The growing EV/HEV market and the growing market share of intermittent renewable energies (wind, PV) are currently reshaping the stationary battery market. How will stationary battery energy storage speed up the energy transition currently underway and will create a $13.5 billion opportunity for storage by 2023?
The recent announcement about Tesla battery storage solution confirms the trends towards massive deployment of distributed stationary storage systems.
Energy storage plays an important role in the energy transition currently underway in all major electricity markets. Decentralization of electricity sources has become possible because of improving technologies and falling costs for renewable energy installations and energy storage solutions. Decentralization and increased deployment of renewable sources have sustainable drivers: access to clean energy, CO2 emission reduction, nuclear hazard reduction, energy independence, clean mobility, and local energy production to decrease transmission and distribution losses. Traditional business models based on centralized energy supply are becoming obsolete. New energy management solutions and business models have to be developed. As shown in the report, the growing market share of intermittent renewable energies (wind, photovoltaics) in electricity generation reveals a strong interest in stationary battery energy storage systems. Recent cases in China (wind generators curtailment), Japan, and some European countries (grid stability issues due to the large percentage of intermittent renewable electricity) have shown that the further deployment of renewable energy sources in many areas of the world will require electricity grid upgrades, larger deployment of suitable energy storage systems, and development of suitable energy management solutions.
Energy management is key for the development of new technologies for a better world with smart cities, smart buildings, clean energy sources, and clean mobility, etc. Most of these technology solutions are interlinked. An energy storage solution, especially a battery, is at the center of all these technologies and applications. According to Yole Développement’s analysis, the market for stationary battery energy storage systems will have strong growth in the future, surpassing $13.5 billion by 2023. As analyzed in the report, this market is driven both by suppliers' development of better performing and less costly battery solutions and by consumers' growing demand for lower energy dependence, greater availability of renewable electricity, and the need for electricity grid stabilization. Battery solutions are particularly attractive for use in buildings having both solar and electricity storage, especially residential buildings; excess photovoltaic electricity can be stored in batteries, then cheap energy can be drawn from the sun or battery during the day when electricity rates are high, and during the night power can be drawn from the grid at low overnight rates. Excess locally generated electricity can also be sold to the utility.
The combination of renewable energies, batteries, and adapted energy management is sought by customers trying to reduce their electricity bills by increasing self-consumption of locally produced electricity. The most popular choice today is still to maintain the connection to the grid and just lower the amount of electricity purchased. This creates big challenges for grid operators that have the burden of providing reliable grid stability and connection for customers that are consuming less electricity, and thus providing less income to cover grid operation, upgrades, and maintenance. The traditional business models must be completely reshaped and new business models will appear. This will have a great impact on the business of both existing players and newcomers.
How will EV/HEV players (Tesla, BYD…) drive the stationary battery energy storage business?
Rechargeable batteries are particularly suitable for distributed energy storage. Although using a battery as an energy storage solution is decades old, new battery technologies are still maturing and their future cost decrease is expected to significantly speed up the development and deployment of existing and new technologies and applications, thus leading to new business opportunities. The growing electric vehicle/hybrid electric vehicle (EV/HEV) market is a game changer driving battery performance improvement and cost decrease. The new Tesla positioning on both EV/HEV and stationary batteries helps it to increase the market volume and to reduce the production costs.
The modular characteristic of battery systems means their size and features can be optimized for very different requirements in a multitude of applications. In particular, their fast demand response capability widens the scope of services (frequency regulation, etc.) that could be provided by batteries, compared to other energy storage technologies. Different battery technologies are commercially available, safe, proven, and used in daily life. The same battery technology can be used in many different applications (stationary/portable/transport) enabling lower production cost because of higher cumulated production volume, common battery technology development, and simpler logistics. Decreasing battery cost allows broader deployment in both existing and new applications. There is still great potential for further cost reduction and performance enhancement of battery systems. As shown in the report, the development and cost decrease of lithium-ion batteries, very suitable for applications in transport, will largely be driven by the growing EV/HEV market. This strong driving force will result in a battery technology consolidation associated with decreasing market share for more mature battery technologies (lead acid, NiMH…). All energy storage technologies currently under development or already being commercially deployed have to face strong competition from Li-ion batteries that have the advantage of high energy density, high power density, high modularity, and decreasing costs.
Growing opportunities within the energy management value chain are attracting numerous companies across the industry
The value chains associated with the management of energy flow (generation, transmission, distribution, storage and consumption) offer opportunities for numerous players from various industries.
As most batteries are built from small-size battery cells, the battery cell suppliers control battery performance improvement and cost decreases. The Li-ion battery cell supply is today dominated by a few large companies located in Japan, Korea, and China, producing cells in very large quantities. Among the leading suppliers are Samsung SDI, Panasonic, LG Chem, SONY, Lishen, Amperex Technology Ltd. (ATL), and BYD.
Based on safe and reliable cells purchased from the established suppliers, many players are currently entering the market as battery integrators—designing and manufacturing battery systems, especially for applications in transport and stationary energy storage (residential and large-size battery energy storage systems (BESS)). As shown in our report, the residential storage market entry barrier is rather low with strong synergies to other products /applications, thus motivating many players to focus on this market segment. The value chain for residential electricity storage market is still greatly dispersed and composed of many small players—more than 50 players offer commercial solutions and others will release their products soon. Automotive makers (Tesla, BYD, Toyota, Nissan…), their suppliers, and partners are also entering the residential or large-size BESS markets. They profit from the advantage of purchasing battery cells in high quantities and thus at lower prices compared to stationary storage “pure-players”. According to Yole Développement’s analysis, a strong consolidation, new partnerships, and M&A activities will strongly shape the stationary storage market over the next several years.
Energy producers are keen to partner with battery makers and energy solution providers. Many of them are testing different battery solutions or have invested in companies involved in the battery business. Energy suppliers involved in renewable energy generation need to reinforce their position by developing solutions that enable easier integration of renewables into the electricity grid. Energy suppliers continuing to stay with their conventional electricity sources will need to improve their capacity and optimize plant operations. Battery solutions can enable both.
The battery and renewable energy players and EV/HEV makers will increasingly focus on the business related to energy supply and energy management (smart grid, smart city, smart building…). The players providing “an energy solution” will gain a better position in the market compared to players selling just “an electricity storage product”.
The companies that manufacture electronic and power electronic components, safety devices, cooling systems, etc. are also taking part in the growing battery business.
To provide insight to:
- How the transition toward renewable energy sources and clean electricity and the development of new battery technologies and solutions will impact the electricity business. What risks and opportunities it will bring?
- Market size for stationary battery energy storage systems
- Expected movements within the value chain
- How the electric vehicle drives the development and deployment of the stationary battery electricity storage systems.