The market has its challenges, but nothing seems to stand in the way of its explosive growth.
Bloomberg New Energy Finance predicts that in the next 12 years, energy storage will mirror solar's growth between 2010 and 2015, which was 700 percent. The growth of this technology will be vital to integrating more renewable energy onto the grid and will allow for more flexibility. This could lead to numerous energy saving benefits, greater resiliency and a more efficient electric grid overall.
Energy storage had a very good year in 2017. Not only did the market grow 46 percent from 2016 to 2017, but projections [PDF] suggest it will grow another nine times in size between 2017 and 2022.
- 46% market growth from 2016 to 2017
- 235% increase in jobs from 2015 to 2016
- 9x market growth projection from 2017 to 2022
Employment is booming, too. From 2015 to 2016, energy storage jobs increased 235 percent to reach 90,800 jobs, with battery storage accounting for over half. By 2022, deployments are projected to increase 859 percent. This is some amazing growth, coming from almost nowhere just two to three years ago.
What's driving this explosive growth?
Energy storage has come a long way in a short amount of time. From being too costly for wide-scale adoption just a few short years ago, the price has come down so fast that many utilities are moving toward renewable energy – coupled with energy storage – rather than building new and costly natural gas peakers.
The largest price drop in utility-scale lithium-ion storage systems occurred between 2014 and 2015, plummeting 29 percent. The following year saw a 26 percent price decline, and last year, 12 percent. As hardware costs fall, the utility-scale system price is expected to continue its decline, dropping 36 percent by 2022.
With firms such as Tesla, GE and Lockheed Martin investing in the technology, hundreds of millions of dollars of capital is flowing toward research, development and commercialization. In fact, Deutsche Bank predicts energy storage is headed toward market readiness, with incremental storage costs likely to drop from about 14 cents per kilowatt-hour in 2015 to about 2 cents by 2020.
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Government policy fuels adoption
As with other emerging technologies in the energy industry, favorable federal and state regulations have also contributed to the market’s growth. These new market rules provide an opportunity for energy storage owners to more easily tap into multiple revenue streams.
For example, New York recently set a statewide energy storage target of 1,500 megawatts by 2025, and New Jersey’s Office of Clean Energy released a proposal last year to allocate $2.5 million for incentives that would encourage more energy storage use. Many other states have provided incentives, too. As shown in California, Massachusetts and Oregon, setting targets can help reduce regulatory barriers to further develop market growth.
Coupling energy storage with renewable energy has the potential to transform how we buy, sell and use energy over the next decade.Lenae Shirley, Senior Director, Technology Innovation and Market Adoption
National policy also plays a role. In 2016, the White House issued over 30 executive actions and private-sector commitments to accelerate the grid integration of renewable energy and storage. Together, this could result in at least 1.3 gigawatts of additional energy storage procurement or deployment through 2021 and potentially lead to $1 billion in investments.
Key challenges to overcome
Energy storage is like a Swiss army knife – it can do a lot of things. It can load shift during peak demand, provide greater resiliency through backup power, alleviate transmission congestion and defer transmission and distribution upgrades, all while allowing for the increased implementation of renewables.
But current market rules don’t compensate energy storage providers for a majority of the services they can provide. It’s like being paid for using the screwdriver on a Swiss army knife but not being paid for using the bottle opener or the scissors, even though those services were provided. Market reforms are necessary to allow owners of energy storage assets to participate fully and be compensated appropriately in the market.
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