New research confirms what we knew

Research from IHS Markit shows solar increasingly being paired with battery storage. Pic: Skeeze, Pixabay.

Research from IHS Markit shows solar increasingly being paired with battery storage. Pic: Skeeze, Pixabay.

By Jason Deign

A new study has strengthened previous evidence that electrical energy storage is getting more distributed, more tied to solar, more long-term and more based on lithium-ion.

The Grid-Connected Energy Storage Market Tracker released yesterday by IHS Markit shows 1.3GW of grid-connected energy storage was installed in 2016. The figure is expected to grow to 4.7GW in 2020 and 8.8GW by 2025.

Revenue-wise, IHS Markit predicts the market will grow from USD$1.5bn in 2016 to more than $7bn in 2025, a 16% compound annual growth rate.

“The global market for energy storage remains poised for growth, with the market outlook strengthening until 2025, reaching a total installed base of 52GW,” said the analyst firm in a press release.

But report author Julian Jansen played down the importance of the headline figures—“it’s a forecast,” he said—and told Energy Storage Report that the key findings were to do with the trends driving growth in the industry. 

Application and revenue stacking

Foremost among these was a move towards application and revenue stacking in energy storage projects.

“When we look at some of the early markets, it was all driven by single applications,” Jansen said. “These were very niche and not always economically feasible.”

Since around 2015, however, the trend has been to add new application and value streams to storage assets, to help improve the project payback time and return on investment.

This, in turn, is helping to drive energy storage adoption, particularly by utilities.

“New value is emerging for utility-side-of-meter storage, primarily from capacity requirements, the integration of utility-scale solar and island micro-grids,” said IHS Markit. 

Solar-plus-storage

Solar-plus-storage has emerged as a major application in the last year or so.

In the US, states such as California, Hawaii and New York are increasingly requiring solar to be tied to battery storage so energy can be delivered to the grid outside peak production times.

Low-cost storage is also driving adoption of PV and batteries in the residential market as government support for rooftop solar fades.

“In the behind-the-meter space you won’t have feed-in tariffs or subsidies, so the case for PV is in reducing energy costs and increasing self-consumption,” said Jansen. “You will install a PV system with a battery.”

This is already increasingly the case in Germany, one of the world’s most advanced residential storage markets, where around 50% of new PV installations have a battery attached, Jansen said. 

A fundamental pairing

“It will become a fundamental pairing,” he commented.

The growing business case for solar-plus-batteries will help force a fundamental shift in the make-up of the energy storage market, IHS Markit predicts.

Echoing findings from Bloomberg New Energy Finance’s Global Energy Storage Forecast, 2016-24, the IHS Markit market tracker forecasts that behind-the-meter installations will overtake front-of-meter installs by 2020.

Meanwhile the increase in storage tied to intermittent renewables, along with the trend towards stacking more applications on each system, will fuel demand for longer-duration assets.

“For frequency response, you only needed 30 minutes, maybe an hour maximum,” said Jansen. “When you’re looking at integrating solar, you’re starting to need longer-duration storage, of three or four hours.” 

Forecast growth in energy storage

Forecast growth in energy storage for longer-duration applications was “much more robust than in the sub-one-hour segment,” he said.

Energy Storage Report charted the rise of longer-duration storage last year, in a study with all-iron flow battery maker ESS.

Flow batteries have typically been touted as better suited than lithium-ion products for these longer-duration tasks.

That is because many flow batteries have cheap components that can cost-effectively provide the storage volume needed for long-duration discharges.

However, the IHS Markit research confirms another trend previously reported on in Energy Storage Report: the plummeting cost of lithium-ion batteries is increasingly allowing them to compete even in longer-duration applications. 

Opportunities for new technologies

“You would think this move to longer durations would open up opportunities for new technologies,” Jansen noted.

“But one interesting finding is that because lithium-ion costs have come down so fast, even at four hours most [projects] are lithium ion.

“It’s going to be difficult for others because the segment they’ve always seen as a sweet spot is starting to be occupied by lithium ion.”

An added problem for non-lithium-ion contenders is that many utilities show a marked preference for buying from dominant vendors, which in the battery market almost invariably limits choice to lithium-ion products.

That said, other recent studies indicate that flow batteries could achieve significant levels of cost reduction with relatively minor increases in production volume. Whether they can dominate long-duration storage remains to be seen.

  • For more on PV plus storage, head to New Energy Update’s 4th Annual PV O&M USA conference, in San Jose, California, on November 2 and 3. Download the brochure now.

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