Energy storage boom needs favourable policies

The right policy, regulatory and market frameworks are key to widescale deployment of energy storage even as costs come down, according to market consultants.
Published: Mon 02 Sep 2019

Consulting firm Navigant Research projects that thanks to favourable policies, 10 countries will add 1,242.1MW of new capacity, accounting for around 80% of the market for utility-scale energy storage: the US, France, Germany, the UK, Australia, China, India, Japan, South Korea, and Brazil.

The new report Country Forecasts for Utility-Scale Energy Storage provides forecasts for utility-scale energy storage systems in 26 countries worldwide. Forecasts include the most common technologies for utility-scale energy storage including electrochemical (batteries) and electromechanical (for example pumped hydro, compressed air, flywheels) technologies for 2019-2028. The market remains concentrated in a relatively small number of countries with the right policies, market structures, regulations, and renewable energy deployments. 

“In terms of applications for new utility-scale energy storage projects, solar plus storage has emerged as a major opportunity and driver of new growth,” says Alex Eller, senior research analyst at Navigant Research. “The rapidly falling costs for both technologies have made combined solar plus storage plants economically competitive against conventional fossil fuel plants in a growing number of markets, which allows a solar plant to be a predictable resource for grid operators.”

Most countries are initiating shorter duration storage projects, often for frequency regulation and related services. These will likely transition to longer duration applications as the market matures.

 

The global energy storage systems market will grow at a rate of more than 6% over the coming years to reach $500 billion by 2025, according to Global Market Insights.

Policies such to minimise carbon emissions and bolster grid stability will underline the need for energy storage, at the same time as technology costs come down while performance and efficiency increase.

Lithium-ion batteries are leading the way in for electrochemical solutions but pumped storage continues to be the biggest source of energy storage, and will grow by more than 3% by 2025 thanks to high efficiency, greater stability, longer lifespan and low storage costs, according to the report.

Bloomberg New Energy Finance also predicts exponential growth in energy storage, reaching 1,095GW or 2,850GWh capacity by 2040, a staggering increase of more than 12,000% from 2018. This will require $662 billion of investment, according to BNEF, partly as a result of further sharp declines in the cost of lithium-ion batteries.

BNEF’s Energy Storage Outlook 2019 predicts that lithium-ion battery costs will decrease by 50% per kWh by 2030, as demand takes off in two different markets – stationary storage and electric vehicles.  “Two big changes this year are that we have raised our estimate of the investment that will go into energy storage by 2040 by more than $40 billion, and that we now think the majority of new capacity will be utility-scale, rather than behind-the-meter at homes and businesses,” said Yayoi Sekine, energy storage analyst for BNEF and co-author of the report.

But in order for the grid to reach 100% renewable supply, energy storage costs will have to come down much further to $20/kWh, according to the Massachusetts Institute of Technology (MIT).

“It’s a large drop but some technologies do tend to improve a lot as we’ve seen in the case of solar panels,” said Jessika Trancik, an associate professor of energy studies at MIT and senior author of the paper.

Costs and calculations in the study Storage requirements and costs of shaping renewable energy toward grid decarbonization are based on the demand and generation profiles of four US locations — Arizona, Iowa, Massachusetts and Texas. The study found that if just 5% of supply could be met by other sources such as other generation sources or demand-side management, the target cost of energy storage could be more like $150/kWh.  

BNEF Energy Storage Outlook 2019