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After the hype and growth, and more hype, surrounding US energy storage in during 2012 and 2013, was followed by a relative slump in the following years; experts now seem to agree that 2016 represents the second wave for the American energy storage sector. Statistics from Memoori, IHS, GTM and the US Department of Energy (DOE), all point to a stellar year for a technology once touted as the catalyst for the renewable energy revolution.
“Although energy storage is a nascent market, it is poised to become more significant in the years ahead. A number of factors including decreasing costs of battery energy storage systems, government funding programs and utility tenders are helping to increase both the interest and viability of distributed energy storage, particularly in developed markets”, explained the Memoori report released last week: Smart Buildings Meet the Smart Grid - http://memoori.com/portfolio/smart-buildings-meet-smart-grid-2015-to-2020.
Battery cost reductions, government funding programs and utility tenders led to a 45% increase in the global energy storage pipeline in the fourth quarter of 2015 compared to the previous quarter. According to IHS, the global pipeline of planned battery and flywheel projects had reached 1.6 GW by the end of Q4 2015. “Suppliers and developers around the world are preparing for a record year in 2016, with significant growth projected in a wide range of regions and market segments,” said Marianne Boust, principal analyst for IHS Technology.
On January 19th the DOE announced the awarding of $18 million in funding for six new energy storage plus solar projects across the country. These new integrated PV and energy storage projects will use smart inverters and work in conjunction with smart buildings, smart appliances, and utility communication and control systems. All the projects are either led by a utility company or include a utility company as a key partner, and must conduct at least a one-year field demonstration of their technologies.
Utilities in particular are seeing the major opportunity offered by energy storage for “distributed energy”. “Energy Storage came out top amongst respondents to the survey when questioned about what technology they thought their utility should invest more in, with 53% of respondents citing this as key”, according to Memoori’s most recent report.
It is widely accepted that a significant reason for the relative slump in the energy storage sector in 2014 and 2015 was the lack of confidence in the sector due to the anticipated reversion of the Investment Tax Credit (ITC).
However, to the delight of many greener members of the industry and the public, congress passed a bill in late 2015, which President Obama then signed into law, which extends the existing tax credits for wind and solar generation facilities for five years. Beyond 2020 the credits will then gradually decrease until they phase out. Although energy storage itself doesn’t qualify for the ITC, if installed along with solar PV or wind, storage systems have been able to claim tax credits previously, as long as they meet certain requirements.
The extension gives a huge boost to the whole sector and sets up a strong growth period in the years ahead. GTM Research expects an additional half a gigawatt of storage paired with renewables to come on-line between 2016 and 2020, compared to a scenario with no tax credit extension. “In 2020, America’s energy storage market will likely surpass 1.6 gigawatts -- making it 28 times bigger than it was in 2015”, predict GTM.
The projects and policy is backed up by the technology itself. “Developments in Li-ion batteries in particular are exciting the market, as they can store far more energy at a lower cost than previous generations of batteries, which have been dominated by lead acid technology”. In terms of costs, a 2014 Rocky Mountain Institute study estimated that the cost of Li-ion battery storage will approximately halve between 2013 and 2020, falling from 700-800 $/KWh in 2013 to 300-400 $/KWh in 2020.
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It’s not just the US of course, distributed energy storage penetration is increasing worldwide and a rapid expansion of installations is forecasted. According to Information cited by the US DOE, 340 MW of storage were installed in 2012 / 2013 worldwide, while installation rates could reach 6 GW per year in 2017, and up to 40 GW installed by 2022. Similarly, Bloomberg estimates that by 2020 global investments in storage will be running at $5bn per annum.
For more in-depth analysis look at Memoori’s ‘Smart Buildings Meet the Smart Grid: Markets, Trends and Enabling Technologies 2015 to 2020’ Report. The report provides analysis of the state of both the Smart Grid and Smart Building markets, accompanied by market sizing forecasts, spilt into 5 categories representing the international markets of North America, Latin America, Europe, Asia Pacific and The Rest of the World.
