Battery Energy Storage on the Cusp of a Major Growth Surge, Deloitte Energy Center says
- May 21, 2018
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The battery -based energy storage market is on the cusp of a sustained growth surge, to a point that the technology may become practically universal, according to the Deloitte Center for Energy Solutions.
Inherently flexible, versatile, highly efficient and virtually instantaneous in response, battery-based energy storage is growing fast surging in nine key national markets amid a backdrop of falling costs, improved performance and greater understanding, Deloitte's research team points out. There's more to it than that, however.
The Deloitte Center for Energy Solutions lays out what it has determined are the eight main drivers of, and four principal barriers to market growth in a new study entitled, “Supercharged: Challenges and opportunities in global battery storage markets.” Energy Central spoke with Deloitte Center for Energy Solutions' Director and study author Andrew Slaughter to gain further insight into the study and prospects for market development and growth in coming months and years.
Zooming in on battery energy storage market drivers, barriers in key markets
Tapping into data and industry insider expertise in nine major markets, Deloitte's study focuses on battery energy storage deployments in electric power grids and what's driving utilities, policy makers and other market stakeholders to push for and support initiatives that spur battery energy storage market development and growth.
The study also zooms in rapid technological innovation – the use of artificial intelligence, blockchain and predictive analytics – and how a global industry “ecosystem” of startups is making use of them. That encompasses development of innovative, behind-the-utility-meter business models, as well as applications and systems platforms of increasing scope and scale, that benefit power grid operators and utilities, as well as their customers.
More specifically, the Deloitte Center identifies eight key drivers of battery energy storage market growth common to all nine national markets covered in the study:
- Cost and performance improvements
- Grid modernization
- Global movement towards renewables
- Participation in wholesale electricity markets
- Financial incentives
- Phase-outs of FITs or net metering
- Desire for self-sufficiency
- National policy
The study also highlight four main barriers to market growth and development:
- Perceptions of high prices
- Lack of standardization
- Outdated regulatory policy and market design
- Incomplete definition of energy storage
Lithium-ion battery storage: Most common uses
At present grid frequency regulation is the most common use of intelligent, battery storage, according to the study. That's followed by reserve capacity, bill management, and energy time shifting.
Today's advanced battery energy storage systems can do more, however. Moreover, legislative and regulatory initiatives that open up new market opportunities and use cases are emerging in all nine national markets, Deloitte points out.
“Electrical energy storage, battery energy storage more particularly, is on the cusp of a very strong take-off phase,” study author Andrew Slaughter told Energy Central.
Signs that the latest stationary lithium-ion batteries was becoming an important power and energy technology from the utility-scale on downstream have been emerging over the past couple or few years, Slaughter noted.
The Deloitte Center studied the market from a broader, global perspective, as well delving further to carry out a detailed examination of the factors fueling growth, in producing its latest study. “We looked at a number of different markets and found that lithium-ion battery storage is really starting to penetrate. There is a remarkable combination of factors behind that,” Slaughter said during an interview.
Viable solutions emerging in a variety of different contexts
Technological advances are yielding remarkable improvements both in terms of cost and performance to the point that lithium-ion battery storage is competitive with building out more in the way of traditional generation resources and transmission and distribution infrastructure, Slaughter highlighted.
Lithium-ion battery storage costs have dropped from over $1,000 per kWh to a couple of hundred dollar per kWh since 2010, he pointed out. "That's an enormous -- an 80 percent --improvement in performance costs over a relatively short period of time, and there's more room to move on from that with growing scale on the production/manufacturing side, as well as declines in the cost of materials."
At the utility-scale, widespread grid modernization initiatives are fueling growth. In some instances that has reached the point where lithium-ion battery storage is now competitive with, or falls below the cost of, building out new, natural gas-fueled peak power plants, he pointed out.
Economic feasibility extends down and across the electricity market value chain to encompass lithium-ion battery systems deployed by mid-tier utilities' business and residential customers.
The ability of battery and other energy storage tech to smooth out dispatch of energy produced by variable, or intermittent, renewable power generation resources is another key driver of market growth, Slaughter continued.
“We used to think of renewable energy generation as intermittent, which constrained expansion, but battery and energy storage more broadly is a natural complement that addresses that,” he said.
Fundamentally, the flexibility inherent to lithium-ion battery storage makes for broad-scale applications, and for corresponding development and emergence of innovative, new business models that can be applied across electricity market value chains regardless of how they're structured, Slaughter continued.
“Their flexibility is a big part of the beauty of battery energy storage systems,” Slaughter said. “Viable solutions are emerging in many different contexts – for utilities, such as in load shifting, and for customers seeking to enhance energy resiliency and autonomy.
"The big question is how and where these systems produce the most value from an investment. Different use cases are being tested and systems deployed on quite a wide variety of scales.”
Early results indicate that lithium-ion batteries can indeed yield substantial value and benefits in a variety of end-use cases and across a wide range of scales. The “learning curve effect,” particularly as it's being compounded via networking, is serving as a catalyst for market and development and growth. That's another key growth driver, one that will accelerate achievement of economies of scale that continue to drive costs down and yield improved results, Slaughter concluded.