Four major battery energy storage pipeline – global trends


This week, we look at the global grid-connected battery energy storage systems market, factors impacting on the market and forecasts of systems’ penetration through to 2025.

According to IHS Markit, annual grid-connected battery energy storage installations grew by 53%, reaching 1.9GW in 2017.

Julian Jansen, senior analyst of solar at IHS Markit, said: “2017 was a record year for deployment of grid-connected battery energy storage. The Asia-Pacific region exhibited the strongest growth, led by South Korea, Japan and Australia. The three largest markets in 2017, accounting for over half of all installations globally, were South Korea, the United States and Japan.

“This continued market growth was backed by an impressive project pipeline for grid-connected energy storage. While the geographic location of planned project activity is diversifying, the largest current pipelines are located in Australia, the United Kingdom, the United States and China.”

The global battery energy storage pipeline reached a record 10.4GW in the first quarter of 2018.

The global battery energy storage market gained significant momentum in early 2018.

Emerging business models, such as gas-peaker replacement and renewable firming, have been successfully demonstrated, leading to a strong uptick in the global pipeline.

This strong industry growth follows a highly active first quarter, with the following encouraging policy developments presaging a bright future for storage:

  1. FERC Order No. 841 will remove key regulatory barriers for electricity storage to participate in wholesale markets across the United States, creating a level playing field for storage to access new revenue streams.
  2. Irish grid operator EirGrid has published its consultation on the DS3 programme, outlining potential six-year contracts that provide frequency response and reserve services to be launched in September 2018.
  3. New York State set a target to deploy 1,500MW by 2025, supported by more than $260 million in funding to accelerate industry growth.
  4. Austria launched a federal subsidy programme for small-scale solar plus storage, while several states in Germany announced the introduction of support programmes for residential battery storage.

More than 3GW of battery energy storage will be deployed in 2018, but uncertainty over supply constraints — and potential cost increases for Li-ion batteries — may create unexpected challenges.

The four major battery energy storage pipeline global trends to watch in the coming year include:

  • Solar-plus-storage co-location projects currently account for more than 40% of the total utility-side-of-meter pipeline, highlighting the future potential of this market.
  • The behind-the-meter segment will comprise more than half of annual installations, from 2023 onward. South Korea and Canada emerged as new key markets for commercial and industrial storage systems in 2017.
  • Battery energy storage is challenging gas-fired peaker plants to meet California’s capacity needs, leading to a significant increase in the outlook for large-scale energy storage in that state.
  • New energy storage deployment targets, and the inclusion of storage in integrated resource planning across the United States, will drive future market growth across multiple states.

Despite an increase in adoption at global scale, Africa remains slow in investing in energy storage.

Julian Jansen, senior research analyst of energy storage at IHS Markit, said: “To date, the grid-connected battery energy storage market in Africa is very limited to a small number of funded trial projects targeting renewable integration, microgrids and distribution upgrade deferral.

“Simultaneously, there is a growing market for off-grid systems integrating storage with renewables and diesel generation in non-interconnected microgrids for both rural electrification and commercial users such as mining.”

IHS Markit predicts total cumulative installations of grid-connected energy storage to grow from a base of 20MW at the end of 2017 to approximately 1,300MW by the end of 2025.

Given the status of the economy in general across the region, with low levels of renewable penetration and less developed power infrastructure, commercial deployment of large-scale energy storage is forecast to remain limited.

In the near term, activity is driven by projects using funding from development agencies and by installations of lead-acid batteries for back-up in businesses and wealthy households. Most significant growth will be driven by utility-side-of-the-meter applications, in particular large-scale solar PV integration, as well as transmission and distribution (T&D) upgrade deferral.

Outside of projects benefiting from multilateral funding, interest in energy storage is most pronounced in South Africa, where utility company Eskom wants to invest in energy storage and is currently looking to understand the long-term need and potential for the technology.

The country suffers from scheduled grid outages and there is a push towards greater renewable generation deployment. Although the fundamentals are strong in the South African market, actual grid-connected installations are moving slowly because of the high cost and lack of available funding for projects.

The IHS Markit Energy Storage Intelligence Service provides a detailed and accurate view of the market for energy storage systems across all key segments of the industry, including small- and large-scale renewable integration, grid support and behind-the-meter storage. It provides the market intelligence and insight needed to understand developing market trends and capitalize on new opportunities.