A new report by market research firm IHS predicts that the United States will be the largest region for grid-connected energy storage installations between 2012 and 2017, accounting for 43% of installations during that period.
Commercial activity in the grid-connected storage market is currently limited to a small number of regions and IHS estimates that only 340 MW of systems were installed across 2012 and 2013, with these predominately demonstration projects.
However, installations will rapidly grow to more than 6 GW in 2017. The availability of financial incentives to reduce the upfront cost of an energy storage system (ESS), the introduction of energy storage procurement and installation targets and changes in electricity grid regulations that create business opportunities for an ESS in the grid will drive the acceleration, according to IHS.
"The grid-connected energy storage market is set to explode, reaching a total of over 40 GW of installations by 2022, says IHS solar research manager Sam Wilkinson.
The report projects that growth will continue and by 2022, more than 40 GW of energy storage systems will be installed in grid-connected applications, including behind the meter, in the grid and co-located with renewable and conventional generators.
In the U.S., installations are currently driven by pay for performance rates for ESS providing frequency regulation services and by avoiding peak demand charges in commercial electricity tariffs. Longer-term, growth will be driven by legislation such as Assembly Bill 2414 ESS Procurement Targets and by the increasing need for flexible capacity as a result of growing levels of renewable penetration, IHS says.
Other regions that will see significant deployment of grid-connected energy storage systems (GCESS) will be Germany and Japan, where the installation of energy storage will be promoted by increasing renewable penetration, growing peak demand and the increasing financial attractiveness of self-consumption of renewable energy.
In general, IHS says GCESS will be critical in upgrading electricity grids to manage the increasing levels of renewable penetration and in balancing increasingly complex supply and demand requirements.
Furthermore, IHS says lithium ion (Li-Ion) batteries will account for 64% of energy storage installations between 2012 and 2017. However, opportunities also exist in the long term for other storage technologies, such as sodium sulphur, sodium nickel chloride, flywheels, flow batteries and alternative compressed air energy storage systems, the report finds.
The business case for an ESS will often rely upon multiple revenue streams that are created by providing a range of different functions. As a result, Li-Ion will dominate the energy storage market and will account for over 60% of annual installations in 2017, as it is a versatile technology that is capable of providing both energy intensive and power intensive functions. However, Li-Ion will begin to lose some share of installations in the long-term, as more energy intensive applications begin to lead the requirements for energy storage systems.
IHS points out, however, that sodium sulphur, sodium nickel chloride, flow batteries and alternative compressed air energy storage systems have the advantage of lower upfront costs than Li-Ion in these applications.
Commercial GCESS deployment is currently limited to regions such as Germany, Japan, the U.S. and parts of Central and South America, according to IHS.
Installations have been inhibited by the high upfront costs of storage technologies and by the limited proof of the advantages of storage, the report says.