The COVID-19 crisis has impacted all industries but those that support our efforts to tackle climate change demand the greatest attention as we try to see how our response to the crisis will impact the environment. Energy storage, be it for use in commercial and residential buildings or at district and utility-scales, is one of those industries. Over the past six months, energy storage has been through a rollercoaster of expectations, from fearing the worst at the beginning of the pandemic to seeing record deployment and raising hopes for future growth. The vast potential for energy storage in commercial buildings, however, does not play a role in this environmental success story.
A survey by the Energy Storage Association (ESA) suggested that the impact of COVID-19 was already starting to take effect across the sector very early in the crisis. Of the 173 respondents, 63% said they were already experiencing delays in project deployment in March, and 37% said they were experiencing delays of six months or longer in their project deployment. The March 23rd survey highlighted that many respondents simply did not know what length their delays might be, due to considerable uncertainty about the duration of the pandemic.
A second survey, in April, comprising of 101 respondents, suggested that a large proportion of the sector expected lower than initially forecast revenues. 63% of respondents indicated they expected a decrease in revenues in Q2, 33% expected drops of at least 20%, and 11% expecting revenue declines of more than 50%. Manufacturers appeared to be the hardest hit, with 75% expecting some revenue reduction and 21% expecting revenue to fall by 50% or more. Layoffs were on the rise too, with 25% of respondents claiming to have already reduced or expect to reduce their workforce by up to 20%, and of the 17% of manufacturers expecting layoffs in Q2, three-quarters expect 50% or more in workforce reductions.
“Like all industries, the energy storage business is significantly impacted by the pandemic due to site access problems and difficulties to get permissions in times of lockdowns as well as a general economic downturn. Behind-the-meter storage companies are likely to feel a stronger impact. Many commercial and industrial customers will have to cut back on investments outside their core business, so the purchasing of an energy storage system might be considered non-essential for the time being,” said Florian Mayr, partner at Cleantech Advisory Apricum, in a July article. “However, we are not aware of any larger-scale project under construction that has been canceled or delayed for a longer period. Quite the opposite.”
By September, the US was reporting an energy storage deployment of 168 MW (288 MWh) in Q2 2020, a 72% increase over the first quarter of 2020, a 117% increase year-over-year, and the industry’s second-largest quarterly deployment figures ever, only behind Q4 2019, according to a joint report by Wood Mackenzie and the ESA. These preliminary reports are in stark contrast to the opinions of many in the sector during those early weeks of the pandemic, and expectations for the rest of the year now look good, if not great, for the energy storage industry as a whole.
"We already know that Q3 will be a big quarter. Based on what we're seeing now, it would be surprising if Q3 is not a big increase over Q2. The desire for resilience in California is growing and in Hawaii, pretty much everyone is getting storage to go with solar,” said Dan Finn-Foley, head of energy storage at Wood Mackenzie. "It's out-competing other assets, including natural gas. Solar and wind are taking a larger chunk of the resource planning, and renewables and storage are making up a larger share at the expense of natural gas."
While suffering from a COVID-19 outbreak, California made up two-thirds of the total deployments for Q2, leading all three segments of the US market, from front-of-meter with 62.5MWh, residential behind-the-meter with 66.1MWh, and for non-residential (including commercial and industrial) with 32.1MWh. In a distant second place, Hawaii saw 26.2MWh residential and 15MWh non-residential, while Massachusetts was a close third with 23.7MWh non-residential and 14MWh front-of-meter.
Clean energy pioneers, California, who faced the direct impacts of climate change with rampant wildfires over the summer, still represent the driving force behind US renewable energy and energy storage markets. In fact, in May, in the midst of the pandemic, a contract was approved for 770MW in energy storage procurement for Southern California Edison’s (SCE), one of the largest ever seen for the technology. Energy storage for California’s non-residential buildings, however, is just a small fraction of the marked growth of storage capacity in the state.
“The association has been encouraged by the sector’s growth in the second quarter, and despite any setbacks from the coronavirus pandemic, the market for energy storage is poised to see significant growth in 2020,” said Kelly Speakes-Backman, CEO of ESA. “Looking out to future growth, we are confident that our expanded vision of 100GW of new energy storage by 2030 is entirely reasonable and attainable, pushing us closer to reaching a more resilient, efficient, sustainable, and affordable electric grid.”
The real Ironman has even bigger ideas. During the Tesla Battery Day on Septemeber 22nd, a socially-distanced crowd sat all sat in Tesla vehicles to hear Elon Musk boldly promise bigger form factor cells, massive cost reductions, and the elimination of cobalt use to support supply security. The company announced plans to scale up from a Gigawatt to Terawatt-hour scale of annual production capacity for lithium batteries, which Musk said he was confident could be done by 2030 “and possibly even earlier,” to the surprise of experts across the industry.
“One very significant [piece of] information was the claim that Tesla alone will produce 3,000GWh (or 3TWh) of batteries by 2030. This is more or less the same number that today is predicted for the entire global battery industry,” said Johan Soderbom, lead for energy storage at EIT InnoEnergy.
“Tesla’s goal of reaching 3TWh of battery manufacturing capacity by 2030 is a herculean task,” added James Frith head of energy storage at BloombergNEF, who currently predict 1.9TWh across all manufacturers globally by 2025. “Whether the carmaker-plus-energy company can make it while achieving the hoped-for 69% reduction in investment cost per GWh is a tough call, since Tesla has both scaled rapidly and fallen short of many of its targets in the past.”
Over the past six months, Memoori has explored the challenges of reducing energy consumption in commercial buildings, both during lockdowns and as employees return to their workplaces. Representing 40% of total energy consumption globally, the role of building energy consumption in the fight against climate change is crucial. However, between being technically unprepared to significantly reduce consumption during lockdowns and being financially reluctant to invest in new energy efficiency technology in the face of recession, commercial buildings are set to remain the world’s energy sink.
Thankfully, utilities and residential buildings are taking up part of the slack, helping us strive for a green recovery from the pandemic and the economic downturn. In fact, energy storage plays a prominent role in the bipartisan green recovery packages being considered by the US Congress. With government support and big ambitions, energy storage technology is expected to improve and reduce in price, ready to drive a clean energy revolution in commercial buildings when they are ready to spend again.