Various forms of energy storage have existed for decades. Why is battery storage currently the biggest one? The most obvious answer is that its cost reduction and performance improvement are particularly prominent in lithium-ion batteries. At the same time, the rise of lithium-ion batteries has also benefited from the expanding electric vehicle market.
Energy storage is an important component and key supporting technology for smart grids, renewable energy high-energy energy systems, energy Internet. Battery storage applications are flexible. According to incomplete statistics, the cumulative installed capacity of global battery energy storage projects in 2000-2017 was 2.6 GW, and the capacity was 4.1 GW, with annual growth rates of 30% and 52%, respectively. What are the challenges to the rapid growth of battery energy storage and what are the challenges? The latest report from Deloitte, “Challenges and Opportunities in the Global Battery Energy Storage Market” gives the answer. We draw on the important points in the report to readers.
Battery energy storage market drivers
1. Cost and performance improvement
Various forms of energy storage have existed for decades. Why is battery storage currently the biggest one? The most obvious answer is that its cost reduction and performance improvement are particularly prominent in lithium-ion batteries. At the same time, the rise of lithium-ion batteries has also benefited from the expanding electric vehicle market.
2. Grid modernization
Many countries are implementing grid modernization programs to improve resilience in response to severe weather events, reduce system disruptions associated with aging infrastructure, and increase overall system efficiency. These plans typically involve deploying smart technologies within an established grid to enable two-way communication and advanced digital control systems that integrate distributed energy.
The development of battery energy storage is inseparable from the efforts made to modernize the power grid. The digital grid supports production consumer participation in intelligent system configuration, predictive maintenance and self-healing, paving the way for a stepped rate structure. All this opens up space for battery storage, enabling it to create value by increasing capacity, peaking operations or improving power quality. Although smart technology has been around for a while, the emergence of battery energy storage has helped to tap its full potential.
3. Global Renewable Energy Campaign
Extensive renewable energy and emission reduction support policies are also driving global use of battery energy storage solutions. The key role that batteries play in offsetting the intermittent and reduced emissions of renewable energy is obvious. The extent and prevalence of all types of power users chasing clean energy is still growing. This situation is particularly evident in the corporate and public sectors. This heralds the continued growth of renewable energy and may continue to deploy battery storage to help integrate more distributed energy.
4. Participate in the wholesale electricity market
Battery storage helps balance the power to any power grid and improves power quality. This shows that battery storage energy is increasingly participating in the wholesale electricity market on a global scale. Almost all of the countries we have analyzed are transforming their wholesale market structures to create a place for battery storage to provide capacity and ancillary services such as frequency regulation and voltage control. Although these applications are still in their infancy, they have achieved varying degrees of success.
Administrations in various countries are increasingly taking action to reward the contribution of battery storage to balancing grid operations. For example, the National Energy Commission of Chile drafted a new regulatory framework for ancillary services that recognizes the contribution of battery energy storage systems; Italy has also opened its ancillary services market as a pilot for renewable energy and energy storage projects. Part of the work done for comprehensive regulatory reform.
5. Financial incentives
In the countries we studied, government-funded financial incentives further reflect that policymakers are increasingly aware of the benefits that battery-energy solutions bring to the entire power value chain. In our research, these incentives include not only the percentage of reimbursement or direct reimbursement of battery system costs, but also funding through grants or subsidized financing. For example, in Italy, a 50% tax reduction for residential storage facilities was provided in 2017; South Korea, the energy storage system that was supported by the government in the first half of 2017, increased its capacity by 89 MWh, an increase of 61.8% over the same period of the previous year. .
6. FIT or net electricity settlement policy will go downhill
As consumers and companies seek to obtain higher returns from solar PV investments, the decline in solar power feed-in tariff (FIT) or net-state settlement policies is a driving factor in further configuring the energy storage system at the back end 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 the FIT policy, solar operators will use batteries as a means of peaking to provide utility companies with auxiliary services such as grid stability.
7. Self-sufficiency wishes
The growing desire for energy self-sufficiency among residential and fossil energy consumers has become an amazing force driving the back-end energy storage of electricity meters. This vision has, to some extent, contributed to the meter back-end market in almost all countries we examined, suggesting that the motivation to purchase energy storage systems is not purely financial.
8. National policy
For battery energy storage suppliers, the country's policies to promote various strategic objectives provide them with more opportunities. Many countries believe that renewable energy + energy storage is a new way to help them reduce their reliance on energy imports, improve the reliability and resilience of their power systems, and move toward environmental goals and decarbonization goals.
The development of energy storage also benefits from a broad range of policy mandates related to the urbanization and quality of life objectives of developing countries. For example, India's Smart City Initiative uses a competitive challenge model to support the deployment of smart technologies in 100 cities across the country. The goal is to ensure adequate power supply and environmental sustainability. Electric vehicles, renewable energy and battery storage are critical to achieving these goals.
Future challenges
Although the market drivers are becoming more and more assimilated and fuel storage continues to move forward, the challenges remain.
1. Poor economy
As with any technology, battery storage is not always economical, and for certain applications, the cost is often too high. The problem is that if the perception of high cost is not accurate, battery storage may be excluded when considering an energy storage solution.
In fact, the cost of battery storage is rapidly declining. Taking the recent XcelEnergy bid as an example, it dramatically illustrates the extent of battery price decline and its impact on the overall system cost. The final result of this tender is the average price of solar photovoltaic + battery is 36 US dollars / MWh The average price of wind energy + battery is 21 US dollars / MWh. This price set a new record in the United States.
It is expected that both the cost of the battery technology itself and the cost of balancing system components will continue to fall. Although these basic technologies are not as compelling as the technology they are concerned with, they are as important as the battery itself and lead the next wave of cost reductions. 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”, and as the market matures, the price of energy storage inverters is expected to decline in the next few years.
2. Lack of standardization
Participants in the early market often have to deal with a variety of technical requirements and enjoy a variety of different policies. Battery suppliers are no exception. This undoubtedly increases the complexity and cost of the entire value chain, making the lack of standardization an important obstacle to industrial development.
3. Lag of industrial policy and market design
Just as the emergence of emerging technologies can be foreseen, it is also predictable that industrial policies are lagging behind the energy storage technologies that exist today. Globally, current industrial policies are developed prior to the development of new forms of energy storage that do not recognize the flexibility of energy storage systems or create a level playing field.
However, many policies are updating the ancillary services market rules to support energy storage deployments. The ability of battery energy storage systems to enhance grid flexibility and reliability is well documented, and this is why authorities tend to focus first on the wholesale electricity market. At the same time, there is also a need to update retail rules, and this will cause residential and fossil energy consumers to be interested in energy storage systems.
To date, discussions in this area have focused on stepped or structured time-sharing rates for smart meter implementations. Without a stepped rate, battery storage loses one of its most appealing features: storing electricity at a low price and then selling it at an expensive price. While time-sharing rates have not yet become a global trend, this situation is likely to change rapidly as smart meters are successfully implemented in many countries.