Tracking Progress: Energy storage
Strong deployment of storage technologies continued to be driven by policy, technological developments and a better appreciation by regulators of the value of storage. Lithium-ion batteries are positioned as the main storage technology due to cost reductions and rapid scale-up of manufacturing capacities. Storage is on track with 2DS due to positive market and policy trends, but an additional 21 GW of capacity is needed by 2025. Further policy action is, therefore, required to tackle challenges to deployment.
With the rise of renewables in much of the world, understanding and managing flexibility is becoming a cornerstone of energy markets. Energy storage played a much greater role in providing flexibility in 2016, with important deployments in both short-term and long-term balancing markets, particularly in Europe and the United States.
While the total capacity additions of non-pumped hydro utility-scale energy storage grew to slightly over 500 MW in 2016 (below the 2015 growth rate), nearly 1GW of new capacity was announced in the second half of 2016. The vast majority of utility-scale stationary energy storage capacity in 2016 was lithium-ion batteries. Other batteries (e.g. redox flow or lead-acid) amounted to an estimated 5% of capacity additions, with all other storage technologies combined accounting for the remaining 5%. A key defining trend during 2016 was the concerted action of integrated energy companies, manufacturers and equipment providers to expand their storage activities, leading to a more concentrated market.
Energy storage in the United States experienced a slight growth contraction relative to 2015, with activity largely sustained by state policy. In Europe, growth continued at historic rates, with a capacity market auction in the United Kingdom delivering half a gigawatt of winning bids. Countries with significant solar PV capacity (France, Germany, Australia and Italy) led growth in the nascent market for behind-the-meter storage installations.
In China, the 13th FYP, the trend toward high-voltage transmission capacity and the lack of specific policy support weaken the outlook for battery storage and strengthen that of large-scale pumped hydro projects. Commissioned storage installations in the ASEAN region, however, almost doubled, largely driven by small-scale and island systems.
Beyond the technologies themselves, innovative business models that capitalise on the benefits of storage have seen timid growth in some regions. While there are positive moves by regulators in Europe and in the United States to create enabling environments for aggregators, virtual power plants and other platforms, it is still early to evaluate their impact on 2DS projections.
The 2DS envisions 21 GW aggregate energy storage capacity by 2025. The key area of uncertainty remains behind-the-meter storage. Growth in this area was significant in 2016, albeit from a very low base of 20 MW and regulatory uncertainty subduing outlook.
Remaining on track with the 2DS targets will require the technology growth to continue at the current growth trajectory over the next decade. While evolutionary improvements to the technology appear to be sufficient to meet short-term deployment needs, advanced technologies, particularly those decreasing material requirements and increasing energy density, will be required to stay on track. In 2016, larger players began to acquire start-ups that are developing these next-generation technologies.
Coherent policies need to complement promising technological developments to fully realise the potential of energy storage. The use of storage by grid operators is limited at present, largely due to the lack of clarity and transparency in market rules and regulations, the lack of markets for flexibility and ancillary services, and the low penetration of new business models. While net metering and other incentives can have a positive impact on behind-the-meter storage, policy assessments are required in each jurisdiction to assess the impact of prosumer-generated electricity and storage. This includes an appreciation of the impact of such developments on traditional grid and utility business models.
Published: 16 May 2017Download Full Report