Last year was record-breaking for global energy storage deployment. The non-residential segment overtook the residential sector for the first time, with half of the 3.3 GW capacity installed in front of the meter (FTM), according to market analysts Wood Mackenzie. The drive toward large, utility-scale projects has been the single most noteworthy change for the industry over the last 12 to 18 months, with storage projects now exceeding 100 MW for four-hour durations. “The business conversation has shifted, and new increased project sizes lend themselves to solar-plus-storage,” says Mike Wietecki, Vice President of Business Operations at Powin Energy Solutions, a developer of battery cells, packs and system management software.
Renewables enhancement is now becoming the dominant application of energy storage, according to IHS Markit’s energy storage research and analysis manager, Julian Jansen. “With new applications such as peaking capacity, time-shifting renewable generation and transmission and distribution (T&D) infrastructure enhancement is becoming feasible,” he explains. “Battery solutions with durations longer than two hours are becoming increasingly dominant.”
With lower costs and longer duration capabilities, the battery energy storage industry is beginning to challenge conventional power structures. “In the early days of energy storage, evangelist-type companies like ours were convinced that there was a role for battery energy storage, and we were out searching for applications to prove that the platform had a role to play at the grid scale. The first nine years of our existence was always as a niche solution looking for a problem to solve,” says Steve Fludder, CEO of NEC Energy Solutions, a global storage integrator. “Now, we have this massive market that already exists. The markets that we are serving, and beginning to serve, exist all around the world and are ripe for us to disrupt with our solution.”
It is projected by IHS Markit that there will be 4.3 GW of grid-tied energy storage deployed globally in 2019, and that annual installations will increase to 10.6 GW by 2025. Over this forecast period, the market analysts predict that FTM installations will account for more than 50% of annual additions.
The global expansion of large stationary battery storage projects is being supported by an ever-growing and evolving industry. “We are seeing more and more global capabilities of storage integrators where before it was largely regional markets,” says Jansen. There was a period of consolidation in 2017 and 2018, with a flurry of acquisitions and joint ventures. In 2017, storage integrator and software startup Greensmith Energy Management Systems was acquired by global maritime and energy manufacturing giant Wärtsilä, which has an energy business that totals some 70 GW of engine-based gas and liquids. Greensmith Energy today operates as a stand-alone turnkey energy storage business, integrating solar, wind, software and storage with traditional energy for complex grids and microgrids. Generator rental company Aggreko has purchased battery storage integrator Younicos in a deal worth $52 million. And in 2018, Siemens and Fortune 500 utility company AES joined forces to develop a 50/50 stand-alone energy storage integration companz, Fluence.
“We have access to 160 countries through Siemens, and they are the eyes and ears if a new market makes sense,” said Marek Kubik, Market Director of Fluence. “We now have a broad reach, with the opportunity to just grow.”
In 18 months, the company has added 50 employees, with a headcount today of 150. A Chinese joint venture exists between PV inverter manufacturer Sungrow and Samsung, Sungrow-Samsung SDI, as two separate storage companies — one for battery module manufacturing and another for system integration with energy management. “As we can provide a complete energy storage system containing a power control system (PCS), battery and energy management systems (EMS) by our own company, the costs have been reduced,” says Robin Xu, Sales Director of the company.
Project development is becoming more standardized and streamlined. The industry is opting for 40-foot premanufactured storage battery containers, and batteries are being delivered directly on site from manufacturers. Companies are working to improve efficiencies and cut costs in all aspects of the project. “We are looking to manufacture products that minimize bottom-line costs,” says Wietecki of Powin Energy Solutions. “We are moving toward a more and more integrated system that is easier to install, with less labor, and where people are trained in a shorter period of time.”
Greensmith Energy’s Director of Business Development, Risto Paldanius, says the company’s quickest project, with a capacity of 80 MWh/20MW, was developed in less than five months.
Customers are also growing in maturity. “It has become a less educational marketplace, and we are not talking much about what the capabilities of the projects are anymore. Instead, customers are starting to ask for what they want, and are also able to evaluate pricing at a much more sophisticated level,” says Wietecki.
Of course, larger international players with strong financial backing support trust from the marketplace. “A lot of times these are infrastructure projects, so the warranties and guarantees look very different when coming from a large industrial company versus a small startup within the sector,” says Jansen of IHS Markit. “I think that this has really contributed to the acceleration in this segment, and also the growth in project size and customer confidence.”
The paradigm shift
With improved economics and longer duration capabilities, battery storage systems are now becoming competitive with gas-fired power plants to serve peak demand, according to Marek Kubik of Fluence, “Batteries on a capex basis are cheaper.” A growing number of markets are turning to storage systems to meet their peak load demand, which is typically used for just a couple of hours per day, over conventionally supplied fossil fuel peaker plants. And this is what the battery energy storage executives are calling the big paradigm shift.
NEC Energy Solutions has been operating in the U.S. utility-scale storage space for 11 years. The company’s CEO, Steve Fludder, excitedly sets out the global opportunity presented to large-scale storage in meeting peak demand: “Every country in the world has a peak. In many places, that way has been gas-fired generation. We are now beginning to disrupt the conventional method of serving peak demand using battery energy storage because the economics are just there.”
“Solar-plus-storage is at a tipping point where it effectively does the same job as conventional structures — but it does it cheaper,” says Fluence’s Kubik. He adds that storage is at a low base, but that by 2028, batteries will overtake hydro. “Each year, storage is doubling over the previous year, and we expect the trend to continue.”
Longer, smart durations
The industry seems to be settling around four-hour duration as the standard for large battery storage projects, which is the approximate length of the evening peak. NEC says its largest bid was 300 MW/1.2 GWh. “The average project size in our pipeline of opportunities right now is 200 MW, or 800 MWh, and we have many projects that are much larger than that appearing in the bid queue,” says Fludder. But most projects have been in the 30 MW to 50 MW range until lately. Fluence Energy’s largest installed project was 30 MW up until last month, when it completed an installation more than three times that size in Long Beach, California. Marek points out that in addition to stand-alone megastorage projects, the company is seeing large portfolios of smaller projects grouped together.
Virtual power plants and smart software are becoming mainstream for the energy industry. Greensmith’s energy management system, GEMS, is currently on its sixth generation, with a large majority of installed energy storage capacity in the United States running on its software. The company says that it is currently operating the energy system of an entire island in Portugal, with 65% energy generation from renewables and even getting up to 100%. “After tens of years of noise on the island, when the engines turned off, it meant that there was going to be a blackout. Now, the lights go on in the silence,” says Paldanius.
Largely as a result of increased lithium-ion (Li-ion) battery production from EV manufacturing, costs have plummeted over the last decade — which has supported the boost of the stationary storage market. “There were significant cost reductions in just a five-year period; prices dropped 70% between 2012 and 2017,” says Jansen of IHS Markit. While price drops have stalled and have actually increased for certain technologies, he says that prices are still attractive for utility-scale battery storage projects, particularly for lithium iron phosphate (LFP) technology, which is being manufactured in China at a lower cost. “We are seeing anything between as low as $160 and $180 for Tier-2 China LFP, to around $250 and above per kWh for high-power nickel manganese cobalt batteries.” Jansen explains that there is a significant range in terms of pricing and the capabilities of different battery technologies.
There are several global economic factors at play. With high demand for electric vehicles and a growing stationary market, IHS Markit says that Li-ion battery supply is constrained, particularly in Europe, and that exploiting synergies with growing demand for EVs will be crucial for growth. “Demand is a huge question mark right now,” says Powin VP Wietecki, referencing the United States’ 25% tariffs on all Chinese goods.
Moving beyond Li-ion
Global integrators largely regard themselves to be technology-neutral, but lithium-ion dominates the stationary storage market. Several companies are experimenting with projects using alternative energy storage technologies such as hydrogen, compressed air and flow batteries. There is a range of technologies being piloted, analyzed and evaluated for the potential to provide longer duration storage, which the market will need as renewable penetrations increase across the system. “It is very difficult to say whether there will be one or two technologies that will win out for this very long duration storage segment, or whether it will always be a combination of technologies that is needed to solve this particular pain point, as each of them provides a unique set of characteristics and specific benefits,” says Jansen.
By Erica Johnson
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