regulatory frameworks.

● In collaboration with other stakeholders, governments should take steps to support the establishment of international standards and certification schemes.

● Experimentation and project financing are vital to improve energy storage system cost and performance and reach economies of scale. Niche markets in which energy storage is currently cost-competitive may offer near-term opportunities.

Further reading

Public-Private Roundtables at the Fifth Clean Energy Ministerial

Engerati-How to Make a Storage Project Bankable

Engerati-Energy Storage Opportunities and Challenges - A West Coast Perspective White Paper