20% increase in grid-connected storage pipeline, says IHS

A surge in behind-the-meter storage deployment from the US, Australia, the UK and Germany has caused IHS to up its forecast from 1.5GW for 2016 to 1.8GW.
The global grid-connected energy storage project pipeline is forecasted to hit 2GW this year; a 20% increase on the figures for the end of 2015, according to new analysis by IHS.

This is mainly due to expansion in the utility-side meter storage segment, which saw around 300MW come online in the first half of 2016. Similarly, a surge in behind-the-meter storage deployment from the US, Australia, the UK and Germany has caused IHS to up its forecast from 1.5GW for 2016 to 1.8GW.

Unsurprisingly, falling prices are cited as an instigator for the increase in projects, according to Marianne Boust, principal analyst at IHS Technology. “Cost reductions in batteries are key drivers but I would also mention changes in policies, such as procurement plans specific to energy storage,” she told Energy-Storage.News. “As the costs have come down, regulators, utilities and project developers are increasingly aware that energy storage can provide cost-competitive solutions for renewable integration services, grid services [etc.]. 

Key regional markets

“Furthermore, energy storage offers growth prospects in a context where solar and wind growth is challenged in Europe. The last point worth mentioning is the emergence of self-consumption in Europe, Australia, [and] Japan, driven by high retail electricity prices, willingness to reduce energy consumption and again enabled by falling equipment costs.”

In the US in particular, the White House’s first real executive push for energy storage inspired a draft bill by senator Heinrich that would grant a 30% investment tax credit to both residential and commercial owners of storage; a mechanism similar to the highly-popular ITC for solar PV. Boust cautioned however that there are still many roadblocks in the way of this provisional bill, particularly given the upcoming presidential elections – the outcome of which will certainly shape this proposal.

Regardless, “the US has been a pioneer with the launch of federal funding for energy storage a couple of years ago (American Recovery and Reinvestment Act of 2009) and since then, the federal government, several states and network operators have launched key policies such as the Californian energy storage mandate and the rules for frequency regulation in PJM etc.,” said Boust.

In South Korea, another region responsible for the increase, policies contemplate mandating energy storage in public buildings and accepting it into the wholesale power market.

In Australia, Boust also said that the increase in storage deployment is “less driven by dedicated energy policies than the surge in retail electricity prices. With that said, the sudden uptake we’re expecting in 2016 comes from the end of solar feed-in tariffs in New South Wales, driving households to consider solar retrofit or solar-plus-storage retrofits,” she added.

In the UK, the catalyst for an increased uptake in storage is the launch of the National Grid’s tender for 200MW for enhanced frequency response a couple of weeks ago. Further afield in Europe, Germany has seen success of projects commissioned for frequency regulation; and according to Boust, project developers see this tender as the biggest opportunity for utility-side of meter projects in Europe 2016. “I would also highlight the recent contracts award from French regulator CRE to 52MW of solar-plus-storage projects in the French overseas islands,” she added.

Lithium-ion leading the way

Long-duration energy storage, which has recently been given a leg-up in California after the Public Utilities Commission’s Self-Generation Programme experienced favourable reforms, is being driven by lithium-ion batteries, which have experienced significant cost reductions. In fact, 90% of the utility-side meter storage projects that IHS has tracked can be linked to lithium-ion technologies. Furthermore, the report states that “underpinning the rapid cost reduction is the build-up of the supply chain for batteries in the auto and power sectors”.

Competition between China’s BYD, GCL and South Korea’s Samsung SDI, LG Chem and Japan’s Panasonic has inspired an intensifying of the supply chain for batteries in said sectors. Moreover, also heating up competition, but in the residential space, was the launch of GCL’s home battery system at A$450/kWh (excluding inverter) in Australia – providing a fierce competitor for Tesla’s 7kWh system.

On the grid-scale front, lithium-ion again is a strong player for longer duration storage technologies. Notably, it is often sodium sulphur and flow alternatives that historically have dominated this segment. Again, the dramatic cost-reduction of the legacy battery format cannot be underestimated. “IHS has observed grid-scale batteries prices for delivery in 2016 around US$400/kWh to US$500/kWh, including warranty and management system, with a further 30% reduction in the next 18 months,” the report states.

Lithium-ion continues to take the lead in more developed storage economies due to not only their price but also their favourable response time and lifespan. Lead-acid technology, however, continues to be popular in emerging markets that are restricted in choice for technology due to financing barriers.

Overall, apart from the obvious cost reduction that is clearly a key driver that is giving lithium-ion technologies an edge, Boust also cited “the economies of scale, the nature of the manufacturers ([being] that they are mostly large Asian conglomerates with track-record and ability to finance expansion), the modularity to provide power and energy and the bankability of lithium-ion,” as reasons why lithium-ion is having an edge over other battery formats.

“Announcements such as Total’s acquisition of Saft is a strong signal of how dominant lithium-ion has become,” said Boust. She also emphasised that even if flow batteries can match in terms of cost-competitiveness, when degradation, performance and lifespan are taken into account, they lack the track-record exemplified by legacy battery players. In addition, the competitive landscape for flow battery manufacturers tends to be dominated by metals or chemicals companies such as Rongke in China or American Vanadium, for example; for start-ups such as Primus Power or Redflow, with less market experience.