Lux Research published 2015's fourth quarter update to its Grid Storage Tracker earlier this month, tracking every stationary deployment of advanced energy storage globally. The Tracker captures over 1,000 projects in various stages of development across key storage technologies, applications, regions, sectors, and other key criteria, while data was compiled from primary and secondary sources that included more than 75 industry interviews with cell and storage suppliers, system integrators, project developers and others.
We’ll kick off this blog with some headline findings
• As of October 2015, 1,788MW and 3,460MWh of grid storage has been deployed globally on a cumulative basis, representing more than 841 installing and operating projects
• Since 2011, the global market for grid storage has shown a combined annual growth rate (CAGR) of 33% when rated by power capacity and 20% when rated by energy capacity, while Li-ion has grown much faster than the global market with CAGRs of 48% and 62% by power and energy, respectively
• Lithium ion (Li-ion) batteries have captured the majority of the annual market on an energy basis since 2011, and cumulatively account for 70% of the market by power and 39% by energy
• Within Li-ion cathodes, the lithium iron phosphate (LFP) market lead has shrunk from 89% of the stationary market in 2011 to 40% in 2015, while nickel manganese cobalt (NMC) has grown from less than 1% to 27% of the global market over the same period, accounting for 476MW cumulatively
• Japan continues to lead the global market in energy capacity deployed, but the U.S. remains the most promising market with 350 projects and 776MW deployed or under construction
• Despite dubious financial benefits, residential storage accounts for 223MWh and 24,350 systems cumulatively
• Led by Tesla’s impressive reservation figures, the residential market is set to nearly triple in 2016, assuming that the company ships 29% of its claimed 100,000 reservations
Image: Lux Research.
Global opportunities catching up with US’ leading position
The grid storage market has more than doubled 2014’s total, but not all of the1090MWh of 2015’s installing systems will be commissioned in 2015. The U.S. remains the largest market opportunity for stationary storage on an annual basis, but there are rapidly developing opportunities globally. For example, AES Energy Storage has established new market opportunities in Ireland, the Netherlands, Dominican Republic, and Philippines where previously there were few or no other operating projects.
Cost reduction has led to Li-ion’s increasing market penetration in stationary storage, and while battery volumes in the stationary storage industry are significant, they are dwarfed by that of electrified vehicles. Plug-in and hybrid vehicles accounted for 2.3GWh of Li-ion batteries in Q2 2015 alone (according to Lux’s Automotive Battery Tracker) which demonstrates that market’s significance in driving scale for Li-ion batteries and in turn the stationary market.
The growth of Li-ion’s within stationary applications has pushed the average Energy to Power [E:P] ratio of the global market down from 4.25:1 in 2011 to less than 2:1 in in 2015 as a result of developers favoring shorter duration, demand focused Li-ion batteries. The success of Li-ion in many ways comes at the expense of alternative chemistries, putting increasing pressure on developers of flow batteries, molten salt, and other forms of storage to differentiate themselves. One key area of differentiation is duration or hours of storage. Li-ion reaches a practical limit at four hours of storage at the nameplate power rating, which creates an opportunity to provide longer duration batteries of five hours or more. Unfortunately for developers pursuing long duration, the global market dynamics have favored shorter duration batteries to date, but that could shift over time, depending on how key stakeholders price on- and off-grid services.
The yearly increase in grid-scale projects is readily apparent. Image: Lux Research.
The need to establish revenue models
When looking at the global market’s development, it’s clear that storage is far beyond the demonstration scale, and the market of tomorrow will play an integral role in managing the future grid, not to mention potentially leapfrogging the grid in developing regions. Furthermore, the market drivers of storage today will not be the drivers of storage tomorrow. One noteworthy example is PJM, which has seen robust growth with 263MW and 148MWh of storage since 2011, but growth prospects are severely limited as the market is reportedly evaluating a cap at 300MW, forcing developers to look at alternate U.S. frequency regulation markets.
Separately, NextEra Energy’s CEO Jim Robo recently predicted that in the U.S. there will be no new peaker plants after 2020. In the traditional sense, peakers are multi-MW transmission connected assets, but peaking capacity on the grid may very well come from a combination of behind the meter, distribution, and transmission assets, requiring advanced control systems to dispatch such assets.
Overall 2015 has delivered a noteworthy year for stationary storage, but there are still few profitable applications for storage globally forcing project developers and in turn software providers to aggregate multiple battery applications where possible. To establish revenue models that can sustain such growth in the long run, developers will need to work with utilities and system operators regarding battery asset ownership, locational value, and virtual power plant capabilities. Until then, the pathways for successful projects will be dictated by network operators, regional demand pricing, and top-down policy initiatives.
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