‘Bullish’ growth in battery investments will reach $1.2trn by 2040

The capital cost for a utility-scale lithium ion battery has fallen 52 percent in recent years as energy storage is poised to attract future investments, according to BloombergNEF.

Energy storage presents a trillion-dollar investment opportunity for investors as batteries improve in cost and performance, according to a report published by energy technology analyst BloombergNEF.

The long-term outlook for energy storage is positive, with an estimated $1.2 trillion of investments heading toward distributed, or behind-the-meter, batteries or utility-scale projects by 2040, according to the report. In a little over two decades, global installed capacity will reach 942GW, the report said.

For years, many have considered energy storage the next technology that will disrupt how traditional infrastructure is used, in this case the generation and transmission of electricity. However, the sector has yet to attract capital from a large number of institutional investors due to the nascent technology underpinning batteries and uncertainty about how they will generate cashflow.

BloombergNEF’s outlook for the sector says those concerns will be lifted in the coming decade, with the capital cost of a utility-scale lithium-ion battery storage system falling 52 percent between 2018 and 2030. Behind-the-meter systems are also expected to increase dramatically at businesses, industrial sites and millions of residential properties.

“We have become much more bullish about storage deployments since our last forecast a year ago,” Yayoi Sekine, an energy storage analyst at BloombergNEF, said in a statement. “This is partly due to faster-than-expected falls in storage system costs, and partly to a greater focus on two emerging applications for the technology – electric vehicle charging, and energy access in remote regions.”

Leading OECD markets will be where energy storage receives the most investment over the next two decades, according to BloombergNEF. Currently, South Korea is the world’s most attractive market, but the US is predicted to take the lead in the early 2020s, and China will draw the most capital for batteries later that decade until at least 2040.

However, developing countries will also experience rapid growth in energy storage, with utilities in places such as Africa finding it’s cheaper to install batteries in far-flung sites rather than extending transmission lines or using fossil fuel generators.

“We see energy storage growing to a point where it is equivalent to 7 percent of the total installed power capacity globally in 2040. The majority of storage capacity will be utility-scale until the mid-2030s, when behind-the-meter applications overtake,” Logan Goldie-Scot, head of energy storage, said in a statement.