While 2020 may have been and gone, the strange times we're collectively experiencing certainly have not. Looking back at least gives us an opportunity to reflect on the lessons learned during the past year or so and Aaroh Kharaya, product manager at solar PV and battery storage quality assurance, supply chain management and engineering services firm Clean Energy Associates takes us through his top takeaways from a time that we may otherwise seek to forget.
The last 12 months likely won’t be remembered with fondness by many. We’ve witnessed horrific wildfires in Australia and California, disruptive extreme weather in Texas, global political unrest, and of course COVID-19. I watched ‘Death to 2020’ on Netflix recently, and while it’s a dark and satirical comedy, it highlights the difficult times that we face as a global community.
As I was watching the show, I couldn’t help but reflect on the developments in my own line of work over the last 12 months. As dark clouds continue to loom, progress in energy storage remains a silver lining in our fight against carbon emissions and climate change. We can carry several lessons with us as we navigate the energy transition in the coming months and years.
Lesson 1: The resilience of the energy storage industry
Energy storage continues to see record deployment. Research firm Wood Mackenzie Power & Renewables reported that energy storage deployment doubled in 2020 compared to 2019. Data on job creation from the International Renewable Energy Agency shows that renewables, including energy storage markets, will continue to grow and provide employment opportunities globally.
In the US, President Biden and his administration are already demonstrating that investments in clean energy will get high priority. Biden’s climate plan intends to put us on track to reach a 100% clean energy economy and net-zero emissions no later than 2050 by enforcing mechanisms that include ambitious milestones and incentivising the rapid deployment of clean energy innovations across the economy.
The plan includes resumption of the US Department of Energy’s loan programme office with entrepreneur Jigar Shah in charge, federal investments of US$1.7 trillion over the next 10 years, and additional private investment estimated at over US$5 trillion. Energy storage will continue to be a major infrastructure investment vehicle for this decade and beyond.
Lesson 2: Energy storage companies continue to innovate with new product launches
In June 2020, Fluence launched the Cube product line, a modular DC block for utility, commercial and solar application. This solution is to be deployed for over 800MW of energy storage projects. Then last fall, Wärtsilä launched Quantum Solv, also based on modular architecture. This emerging trend is primarily in response to cost pressures, faster deployment, and the easier augmentation of the modular energy storage system.
Eventually, the 40-foot ISO container design will likely disappear altogether. Typically, modularisation signals a maturing market. This remains something all stakeholders in the energy transition should continue to monitor closely.
Lesson 3: Business models continue to evolve
The energy storage industry is a dynamic marketplace, with the status quo continually challenged by new entrants. New battery vendors moved up the value chain in 2020 to provide racks, battery management systems (BMSs), and integrated DC blocks to prevent their product from being commoditised.
Controls companies started to provide integration services. We also saw many asset monetisation firms expand into asset management and optimisation. However, Tesla and Fluence still remain at the top for now.
Another business model that emerged is the disintermediation of full-scope system integrators. This is mainly applicable for large-scale utility projects over 50MW. Many such deals closed in the last year had owner-furnished equipment, with integration provided by the EPC / general contractor, thus removing the need for system integrators. This trend is analogous to what happened in the solar industry about 12 years ago, where asset owners started to procure solar PV modules themselves.
Tesla is an exception to this trend, possibly because of their focus on vertical integration, and hence their ability to control battery costs. These business models for energy storage will continue to evolve in the coming months and years as the industry continues to mature and grow.
Lesson 4: Fire safety is top of mind, and risk mitigation tests and standards remain critical
On April 19, 2019, a fire broke out in the building housing an energy storage system at the McMicken site and Surprise, Arizona. The system experienced catastrophic failure and injured multiple fire responders. After a thorough investigation, APS released a final report titled ‘McMicken Battery Energy Storage System Event Technical Analysis and Recommendations’ on July 27, 2020. The report highlighted thermal runaway, initiated by internal cell failure, as the cause for the incident. LG Chem, supplier of cells on this project, disputes those findings.
On September 16, 2020, an energy storage system fire was reported in Liverpool, England. This was a 20MW project called Carnegie Road, owned by Ørsted. It had Li-ion batteries housed in three separate ISO containers supplied by NEC Energy Solutions.
These incidents further demonstrated how critical a robust fire safety mechanism is for a Li-ion battery system to prevent and mitigate the risk of a thermal runaway event. They put codes and standards for energy storage systems at the forefront, as fire safety continued to make headlines. Tests like the UL 9540A Test Method are becoming more commonplace in battery system design and validation, a trend I expect to continue. Alongside more robust testing, standards like NFPA 855 have also gained more prominence in the last year. This is only the beginning; although not as widely applied today, I expect UL9450A, NFPA 855 to become more common in energy storage system design.
Lesson 5: Industry leader NEC Energy Solutions made a surprising exit
This one hit close to home for me. NEC Energy Solutions was an undisputed leader in energy storage with deployments of over 1GW, yet decided to exit the energy storage market in June 2020. As a former Senior Systems Engineer at the company, I worked closely with both the products and the people who made it a great company. As reported in multiple news outlets, the company struggled to maintain profitable growth, which reaffirms the continued shrinking space for system integrators.
Market poised for exponential growth
One thing remains clear: The energy storage industry had an exceptionally busy 2020. While not immune from the COVID-19 pandemic and other disruptions, the industry managed to grow and record major milestones amid these unprecedented times.
The bottom line is that energy storage is on the precipice of exponential growth and will probably double in total megawatts installed over the next 12 months. While we continue to navigate uncertainties, I remain confident that we are only at the beginning of the energy storage decade.
Cover image: Fluence's launch of a range of modular 'building block' energy storage system solutions was an indication of the innovation and determination to differentiate by the industry during 2020. Image: Fluence.