Energy Storage Development Still Faces Obstacles

Policy, finance and technical challenges still plague energy storage development but there is progress.
Published: Fri 10 Oct 2014

It is no secret that energy storage will become a major game changer as the adoption of renewable energy sources continues to grow.

According to Lux Research, the global energy storage market is set to grow nine-fold by the year 2017 to become a US$10.4 billion industry. In addition, its ancillary services – all the required maintenance and transmission efforts needed to maintain and transmit energy – will become a US$3.8 billion market by 2023. [Engerati - The Value of Data and Analytics in Storage Solutions.]

Energy storage will not only help utilities to manage their power supply and demand but it will also help businesses and homeowners, who have installed solar panels on their roofs, to do exactly the same.

It is therefore no surprise that Tesla is building giant lithium-ion battery factories in response to this growing need. While the company intends to use the batteries mostly to power its cars, the company is getting ready for the energy storage market boom as renewable energy gradually increases its share in energy mixes around the world. [Engerati – Energy Storage Business Models – Focus on the Potential.] and [Engerati – Will Tesla’s ‘Gigafactory’ Crack the Energy Storage Market?]

Energy storage needs appropriate policies and finance

However, without the right policies and investments in place, the new clean energy storage market will struggle to progress further. New technologies on the market tend to be costly and utilities are not likely to adopt them without mandates that come with mechanisms to compensate them for the investments. Some states have realised this and have taken the lead by putting mandates into place in order to see the development of renewable energy generation and grid management. California took the lead last year and New York followed suit by budgeting US$25 million for the promotion of energy storage development. [Engerati – California’s Energy Storage Mandate – Will Others Follow?]

The US Federal Energy Regulatory Commission has also passed rules to help make energy storage services attractive to utilities and grid operators as an option to regulate power supply and demand.

PJM, a grid operator that serves a large area of the east coast, including Michigan, Maryland, New Jersey and Pennsylvania, rushed to put these rules into practice. This fast response has resulted in some of the biggest energy storage projects in the area, including flywheels by Beacon Power and lithium-ion battery projects in West Virginia and in Ohio by AES.

Financing can be a major challenge since large financial institutions and banks are waiting to see how quickly the energy storage market takes off before making investments. Often, early investors will demand higher returns in exchange for taking the risk.

Engerati wrote recently about a California energy storage service provider called Stem which managed to line up a US$5 million project development fund from Clean Feet Investors last year. The company also secured a US$100 million fund this year through B Asset Manager in New York City. [Engerati – Stem Pulls Distributed Storage Systems Together as One Resource.]

Energy storage - technical challenges

The federal government handed out billions of grants and loans to battery and other technology developers to commercialize their technologies for electric cars and renewable energy storage but some early players changed business plans, went bankrupt or got sold for cheap because they couldn’t find enough customers or raise the necessary capital for sales and deployment. The sale of A123 Systems and Xtreme Power are good examples. [Engerati – NEC’s Big Step into the Storage Market.]

Technical challenges continue to be an issue. Developers are working hard to create long-lasting batteries which have the ability to store a lot of energy. While a set of solar panels is meant to last 20-plus years, battery makers cannot guarantee that their systems will match that. This may provide an opportunity for battery service providers as they could offer potential customers a maintenance or replacement service.

While the energy storage market does still face its challenges, there are a number of opportunities available to those who are willing to be innovative.