Battery vendor landscape is already ‘insanely competitive’: analyst’s view from IH

Marianne Boust of IHS: "…2015 was the first time energy storage really became viable, for everybody. It’s happening and 2016 is going to be even more interesting." Image: IHS.
Research firm IHS recently reported that as of the end of 2015, there was a global pipeline of 1.6GW of battery or flywheel-based grid storage projects in place. Andy Colthorpe spoke to principal analyst Marianne Boust, who explained why last year truly saw a “change in stakeholder mentality” in favour of energy storage and why 2016 will be another record-breaking year.

There have been some variations in what analysts perceive the size of the market to be, and how quickly it will grow. But you all seem to be in agreement on one thing - that 2015 was a really big year in energy storage.

Absolutely, 2015 was the first time energy storage really became viable, for everybody. It’s happening and 2016 is going to be even more interesting.

I’ve been following since beginning of 2014, when everyone was saying, we’ll see some things happening and there’d be bits and pieces and last year it went really fast towards the end of the year.

How has it got to this point?

I’ve been covering renewables and storage since 2008, mostly renewables. The first time I wrote about storage was in 2012, when Germany first launched incentives for solar and batteries. That time we thought self-consumption could be a topic, but batteries were very expensive. It was the sort of thing crazy people would do just to be independent from the grid!

During last year, what happened, was really helped by the success of the solar industry, the fact that everyone thinks it makes sense to have PV panels and in the same way they are looking at storage.

In terms of cost invested it’s manageable, solutions [are appearing]. In Germany you have the energy storage funding initiative, for example. In that sense there’s a change of mentality among stakeholders that storage is part of the equation now, it’s not a long-term opportunity.

Another thing I would add is the Tesla Powerwall announcement – Elon Musk's marketing campaign led everyone to believe that energy storage was affordable. That's not the kind of thing that will move the market in itself but it’s just a signal that things are maturing.

Manufacturers are working hard to differentiate themselves. Image: Andy Colthorpe.
Your most recent reporting was based on a pipeline of planned projects. How likely is it that these projects will go ahead and can you give us an idea of the development process and how long it takes?

Generally, there will be a mixed bag around these projects. Some projects that are backed by the strongest players on the utility side I would say are very much likely to go through, some others that were wrapped up quickly with financial institutions, also banking that with the battery, we’ve seen some projects where the developers wait until the very end to purchase a battery and give the price based on that cost curve.

I guess it’s really a gamble and I’m sure some projects will not go through because the developer has been too ambitious in terms of cost reduction and so we will probably have to see who is the player involved, to make a guess on the likelihood of this project going through.

You see also a lot of the smaller technology players that are trying to get well-known among the industry being a bit more aggressive in terms of what prices they’re offering and obviously they make a bet whether or not this technology is viable.

In terms of timeframe – battery projects, once they have the permit in place, can go very fast. It’s not like a complex power project building a battery and we still are at a relatively small scale [for the most part], 10MW or 20MW at the moment.

I’m hearing from various sources that competition in the market will get very aggressive globally over the next 3-4 years…

It is already. Competition is insane. Especially among the battery manufacturers, they see the energy storage market as a great opportunity, but right now the market is still small. At the end of the day we’re talking about a 1GW market in 2015 and you have so many players eager to capture market share. So it’s extremely competitive and that has implications on costs, that’s why we see the costs coming down rapidly at the moment.

It really makes me think of the solar industry of three years ago when the Chinese starting ramping manufacturing capacity and it’s already a very hot market.

What is the dynamic of that competition at present?

It’s hard to differentiate yourself except by price. At the end of the day it’s just battery product. You can play on the specs, voltage and so on but it’s not that specific as a product. What we’re really seeing right now is the players are differentiating themselves on price and trying to be cheaper than the others, or having exclusive agreements. I think in two or three years from now it will be very difficult for new entrants to get in. Unless they have a beating technology with much more duration capabilities, round trip efficiency, in terms of performance of the batteries.

What will be the key to commercialising energy storage beyond the existing mandated programmes such as California’s AB2514 and Germany’s incentives? 
There appear to be many possible routes being explored, from providing grid services to saving money on electrical infrastructure costs to extended application of time-of-use charges for electricity.

It’s a difficult question because energy storage can provide so much value and different functions and applications. I don’t think there’ll be one or two mainstreams of value it will depend very much on the country or the region in the case of the US. In some markets, self-consumption will be the main driver, I’m thinking Germany for instance, in other markets it will be grid services, either at the transmission level or more at the distribution level, we’re just starting to see what type of value storage will provide.

Storage really makes sense in emerging markets where the grid infrastructure is still very much weak but growing in capacity. These countries are considering renewables as a real mainstream technology, as compared to more established markets where renewables came afterwards. So they’re building from scratch. I’m thinking here of South Africa for instance, they see storage really as an important item from a transition point of view, instead of adding a new line.

Marianne Boust is a principal analyst at IHS Technology.

Tesla's Powerwall announcement was a highlight of the year in bringing awareness of the technology into the mainstream. This and cover image: Tesla.