The Americas region is projected to take the lion’s share of the global energy storage market by overtaking the Asia Pacific region by 2025, according to research firm Wood Mackenzie.
Led by the US, which tripled its capacity in 2020 (accounting for 38% of 2020 total installations), the Americas region is expected to deploy up to 371GWh of energy storage capacity by 2030.
The region led the global energy storage market in 2020 by deploying 13GWh, owing to an increasing number of pilot projects deployed, government subsidies and grid interconnection requirements over the past decade. Without strong policy support, it will be difficult to scale up the front-of-the-meter (FTM) segment across the region, according to Wood Mackenzie.
Next to the US, China is expected to be the world’s largest energy storage market by deploying 150 GWh, while Japan will sit third (25 GWh) by the end of the decade.
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Le Xu, Wood Mackenzie senior research analyst, adds: “China, Japan and South Korea have set climate-neutrality targets, underscoring their commitment to the energy transition. While in Australia, renewables plus storage technology is competing with gas power and already replacing ageing coal units.
“If battery projects can solve the financing challenge they currently face, energy storage will be a key feature of decarbonisation plans across the region. Asia Pacific’s energy transition ambitions could be thwarted if this issue is not resolved, as battery storage provides the flexibility power plants and grids require to generate reliable electricity around the clock.”
Energy storage deployments in Europe
Deployments in Europe have been slow. However, they are expected to increase as member states are required to comply with the Renewable Energy Directive and as current overcapacities in electricity markets are reduced with nuclear, and coal exits take place.
Europe is anticipated to deploy approximately 3GWh of energy storage capacity in 2021, a 55% increase on 2020, and will see cumulative capacity hit 9GWh by the end of the year.
Anna Darmani, Wood Mackenzie Lead Analyst, said: “Europe’s storage numbers appear relatively small on the global scale. However, they are remarkable if we consider that Europe did not have a trackable battery market until around four years ago.
“In the past two years, Europe has invested more in its battery value chain than any other region worldwide and its residential segment is growing faster than any other region.”
In 2020, China, Germany, and the UK saw double-digit growth, while Australia’s installations fell in year-on-year numbers. Steady growth in a number of key countries during the coronavirus pandemic and strong recovery in 2021 will accelerate global energy storage adoption in the long term, says Wood Mackenzie.
In 2020, the energy storage market began to move from small-scale short-duration batteries to four-hour batteries. The pandemic caused power demand to fall in 2020, putting downward pressure on wholesale power prices and reducing the need for peaking units. Long-duration batteries helped to strengthen grid reliability and reduce the risks of power outages. By 2030, the average lithium-ion project size is expected to increase from 100MWh scale to 1GWh scale, up sevenfold.
Dan Finn-Foley, Wood Mackenzie head of energy storage, said: “2020 was a record year for global energy storage. The market exceeded 15GW/27 GWh in 2020, increasing 51% in GWh terms, and is expected to grow 27 times by 2030 by adding 70GWh of storage capacity a year to surpass 729GWh in 2030.
“Approximately $5.4 billion of new investment was committed to storage projects across the world last year, increasing the total cumulative investment to an estimated $22 billion. By 2025, the overall investment pot will reach $86 billion, with a 24% CAGR despite the economic slowdown caused by COVID-19.”