BY RICHARD HEAP:
Happy new year. This is traditionally a time when we let go of unwanted and unhealthy habits so we can be our best selves. Well, for a bit anyway.
It’s with this in mind we want to start a new Energy Storage Report tradition. In the first week of January each year, we’re going to make ten predictions for what the next 12 months holds for the energy storage sector – and then, in December, we’ll look back to see which ones we got right and wrong.
Will we be Nostradamus or Nostra-damn-fools? You be the judge:
1. US storage sector braced for Biden boost: US energy storage achieved installations of 1.2GW in 2020, and is set to grow threefold to 3.6GW in 2021 according to Wood Mackenzie. We believe this fast-growing industry will receive further policy boosts from the US government in 2021 after the election of Joe Biden, including a standalone tax credit.
2. Australia to remain a big-hitter with China rising fast: Developers in the US and Australia are slugging it out to build the biggest standalone storage projects, and that battle will continue this year. However, we do expect to see more mega-scale storage projects in China as the country seeks to make good on its goal of net zero emissions by 2060.
3. Growing attention for storage in the Middle East: Ongoing trouble for the oil and gas have left Middle Eastern countries looking again at how to position themselves in a changing energy sector. We expect this to result in high-profile storage projects and investments in the Middle East in 2021, from Abu Dhabi and Saudi Arabia to Israel, Jordan and Oman. It might prove a short-lived experiment if the fortunes of oil bounce back.
4. More attention and scrutiny for green hydrogen: Green hydrogen was a breakout star for the energy sector in 2020 as more utilities put their weight behind pilot schemes. We expect more investors to begin talking publicly of their green hydrogen ambitions this year as projects achieve financial close. With this, though, we expect to see greater scrutiny of potential pitfalls of the technology, including the amount of renewables needed, and the oil companies who are among its biggest supporters.
5. Pure renewables firms to drive M&A activity: In the last 12 months, we’ve seen pure renewables players entering the storage sector by acquiring storage platforms or portfolios. In 2021, we expect M&A activity in storage to continue to be dominated by renewables-focused developers, investors and utilities that want to diversify their asset mix, as well as sovereign wealth.
6. Lithium-ion will keep making the most of its head start: Lithium-ion holds a 90% share of the battery storage market and, with ongoing cost falls, this is likely to persist this year. But this won’t tell the whole story. We expect long-duration alternatives to gain momentum in 2021, with major deals help to take them to commercial maturity and gain market share in the years ahead.
7. Pumped hydro portfolios to attract investor interest: Lithium-ion may lead the battery storage market in terms of installed capacity, but it’s still small fry compared to pumped hydro. There is around 158GW of pumped hydro installed globally. We expect pumped hydro to get sexier in 2021 (from a low base of sexiness!), with big deals for pumped hydro portfolios as renewables-only players look to grow quickly in storage.
8. Floating solar and storage open asset management opportunities: A bit of a leftfield one, but hear us out. In 2020, we’ve seen the emergence of floating solar and storage projects, both of which we expect to persist in 2021. We also expect discussion about how these systems could help pumped hydro operators to realise more value from their reservoirs.
9. Energy storage systems for skyscrapers: We know that batteries can be used in homes and commercial buildings, and in 2021 we expect more chat about how best to use storage into skyscrapers and city centres. The Covid-19 pandemic has sparked soul-searching about how buildings are used and grids are run. This means opportunities for urban storage.
10. Electric vehicles to thrive in post-Covid world: Electric vehicle demand held strong in 2020 despite Covid-19, and we expect it to keep growing in 2021. This includes more policy support for electric vehicles globally; more tie-ups between car makers and battery companies; and greater focus on how the electricity grid and storage will need to evolve.
And there you have it. We’ll be back at the end of 2021 to celebrate what we got right and laugh at any of the points that are wildly off the mark.
What do you think? If you have any predictions of your own for energy storage this year, let us know. All the best for a happy and healthy 2021.