Battery Storage Goes Mainstream
Energy storage using grid-connected electrochemical battery systems has widely been hailed as a crucial tool to enable widespread integration of renewables, unlock grid flexibility, and bolster grid reliability. For years, battery storage was considered elusive, hindered by high upfront costs and technical setbacks. But over the past decade, battery storage has taken great leaps toward mainstream use, expanding exponentially alongside renewable technologies.
In the U.S., which harbors substantial reserves of pumped hydropower storage, battery storage is now clearly an established market. Battery storage deployments—including from lithium-ion, lead acid, sodium chemistries, and flow technologies—grew to 336 MWh in 2016, doubling megawatt-hours deployed in 2015, according a report released by GTM Research and the Energy Storage Association (ESA) in the first quarter of 2017. The entities remarked that in the final quarter of 2016 alone, 230 MWh came online—more than the sum of the previous 12 quarters combined—driven by a burst in utility installations (Figure 1).
Worldwide, as of early April, about 733 grid-connected electrochemical projects with a total rated power of 1.8 GW (of varying duration) have been installed, according to the U.S. Department of Energy’s Global Energy Storage Database.
A Global Factor
While a vast amount of research and analyses on the sector exists, the consensus is this growth is expected to continue. IHS Markit, which owns the Energy Storage Intelligence Service, records a global 390-MW pipeline for battery projects, characterized by new announcements in China, Australia, South Korea, and India.
“Energy storage is set to grow as fast as solar photovoltaic energy has in recent years, sparking strong interest from a wide range of players and underscored by recent mergers and acquisitions among car manufacturers, major oil and gas companies, and conventional power suppliers,” said Marianne Boust, a principal analyst at IHS Markit.
Industry experts caution, though, that this growth won’t be even. Several fundamental contributing factors are setting the stage for future battery storage growth in different regions. Every country around the world, they note, has a unique energy storage potential that is based on the combination of energy resources, historical physical infrastructure, and electricity market structure, as well as regulatory framework, population demographics, energy demand patterns and trends, and general grid architecture and condition.
It is more valuable to assess general drivers affecting the sector, the experts say. One of the most important drivers of utility-scale battery storage systems, for example, continues to be the substantial growth in the amount of renewable energy being deployed around the world. Bloomberg New Energy Finance said in a 2016-released long-term forecast that 644 GW of new wind and solar photovoltaic (PV) capacity could be installed worldwide over the next five years. That variable generation could present a host of challenges to electrical grids not designed to handle them, particularly in the developing world, where grids are already stressed delivering existing generation.
Another key driver will involve national targets to curb greenhouse gas emissions under the Paris Agreement negotiated by 197 countries in late 2015. Countries are also generally moving toward improving the resilience of their grids in the face of heightened climate disruptions.
Meanwhile, falling system costs are making battery storage an attractive alternative to certain infrastructure investments. The sector’s relative maturity is also prompting many utilities to consider energy storage systems in resource planning. The financial community, too, is getting comfortable with investments in battery storage.
In the Act of Consolidating
Yet, the sector is still in a state of flux, and it is still unclear whether this will help or hinder the widespread deployment of battery storage.
Surging interest and rapid deployment have attracted an increasing number of actors in the sector, such as utilities, battery manufacturers, and renewable project developers, which are generally helping to drive competition. Greensmith Energy, a U.S.-based firm that designs and deploys energy storage systems and software, noted that in the face of diminished venture capital funding, market participants are also looking to execute on growth strategies and scale-up to maximize profits or decrease costs along the value chain.
Those are some reasons the sector saw multiple large corporate deals during 2016. Total Energy, for example, acquired industrial battery maker Saft, Engie bought Green Charge Networks, Doosan struck an agreement with energy storage systems software provider 1Energy Systems, and Tesla Motors acquired SolarCity.
“Under synergistic circumstances, mergers can certainly jumpstart long-term growth for an enterprise, but the failure rate of mergers and acquisitions is between 70%–90%,” said Ian McClenny, a research analyst with Navigant Research in an August blog post.
McClenny pointed out that enterprises might also choose to acquire companies to fundamentally shift their core competencies to another business segment.
“Creating shareholder value is important to secure longevity in any market; investor expectations help incent company innovation,” he said. “Key motivations behind these acquisitions appear to be project financing and accessibility to behind-the-meter customers. Having more financial resources bolsters a storage company’s influence when bidding for larger grid storage contracts.”Read full article at PowerMag.com