For the energy storage industry, the past five years have been something of a stage rehearsal for a market explosion to come, led by the U.S. and China, but expanding to covering markets across the globe.
That’s the picture painted by Wood Mackenzie Power& Renewable’s latest report, Global energy storage outlook 2019: 2018 year-in-review and outlook to 2024.” Tuesday’s report projects that energy storage deployments will grow 13 -fold over the next six years, from a 12 gigawatt-hour market in 2018 to a 158 gigawatt-hour market in 2024.
That equates to $71 billion in investment into storage systems excluding pumped hydro, with $14 billion of that coming in 2024 alone. This growth will be concentrated in the United States and China, which will account for 54 percentage of global deployments by 2024, followed by Japan, Australia and South Korea in a second tier of growth marketplaces, and Germany Canada, India and the U.K. rounding out the list.
Each of these markets is taking its own approach to integrating energy storage into its grid operations and market structures, from the state-by-state development in the U.S. to China’s five-year scheme. But they share a commitment to relatively aggressive renewables growth targets, along with the attendant challenges of integrating an increasing share of intermittent gust and solar power into the grid.
And much like the renewables that are driving their growth, the batteries that make up the lion’s share of new storage systems being deployed are falling in cost. That’s positioning them for a much broader integration into grid operations beyond renewables integration, Ravi Manghani, WoodMac’s head of storage research , noted in a Tuesday interview — “Over the last five years, the world began to experiment with storage; in the next five, storage will become a key grid asset.”
Last year considered global energy storage deployments grow 147 percent year over year to reaching 3.3 gigawatts, or 6 gigawatt-hours, the report noted. That’s virtually double the average 74 -percent compound annual growth rate for the industry from 2013 to 2018. In fact, last year’s deployments made up more than half of the total amount of storage deployed in the past five years, “beckoning an intonation in storage demand, ” Manghani said.
This inflection point is measured is not merely in terms of project volume, but in the variety of regulatory and marketplace structures allowing these projects to be financed and built, he noted. The past half-decade of energy storage growth has been driven by a relatively limited and isolated decide of revenue streams, as well as government incentives designed to jump-start development in advance of the market structures to unlock the value of storage, he said.
From 2019 to 2024, WoodMac projects a more mature but still early-stage compound annual growth rate( CAGR) of 38 percent for key storage markets, but with a far broader set of money-making opportunities for the systems being installed. This will include a transformation from short-duration systems providing high-value, but limited-size marketplaces such as frequency regulation, to long-duration systems that can start to displace diesel, oil and gas peaker plants.
A market-by-market breakdown
We’ve already covered WoodMac’s growth projections for the U.S. energy storage market, the world’s biggest at present, and still expected to retain that position by 2024, if only just ahead of China. The U.S. deployed a record 311 megawatts, or 777 megawatt-hours, of energy storage in 2018, but that marketplace isexpected to double in 2019, and triple in 2020, according to last month’s Energy Storage Monitor from WoodMac and the Energy Storage Association.
This growth will continue to be driven by key marketplaces like California, the country’s leader in behind-the-meter batteries, and other states with gigawatt-scale energy storage deployment mandates such as New York and Massachusetts. But it will also be driven by utilities adopting storage for capability or as part of large-scale solar projects, as with recent large-scale contracts in Hawaii, Texas, Minnesota and Colorado.
And of course, Federal Energy Regulatory Commission( FERC) Order 841, which orders the country’s regional wholesale market operators to open energy, capacity and ancillary services markets to energy storage, will create new market opportunities.
Turning to Asia, “we’ve watched China wake up in terms of energy storage, and slightly ahead of schedule, ” Manghani said. China find a 40 -percent year-over-year energy storage market growth in 2018, driven by more than 300 megawatts, or virtually 500 megawatt-hours, of utility-scale deployment.
In November 2017, China’s government announced a 10 -year plan for developing its own grid-scale energy storage industry. This was partly a means of supporting and building upon its already massive dominance in battery manufacturing for electric vehicles, but it’s also a response to China’s mounting grid challenges — namely, integrating the massive amounts of gust and solar power being built in remote western regions to the country’s urban east.
And when China decides to build grid batteries, it constructed them at scale. “The majority of the deployments are currently pilot-scale project — but when China does pilot scale projecs, we’re talking about tens of megawatt hours, ” Manghani said. Last year sawone 101 megawatt, 202 megawatt-hour energy storage project come online in Jiangsu, and another 240 megawatt, 720 megawatt-hour project approved in Gansu to reduce renewables curtailment.
In the next five years, several more large-scale energy storage projects to support grid reliability and flexibility are expected to come online. About 65 percentage of China’s 2018 installed capability was developed by the State Grid Corporation of China( SGCC) for ancillary services purposes, indicating the importance of central planning for growth.
South Korea represents a similar narrative of how government planning can drive massive energy storage marketplace growth, with a new policy to permit storage-backed wind and solar projects to earn renewable energy credentials worth five times their capacity value driving a massive boom in 2018. From less than 10 megawatt-hours are used in 2017, South Korea’s utility-scale and commercial-industrial behind-the-meter deployments boomed to 1,100 megawatt-hours in 2018, with nearly $400 million in energy storage investments and a gas pipeline of projects that’s already overshot its goal of 800 megawatt-hours by 2020.
Australia, by contrast, has been driven by solar-plus-storage projects on the residential side of the market, driven by its competitive energy marketplaces and the increasingly attractive economics of self-generated solar power. Australia led the world in residential storage in 2018 with 150 megawatts, or 300 megawatt-hours, of systems deployed. Japan ranked a close second in residential storage, taking a slight result over Germany in terms of 2018 deployments, although Germany still retains the lead in total number of systems deployed, at about 860 megawatt-hours
At the same period, policy shifts can have an impact on global energy storage markets. The U.K. installed its own record-setting 408 megawatts, or 325 megawatt-hours, of utility-scale storage in 2018. But as these figures indicate, this boom was largely in the form of shorter-duration battery systems, which could see their value decreased significantly under modification of the UK’s capacity market mechanism to de-rate shorter duration systems in favor of multi-hour storage.
At the same time, a November European court ruling against the U.K.’s capacity market mechanism — along with the broader uncertainty over how the country’s deviation from the European Union under its 2016′ Brexit” referendum could affect its energy future- has created challenges for the market.
Likewise, in Canada, last year’s efforts to incorporate energy storage into wholesale marketplaces in Ontario and Alberta have been counterbalanced somewhat by the new Ontario government’s decision to cancel hundreds of renewable energy projects.
The Wood Mackenzie Power& Renewables report is available for purchase here.
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