Renewable energy's rise over the last decade across the world has always had that one vital flaw: what happens when the wind doesn't blow and the sun doesn't shine? Financial constraints, geographical hurdles and resource scarcity have also limited the growth of baseload technologies such as biomass, hydro and geothermal. While many modern grids have strived to embrace the world's low-carbon ambitions, building an electricity system on renewable energy has thus long had its limits.
Enter stage left energy storage. Labelled “the holy grail of power” at Infrastructure Investor's Berlin conference earlier this year by Denham Capital managing director Justin DeAngelis, storage has the potential to revolutionise the installation and management of renewable energy. While DeAngelis's caveat was the technology's tricky economics, many seem to disagree and across several markets in 2016 energy storage made significant inroads.
In the US, a total of $812 million was invested in energy storage up to the end of September, according to the country's Energy Storage Association. The year 2016 has seen a “critical trend in energy storage deployment” in the US, according to the ESA's executive director Matt Roberts, with utilities driving the growth of large-scale systems.
The Chinese market saw in the third quarter alone 587MW of storage projects announced to be in planning, development or operations, a 586 percent year-on-year increase. The China Energy Storage Alliance also noted Shanghai Electric's pledge to invest $4.3 billion on over 1,000 projects just in the Hubei province over the past five years.
Meanwhile, the UK made great strides through procuring 201MW of enhanced frequency response systems via a tender in August before its capacity auction earlier this month saw 500MW of battery storage contracts emerge. The latter includes a 49MW project set to be one of the world's largest and owned by Centrica, the utility currently shedding its wind assets.
Yet the storage market is not just attracting investment from utilities, it is now also luring capital from institutional investors. This year saw Swiss firm SUSI Partners launch its first energy storage fund, endowed with a pipeline of over 400MWh of storage capacity across the world. The fund, which targets about €250 million, is set for a Q1 first close next year, its managing director Asif Rafique told us in October.
Elsewhere, July saw Macquarie pump $200 million into energy storage company Advanced Microgrid Solutions, providing it with exclusive rights to the first 200MW of projects AMS will build in California. Co-location is also an option on the table for investors, with UK-based NextEnergy Solar Fund last month revealing it is “exploring the feasibility” of applying storage capabilities to some of its solar plants.
For 2017, the question is not about whether the market will grow – but about how fast its size will increase. Barriers clearly remain, with policy certainty and proven investment frameworks still largely elusive. Despite their continuous fall, costs also remain a significant stumbling block. French firm VINCI Energies, which has built a 10MW battery storage project in the Netherlands, said recently it is yet to see large reductions in the price of lithium ion batteries. It also warned that the market's future hinges, to an extent, on the uptake of electric vehicles. As a new asset class, Rafique explained, investors are still trying to increase their understanding of storage, although he added that conversations regarding fundraising “have all been very positive”.
Plenty of eyes then on SUSI next year as it starts reaping the fruit of its early entry in the field.