Challenges and Opportunities for the Global Battery Storage Market

Energy storage is an important part and key supporting technology of smart grid, renewable energy high proportion energy system, energy internet. Battery energy storage application is flexible. According to incomplete statistics, the cumulative installed and put into operation scale of the global battery energy storage project between 2000 and 2017 is 2.6 GVA, and when the capacity is 4.1 GVA, the annual growth rate is 30% and 52%, respectively. What factors benefit from the rapid growth of battery energy storage and what challenges are faced? The answer is given in Deloitte’s latest report, challenges and opportunities for the global battery storage market. We capture the important points in the report for readers.

The market driving factor for battery energy storage

1. Cost and performance improvements

Various forms of energy storage have existed for decades, why is battery energy storage currently dominant? The most obvious answer is the decline in its cost and performance, which is particularly prominent in lithium-ion batteries. At the same time, the rise of lithium-ion batteries has also benefited from the expanding market for electric vehicles.

2. Grid modernization

Many countries are implementing grid modernization programmes to improve resilience to adverse weather events, reduce system disruptions associated with ageing infrastructure and improve overall system efficiency. These plans typically involve the deployment of smart technologies within established power grids to achieve two-way communication and advanced digital control systems, integrating distributed energy.

The development of battery energy storage is inseparable from the efforts made to realize the modernization of the power grid. The digital grid supports the participation of production consumers in smart system configuration, predictive maintenance and self-repair, paving the way for the implementation of a stepped rate structure. All of this opens up space for battery energy storage, prompting it to create value by increasing capacity, peak-shaving operation, or improving power quality. Although intelligent technology has existed for some time, the emergence of battery energy storage helps to tap its full potential.

3. Global Renewable Energy Campaign

Broad renewable energy and emission reduction support policies are also driving the global use of battery energy storage solutions. The critical role played by batteries in offsetting the intermittent nature of renewable energy and reducing emissions is evident. The extent and prevalence of all types of electricity users chasing clean energy are still growing. This is particularly evident in enterprises and the public sector. this heralds the sustainable development of renewable energy and may continue to deploy for battery energy storage to assist in the integration of more distributed energy.

4. Participation in wholesale electricity markets

Battery energy storage can help balance the grid, connected to any power supply, and improve power quality. This indicates that there are increasing opportunities for battery energy storage to participate in the wholesale power market worldwide. Almost all of the countries we have analyzed are transforming their wholesale market structures in an effort to create a place for battery energy storage to provide capacity and ancillary services such as frequency regulation and voltage control. although these applications are still in the primary stage, they have all achieved varying degrees of success.

National authorities are increasingly taking action to reward the contribution of battery energy storage in balancing grid operations. For example, the National Energy Commission of Chile has drafted a new regulatory framework for ancillary services that recognizes the contribution that battery energy storage systems can make; Italy has also opened its market for ancillary services as a pilot for renewable energy and energy storage projects to be introduced as part of a comprehensive regulatory reform effort.

5. Financial incentives

in the countries we studied, financial incentives funded by the government further reflect the growing awareness among policymakers of the benefits of battery energy storage solutions for the entire power value chain. In our study, these incentives included not only the percentage of battery system costs reimbursed or reimbursed directly through tax rebates but also financial support through grants or subsidized financing. For example, Italy provided 50% tax relief for residential storage devices in 2017; South Korea, an energy storage system invested with government support in the first half of 2017, increased capacity by 89 MW,61.8% from the same period last year.

6. FIT or Net Electricity Settlement Policy

Because consumers and businesses try to find ways to get higher returns from solar photovoltaic investment, the backslope of solar power grid tariff subsidy policy (FIT) or net electricity settlement policy becomes the driving factor for further configuration of the back end energy storage system of the meter. This happens in Australia, Germany, the United Kingdom, and Hawaii.

Although this is not a global trend, with the phasing out of FIT policy, solar operators will use batteries as a peak-shaving tool to provide ancillary services such as grid stability for public utility companies.

7. Desire for self-sufficiency

The growing desire of residential and fossil-energy consumers for energy self-sufficiency has become an astonishing force driving the deployment of energy storage at the back of the meter. this vision somehow fuels the electricity meter backend market in almost all of the countries we examine, suggesting that the motivation to buy energy storage systems is not purely financial.

8. National policies

for battery energy storage suppliers, the policies introduced by the state to promote various strategic objectives offer them more opportunities. Many countries believe that renewable energy storage is a brand new way to help them reduce their dependence on energy imports, improve the reliability and resilience of power systems, and move towards environmental and decarbonization goals.

the development of energy storage also benefits from broad policy mandates related to urbanization and quality of life objectives in developing countries. For example, India’s Smart Cities Initiative uses a competitive challenge model to support the deployment of smart technologies in 100 cities across the country. The objective is to ensure adequate electricity supply and environmental sustainability. electric vehicles, renewable energy and battery energy storage are critical to achieving these goals.

Challenges ahead

While market drivers are increasingly assimilating and driving energy storage forward, challenges remain.

1. Poor economy

like any technology, battery energy storage is not always economical, and its cost is often too high for a particular application. the problem is that if the perception of high cost is inaccurate, battery energy storage may be excluded when considering energy storage solutions.

In fact, the cost of battery energy storage is falling rapidly. Consider the recent Xcel Energy tender, which dramatically illustrated the extent of the decline in battery prices and its impact on system-wide costs, which culminated in an average price of $36/MW for solar photovoltaic cells and $21/MW for wind cells. The price set a new record in the United States.

It is expected that both the cost of battery technology itself and the cost of balancing system components will continue to fall in price. While these basic technologies are not as compelling as those of concern, they are as important as the battery itself and lead the next wave of sharply reduced costs. For example, inverters are the “brains” of energy storage projects, and their impact on project performance and returns is significant. however, the energy storage inverter market is still “new and scattered “. as the market matures, the price of energy storage inverter is expected to decline in the next few years.

2. Lack of standardization

Participants in early markets often had to respond to a variety of technical requirements and enjoy a variety of policies. battery supplier is no exception. This undoubtedly increases the complexity and cost of the whole value chain, making the lack of standardization an important obstacle to industrial development.

3. Delay in industrial policy and market design

just as the emergence of emerging technologies can be predicted, it is also predicted that industrial policies are lagging behind the existing energy storage technologies today. globally, current industrial policies are formulated before developing new forms of energy storage, which do not recognize the flexibility of energy storage systems or create a level playing field. however, many policies are updating ancillary service market rules to support energy storage deployment. the ability of battery energy storage systems to enhance grid flexibility and reliability is fully demonstrated, which is also why the authorities tend to focus first on the wholesale power market. Retail rules also need to be updated to generate interest in energy storage systems for residential and fossil energy consumers.

To date, discussions in this area have focused on the implementation of stepwise or structured time-sharing rates for smart meters. without implementing a step-by-step rate, battery energy storage loses one of its most attractive features: storing electricity at a low price and then selling it at a high price. While time-sharing rates have not yet become a global trend, this may change rapidly as smart meters are successfully introduced in many countries.