Storage set to be game-changer for energy sector

If energy generated from renewables doubles by 2030, the world will need 150GW of battery storage, S&P says.

A “structural shift” in global energy systems is in the cards as mergers and acquisitions in the space accelerate and substantial investment in energy storage companies is being made, according to Standard & Poor's. 

“We believe this is a sign of things to come, as leading estimates predict that the world will need 150GW of battery storage if it is to double the share of renewable power generation by 2030,” the agency said in a statement. 

The prospects for energy storage have soared on the back of a decline in renewable energy costs and growing awareness of issues surrounding climate change, noted Michael Wilkins, S&P's head of infrastructure research. 

The agency cites a report by the UK's National Infrastructure Commission according to which the country could save £8 billion ($11.3 billion; €10.1 billion) through the incorporation of smart power – a combination of interconnection, energy storage and demand flexibility. 

Energy storage is attracting attention in large part due to the declining cost of the components involved. For example, the lithium ion technology used in battery packs for electric vehicles has fallen from $1,000 per kWh in 2010 to $350 last year, the ratings agency said. 

As for financing these types of ventures, Wilkins said wind, solar and energy-efficiency projects – which share barriers such as high upfront costs and long payback periods – could provide useful templates to follow. “However, unlike those technologies, energy storage has the potential for multiple-use applications enabling various revenue streams and potentially shortening payback periods,” Wilkins commented. “This increased flexibility represents both an opportunity for creative project development and a risk to realising full revenue projections and hence returns.” 

Wilkins noted that the multiple revenue streams and risks involved will likely make financing energy storage schemes more complex than renewable energy projects. 

“Nevertheless, as the technology approaches large-scale commercial viability, we believe storage will become a key tool in global efforts to decarbonise the power sector in the years to come,” Wilkins said.