Global Energy Storage Market to Expand 13-Fold By 2024
*Wood Mackenzie Power & Renewables
- April 9, 2019
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The global market for energy storage will expand 13-fold, from 12 to 158 gigawatt-hours (GWh) per year and become a vital asset of power grids, according to Wood Mackenzie Power & Renewables.
The advantages of using today's smart, lithium-ion battery energy storage systems (BESS) in particular— high efficiency, fast response, rapid deployment, zero greenhouse gas emissions and small physical footprints among them— have become increasingly evident and valued in recent years, as they've been making their way on to utility grids, as well as installed behind-the-meter at utility customer sites. Recent, sharply declining costs have been and continue to add momentum to market growth, Wood Mackenzie points out.
Global installed energy storage capacity surged 140 percent higher year-to-year in 2018, increasing 6 GWh and 3.3 GW, Wood Mackenzie highlights in its latest market report. The market is still at a very early stage of development and maturity, however, according to the global research and consultancy.
“From 2013 to 2018, we saw fledgling market growth. This was reflected in a global GWh compound annual growth rate (CAGR) of 74%, although we did observe relatively small deployment totals of 7GW/12GWh for the period," Research Director Ravi Manghani was quoted in a press release.
Making believers of key industry players
Experiences to date nonetheless are making believers of key industry players and others, Manghani continued. "[T]hese developments have shifted the minds of global regulators, policy makers, grid operators, asset operators and developers, in terms of how energy systems can be balanced.
"Market structures have generally struggled to keep up with the pace of this technology, illustrated by the limited number of revenue streams available to appropriately compensate storage. More than half of the GWh during this period came online in 2018 alone, beckoning an inflection in storage demand.”
Half the energy storage capacity added last year was deployed in front of the utility meter (FTM). The opening of opportunities to monetize some of the grid services, ancillary grid services more specifically, BESS can provide by market regulators fueled growth. New opportunities for solar-plus-storage systems to provide semi-dispatchable power capacity, e.g. solar generation during peak daytime hours, also contributed to growth, Wood Mackenzie highlights.
In addition, non-residential energy storage installations surpassed their residential counterparts for the first time last year. Institution of a subsidy and growth in South Korea, in particular, spurred the increase. It's going to take some time before all the risks associated with deploying non-residential energy storage systems, as well as gain access to financing and scale up in capacity, are resolved due to the complexity of the value proposition in several markets, however, according to Xu.
“In terms of residential storage, state incentives, reduction in solar export tariffs and the need for backup facilitated storage deployment. Due to rapid system cost reductions, we expect sustainable growth to continue in markets where subsidies are being curtailed," said Senior Research Analyst Le Xu. "With or without a subsidy, consumers are willing to pay a premium to increase their use of rooftop solar power and, in the process, mitigate the risk of electricity bill increases."
A look at what may come
Looking ahead, Wood Mackenzie Power & Renewables expects energy storage will thrive in major markets worldwide from 2019-2024. The research firm forecasts capacity will increase at a 38 percent compound annual growth rate (CAGR) over the period, with power and energy capacity soaring to 63 GW and 158 GWh per year, respectively.
Geographically, Growth will be fastest in the U.S. and China, will will dominate the global market. Together, Wood Mackenzie expects them to account for 54 percent of the GWh capacity installed during the period. Market reforms, state mandates and, in particular, "the most significant energy sector transformation since the Dash for Gas" will
In terms of market segments, Wood Mackenzie expects FTM will continue to be the largest over the period. That said, the research firm expects a shift from short-duration that provide high, but limited value power services, such as frequency regulation, towards long duration storage dispatch will take place. It's at that point that FTM energy storage will displace diesel, oil and gas peaker plants on a widespread basis, according to the Wood Mackenzie.
“We expect renewables-plus projects to become a popular trend through 2024," the firm states. "This is especially true for solar-plus-storage projects, as the requirement for clean and dispatchable renewables is widely accepted."
In terms of investment, Wood Mackenzie estimates the cumulative global energy storage market, which it defines as total system capital expenditure on electrochemical and electromechanical energy storage systems, excluding pumped hydro, to grow six-fold to reach $71 billion in total by 2024. Some $14 billion of that total will be invested in 2024 alone, the firm says.
“The electrification epoch will unfold more rapidly over the next five years. With it, energy storage will become a necessary technology to enhance system flexibility and enable clean, rapid system balancing, while de-risking ever increasing intermittent assets and portfolios,” said Wood Mackenzie Power & Renewable Senior Research Analyst Rory McCarthy.