Summary

A stationary energy storage system (SES) can store energy and release it in the form of electricity when it is needed. The key issue that SES systems solve is that electrons cannot be stored. So, in order to store electricity, electrons need to be converted into molecules that can be stored in many different ways, ranging from batteries, to water, heat, compressed air, green hydrogen, etc. There is no single standard storage solution for the electricity system because the grid requires ultra-short term capacity and ultra-long term capacity known as seasonal or strategic storage. Different storage technologies compete on response time, efficiency, discharge time, capex, weight, and cost. Batteries, for example, are cheap and good for short-duration range but a 4-hour discharge time makes them ill-suited for long-term and ultra-long term storage where green hydrogen and pumped storage hydroelectricity (PSH) are better.

Viability (5)

The market is already well established with pumped storage hydroelectricity (PSH) accounting for around 95% of all active tracked storage installations worldwide, with a total installed throughput capacity of over 181 GW. Lithium-ion battery storage contributing 95% of new utility-scale capacity globally in 2021, with only a few rare exceptions such as three new compressed-air energy storage systems (CAES) in China. Battery R&D is exploring different chemistry combinations to increase response time, efficiency, reduce discharge time. Such batteries include metal-air, redox flow, and solid-state. For longer-term storage, thermal (sensible thermal storage (STES), latent phase-change material (PCM), thermochemical storage (TCS)), mechanical (flywheel energy storage (FES), compressed air energy storage (CAES)) and Green Hydrogen are the main focus of R&D.

Drivers (5)

Demand-side, as with all other energy technologies, the macro driver is the climate emergency and the need to decrease global carbon emissions by 45% by 2030 and to reach net zero by 2050. To meet net-zero goals, there needs to be 245 gigawatt-hours of batteries added each year to 2030 (26 times the 2020 total). Combined with Solar Photovoltaics and Wind Power, these technologies offer a pathway to energy independence, now a powerful tailwind from the Russian invasion of Ukraine. Governments around the world want to meet their net zero targets and reduce reliance on foreign energy sources. The supply-side driver is price, with a 97% decline in the last three decades. And the declines are accelerating with cost halving between 2014 and 2018, with prices fall by an average of 19% for every doubling of capacity. Batteries and Solar Photovoltaics and Wind Power are in a reinforcing relationship in which cheaper batteries mean more solar and wind deployment which in turn lowers costs and increases demand for batteries.

Novelty (4)

At a fundamental level, SES competes with alternative ways to deliver energy. SES is not needed for coal, gas, nuclear, or Deep Geothermal Energy power plants that generate dispatchable energy. There is no need to store energy is you can just generate supply based on demand. Realistically though, SES is a decarbonisation technology and so only competes with nuclear energy and geothermal. But the scale of the decarbonisation needed and the cost and length of time it takes to bring new nuclear and geothermal capacity to market means the technologies are complementary.

Diffusion (3)

The biggest challenge to adoption is the supply of cobalt, nickel, lithium and other rare earth metals for batteries. However, supply and price concerns is driving investment into alternative battery chemistry like lithium iron phosphate (LFP) but it’s likely materials for lithium-ion batteries will come to be a key geopolitical tension point over the next decade. CAES, pumped storage hydroelectricity (PSH) and Green Hydrogen will ameliorate these concerns but not in the short-term. Although China is aiming for 25% of energy storage will come from CAES by 2030. With China producing 80% of the world’s supply of lithium-ion batteries, adoption is particularly sensitive to geopolitical tension and may drive CAES to limit lithium reliance.

Impact (4) High certainty

Without SES it is close to impossible to get anywhere close to decreasing global carbon emissions by 45% by 2030. There are alternative non-fossil fuel baseload solutions like Generation IV Nuclear Reactors and Small Modular Reactors (SMRs) today and Green Hydrogen in the 2030s and Nuclear Fusion in the 2040s maybe, but nothing that can meet demand at a reasonable cost in the 2020s. SES is an enabler and catalyst of Solar Photovoltaics, Wind Power, and Virtual Power Plants to manage the grid more efficiently. Widespread cheap SES is an abundance technology. Like Nuclear Fusion and Deep Geothermal Energy it enables the use of more energy not just the removal of emissions or switching of energy sources.

Timing (2020-2025) High certainty

Market will grow from $31 billion in 2021 to $224 billion in 2030 at about a 25% growth rate. Others predict a 30% growth rate, either 25% or 30% would make SES one of the fastest growing technologies in the world. Lots of interesting software and algorithmic challenges around grid management and Virtual Power Plants rather than just improvements in battery chemistry.