By Jason Deign
A major study published last week not only forecasts massive energy storage growth but also predicts a seismic shift in the structure of the market.
The Global Energy Storage Forecast, 2016-24, from Bloomberg New Energy Finance (BNEF), predicts about 45GW and 81GWh of storage could be installed by 2024, representing an investment of USD$44bn.
The figure excludes pumped hydro capacity, of which there is currently 104GW according to 2012 US Energy Information Administration data cited by the American Energy Storage Association.
Perhaps more importantly, though, the Forecast shows worldwide behind-the-meter storage overtaking utility-scale applications between 2020 and 2021.
By 2024, predicts BNEF, 66% of all storage will be behind the meter, compared to just 16% at present.
This estimate may prove conservative
Energy Storage Report can reveal that even this estimate may prove to be highly conservative since the Forecast does not take account of the impact of second-life batteries likely to flood the market from 2020 onwards.
The second-life effect, which could reduce lithium-ion battery costs to as little as $49 per kWh in a couple of years, was only uncovered in a separate BNEF study a fortnight ago.
Forecast author Logan Goldie-Scot told Energy Storage Report that this factor had not been incorporated into his global market sizing calculations and would be included in a second phase of the research.
Second-life batteries could further skew energy storage market dynamics to behind-the-meter applications.
Colin McKerracher, manager for advanced transport insight at BNEF, said “behind the meter is the most promising application” for second-life batteries, “so residential will play a big role.”
A clear swing towards behind-the-meter storage
Even without taking into account the multiplier effect that second-life batteries could have, a clear swing towards behind-the-meter storage within the next half decade could carry profound implications.
The first and most obvious one is that future energy markets would seem increasingly unlikely to resemble those currently seeing a boom in grid-scale storage, such as California or the UK.
And they are even less likely to look like markets where the legacy energy model still prevails, which equates to most of the world.
Instead, a mere five years from now an increasing number of electricity markets will start to take after Germany and Australia, where a growing proportion of power customers are partially or totally disengaging from the grid.
The Forecast makes it clear that the move to behind the meter is all about energy independence.
“64% of all commissioned capacity in 2024”
“Behind-the-meter PV plus storage goes from being a niche application in 2016 to making up 64% of all commissioned capacity in 2024,” it says.
This trend threatens the energy sector status quo. Utilities could face a powerful new competitor in the shape of customers’ ability to service their own energy needs. And dealing with this competition might not be easy.
Consumer buying habits are hard to predict because they are only partly based on price.
In many parts of Australia and Germany, for example, the business case for residential PV and storage is still marginal at best, but that has not deterred homeowners from installing systems for a range of other reasons.
Hence utilities may find it hard to predict with certainty if and when a stampede towards solar plus storage might hit the market. Nevertheless, how they deal with the situation could be important for their future success.
Distributed generation with storage
In Spain, for instance, the major utilities have earned the contempt of many consumers by seeming to have a guiding role in national laws clamping down on distributed generation with storage.
But in Germany and Australia, a handful of far-sighted utilities such as E.ON and AGL Energy are attempting to head off the grid defection trend by providing solar-plus-storage systems of their own.
This seems like a smart move, potentially allowing the utility to maintain its customer relationships and deliver other value-added services down the line.
Maintaining that customer relationship could emerge as a critical task for utilities since one of the big problems with partially disconnected customers is that their grid requirements will be difficult to predict and control.
For the sake of grid stability, most utilities and network operators would want to have a say in how behind-the-meter storage assets are used, ideally for example aggregating them to form virtual power plants.
Storing excess solar energy for customers
Some could even go as far as MVV Energie in Germany, and create a grid-scale battery plant to store excess solar energy for residential customers. And it is not just utilities that could be affected by the behind-the-meter trend.
If the future of energy storage lies in homes and commercial or industrial installations, rather than on the grid, then that calls into question the prospects for a host of current start-ups commercialising grid-scale battery products.
“There will be swathes of lithium-ion batteries deployed,” said Goldie-Scot. “The challenge for alternative technologies is how do you compete with the large lithium-ion manufacturers if you can’t compete on scale.”