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How rapidly will the global electricity storage market grow by 2026?

Global installed storage capacity is forecast to expand by 56% in the next five years to reach over 270 GW by 2026. The main driver is the increasing need for system flexibility and storage around the world to fully utilise and integrate larger shares of variable renewable energy (VRE) into power systems. 

Concentrated solar power, pumped hydro and batteries, installed storage capacity in 2020 and 2026

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Utility-scale batteries are expected to account for the majority of storage growth worldwide. Their installed capacity increase sixfold over the forecast period, driven by incentives and an increasing need for system flexibility, especially where the share of VRE covers almost all demand in certain hours of the day. Hybrid auctions combining wind or solar PV with storage have emerged in India and Germany, with contracts in the range of USD 40-60/MWh over the last year. In the United States federal tax incentives, combined with high peak prices in several markets, are driving expansion, while long-term government targets in China see battery storage increasing fivefold over 2021-2026.

Pumped storage hydropower (PSH) provides 42% of global expansion of electricity storage capacity. With over 40 GW of expansion in the next five years, PSH remains the largest source of installed storage capacity, achieving 200 GW cumulatively installed by 2026, three times larger than batteries. China alone accounts for three-quarters of global PSH capacity growth thanks to the government’s long-term targets and new remuneration scheme aimed at reducing VRE curtailment.

Concentrated solar power (CSP) storage expands by only 2.6 GW during the forecast period. China leads the expansion thanks to a generous FIT scheme, which is set to continue until the end of this year. Beyond China, the United Arab Emirates is expected to bring online the second-largest volume of new capacity globally, thanks to phase four of the Dubai Electricity and Water Authority’s Mohammed bin Rashid Al Maktoum Solar Park, which brings an additional 700 MW and aims to help the country achieve its target of 75% clean energy by 2050.

Installed capacity does not provide a full picture of each storage technology’s capabilities.1 PSH and CSP can provide medium-term storage capabilities cost effectively. In the case of CSP, storage is usually in the range of 5-15 hours. In contrast, the most widely used lithium-ion battery technology can usually store electricity for less than 4 hours. For PSH, the storage duration ranges from 5 to 175 hours, but some installations, such as PSH units installed in cascading systems that link two or more large reservoirs, offer even greater storage capacity (IEA, 2021f).

Addressing global electricity storage capabilities, our forecast expects them to increase by 40% to reach almost 12 TWh in 2026, with PSH accounting for almost all of it. India dominates storage capability expansion by commissioning over 2.5 TWh (80% of the expansion) thanks to projects using existing large reservoirs. CSP storage capabilities almost double partly thanks to the longer storage hours (10 hours on average) of projects under construction in China, the United Arab Emirates, Morocco, South Africa, Chile and Greece. Similarly, global battery storage capabilities also increase eightfold by 2026.

In addition to PSH, CSP storage and batteries, the IEA Special Hydropower Market Report estimated the energy storage capabilities of hydropower (IEA, 2021f). Accordingly, existing conventional reservoir hydropower plants can store up to 1 500 TWh of electricity, significantly more than all other storage technologies combined.

Pumped storage hydropower storage capability by countries, 2020-2026

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CSP, PSH and battery storage capability in 2020 and 2026

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Concentrated solar power storage capability by countries, 2020 and 2026

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Battery storage capability by countries, 2020 and 2026

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PSH and CSP storage can use already-installed plant infrastructure instead of greenfield projects, providing cost-effective opportunities to accelerate storage capabilities locally. Currently around half of CSP installations worldwide do not have any storage capability, especially in Spain and United States (HELIOCSP, 2020). Accordingly, we estimate the potential for retrofitting CSP projects by adding storage could be significantly higher compared with our forecast for greenfield plants. For instance in Spain, solar PV developers face grid constraints to connect new projects. CSP retrofits adding storage could help alleviate some of these grid constraints. For CSP retrofits to make economic sense, remuneration for existing projects would need to be extended and adjusted to reward flexibility and storage capabilities. For PSH, existing reservoir plants and dams can offer opportunities to achieve long-term storage cost effectively. In the IEA Special Hydropower Market Report (IEA, 2021f), the outlook to 2030 indicated that adding PSH capabilities to existing reservoirs would add more storage capability than new projects. 

Technologies like CSP and PSH not only generate electricity and serve as daily or weekly balancing, but also provide additional services to the grid, such as system inertia, frequency response and grid regulation by means of their rotating mass. They are difficult to finance because of their high investment costs and, in many countries, the lack of remuneration schemes valuing grid services and therefore long-term revenue visibility. Some markets, such as the United Kingdom, Ireland and some Nordic countries, provide market-based remuneration for grid services. However, energy sales continue to be the primary source of revenue for both CSP and PSH, given that revenues from ancillary services range from 1% to 5% of total revenue in many markets (IEA,2021f). More income streams are therefore required for storage technologies to become bankable. Auctions that support hybrid plants can provide a good solution to scale up PSH and CSP. In India, for instance, a PSH and PV system won a hybrid auction last year at USD 57/MWh (PV Magazine, 2020).

References
  1. Our estimates of storage capabilities, or stored electrical energy, for PSH are based on the International Commission on Large Dams’ database of existing dams and reservoirs (ICOLD, 2021), country-level storage data and IEA research. Energy storage capability calculations depend on the potential energy of water that can be used for power generation stored behind each dam. Factors include the average head of the dam, energy conversion efficiency (assumed at 90%) and estimates of the live part of a reservoir’s volume. In some cases, we also applied a standard assumption of 10 hours’ storage capability. We based storage capabilities of CSP on the SolarPaces NREL database and project level research (NREL, 2021). For batteries, we used information from the WEO 2021 report (IEA, 2021d).

    All capability calculations are for one charge cycle, and these technologies operate under different charging cycling patterns.