Sector focus: Storage

The race to develop energy storage capacity is creating growing excitement among investors and policymakers.

The concept of using battery systems to store power generated by renewables has long been seen as critical to allowing electricity grids to end their reliance on gas, coal or nuclear for baseload supply.

The technology is still at a nascent, and costly, stage. However, a report by BloombergNEF estimates that energy storage projects that provide transmission and distribution services will receive $277 billion in investment by 2050 – up from less than $1 billion today. The growth in the market is to be driven by falling costs, with lithium-ion battery costs predicted to drop by 68 percent between 2020 and 2050.

Although policymakers have long recognised the potential role of storage in a fully decarbonised electricity system, governments are only beginning to make detailed plans for storage capacity. In Australia, New South Wales’s government published a roadmap in November calling for 2GW of storage capacity to be added to the state’s electricity infrastructure by 2030. Germany aims to install a 500MW battery in the southern town of Kupferzell by 2025 – double the size of the world’s largest operational battery, which was unveiled in California in August.

Infra investors are also showing growing interest in entering the storage market. “Batteries are going to change the pricing and value of electricity,” says David Scaysbrook, co-founder of Quinbrook Infrastructure Partners. Along with solar, he says batteries represent “the most significant shift in power markets since the second world war”. Infrastructure Investor reported in November that Quinbrook’s UK-focused renewables fund would target solar and wind assets that have battery storage capabilities attached.

Singapore’s Equis has been active in the Asian batteries industry and completed an exit from South Korea’s largest storage system in November. The firm told us it would seek to integrate battery storage within the design of every generating asset in its portfolio and develop “standalone battery storage solutions to assist grid operators to reliably manage the supply profiles of renewable energy generation”.

Batteries running low

However, the actual volumes invested in battery storage systems have been surprisingly static. The International Energy Agency reported in June that investment in battery storage had declined by 12 percent in 2019, though the dip is partly explained by falling costs. IEA figures also showed that investment in battery storage stood at less than 1 percent of the value of investment in generation assets.

Even so, given the potential impact on global energy systems that effective storage systems would deliver, the industry’s evangelists are advising investors to enter the market before the trickle of dollars becomes a flood. Laurent Segalen, managing partner at advisory firm Megawatt-X, said at our online global summit in October: “You should start investing now and learn because there’s a lot of learning to be done… If you wait three, four or five years until everything is mature, the catch-up will be too big.”

Stories of the year

Batteries continue to attract investment

August 2020 The world’s largest battery storage project comes online in California, with capacity of 230MW

September Ardian Infrastructure and Enel sign a deal to invest in 10 battery projects in Canada

November New South Wales unveils a roadmap calling for 2GW of storage capacity by 2030. Equis sells South Korea’s largest storage system to Kiwoom Asset Management