Understanding how the energy storage industry is poised to grow and change over the next years will help the solar PV industry understand how and when storage will contribute to the renewables sector. Industrial policy has a profound effect on clean technology markets and sets the tone for what a region will contribute to the storage market by way of technology and innovation. Once the technology offerings are decided, the market takes over. Since storage is used to fix an existing problem in the energy system (in contrast to solar PV, which creates new value) the technologies that solve the largest, oldest, and most pressing problem win the most market share. However, some of the most exciting innovations are based on software and control systems, which bring to mind the computing analogy of distributed and virtual energy networks.
Generally speaking, governments in Asia Pacific have bet on specific technologies instead of funding innovation in general. Europe, in keeping with its collaborative and cooperative approach, has not chosen specific companies or technologies to fund; but countries within Europe have set clear national technology agendas. Finally, North America has opted to finance overall innovation rather than any specific technology.
The R&D investment strategy in Asia Pacific has become more apparent as Asian economies have demonstrated a focus on advanced battery technologies, with the intention of developing export industries, whereas the North American governments have pursued policies of funding innovation. Consequently this region is the most technologically diverse in the industry. In contrast, European governments, along with the European Union as a whole, are most concerned with matching their ambitious energy mix and efficiency targets with the best available technologies regardless of provenance.
In its Energy Storage Tracker, Navigant Research tracks the projects in the energy storage industry on a biannual basis (currently 757 in all). Using this data, we have identified several key trends in the energy storage market, including technology bias, diversity of technology over time, and the most active end-use markets.
The Asia Pacific region has demonstrated a technology bias for either locally developed and manufactured technologies or established technologies, such as traditional pumped storage, that represent a much lower or better understood technology risk. This focus indicates that the energy storage industry in the region will be driven by one of two forces: the determination to mitigate the consequences of a rapidly changing energy profile, or the mandate to develop an export industry.
While Asia Pacific is the clear winner in terms of regional market share, the region is largely stagnating in terms of new projects. North America and Western Europe, by contrast, are characterized by much more new activity in the space.
Diversity in Europe
The technology profile for Europe is more diverse. For now, Eastern Europe is limited to traditional pumped storage (20 installations totaling 9,383 megawatts of storage). However, Europe as a whole has deployed as many as 11 different technologies, compared to 8 in Asia Pacific. Moreover, Europe has integrated emerging technologies, such as hydrogen and molten salt, that are altogether unknown in Asia Pacific.
The most technologically diverse region for energy storage is North America, where companies currently deploy as many as 15 technologies, reflecting a market driven by innovation. North America is also home to many more startups spun out from university research than either Asia Pacific or Europe, where most of the research is tied to national laboratories.
These examples provide an overview of which technologies are deployed and connected to a grid, but that tells only part of the story. For instance, the profiles of the deployed installations do not indicate which technologies are in the pipeline, the breadth and depth of innovation across supply chains, or which end-use markets are benefiting the most from these advances.
To set the stage, there are 113,722 MW of traditional pumped storage installed globally, with another 2,330 MW of deployed capacity consisting of new or alternative pumped storage, compressed air energy storage, sodium sulfur (NaS) batteries, molten salt, lithium-ion (Li-ion) batteries, flow batteries, lead-acid batteries, and flywheels.
By way of comparison, there are 37,433 MW of announced projects, representing the pipeline of energy storage projects globally. The technological diversity in the pipeline includes pilots of hybrid battery technologies, zinc-air batteries, metal-air batteries, and sodium-ion batteries nearly all of them in the North American market. In fact, North America leads the global market in terms of announced storage project capacity.
Software and control systems
Advances in energy storage devices are not the only markers of innovation. Companies specializing in software and control systems for energy storage, such as Ampard, Greensmith Energy, and GELI, are bringing a great deal of innovation to markets. Firms with disruptive business models such as AES Energy Storage and SolarCity are making technology more accessible to consumers. All of these companies are based in Europe or North America.
End use markets
Energy storage optimizes an existing system be it a building, the grid, a car, or a transit network. As a result, it can be difficult to get a handle on which end-use markets are leading the industry in terms of innovation.
By far the leading market segment for energy storage is bulk storage. Although bulk storage is largely made up of 160 traditional pumped storage installations, which all provide load-leveling and peak-shifting services, bulk storage is the most technologically diverse market segment, with 13 technologies represented globally. Load-leveling and peak-shifting is the original application for energy storage. This application addresses the most basic challenge for a grid operator: matching generation and load. Indeed, up until very recently, grid operators considered energy storage to be an asset whose primary function would be to smooth out electricity demand, in order to better match the steady output of thermal generation plants such as coal and gas. In the absence of intermittent assets such as wind and solar, there was a limit to how useful energy storage could be to the system.
The commercial buildings market (excluding uninterruptible power supply applications) is the second most active market segment, reflecting demand for energy cost management solutions from commercial and industrial customers. Energy storage is an attractive option for those struggling with energy bills that are increasing, either because of rising energy prices or due to time-of-use programs, such as demand charges or dynamic pricing, that are eroding profits. Storage can also be an attractive option for businesses, such as the semiconductor industry, that rely heavily on steady, high quality power. Although commercial and industrial customers are willing to invest in technology to reduce costs, this group of customers typically prefers solutions with less technology risk. As a result, there are relatively few technologies participating in this market segment.
The third primary applications segment, ancillary services, is a nascent market segment for the energy storage industry. It includes diverse applications that either maintain the quality of energy on the grid or act as a reserve or backup for the grid. The activity in this segment reflects three key trends: increased volatility in load and generation, liberalization of market structures and utility attitudes, and a higher opportunity cost for delivering ancillary services using thermal units in the face of rising fuel costs. In terms of technologies, this market segment is highly diverse, with as many as seven technologies totaling 211 MW delivering ancillary services to the grid globally at the end of 2012.
The industrial policies of Asia Pacific, the European Union, and North America will set the agenda for innovation in the energy storage industry for the next five to ten years. Asia Pacific is committed to building export industries based on advanced battery technology this will limit the amount of innovation from Asia Pacific in other areas, such as software. The European Union is focused on renewables integration challenges, and although storage is a useful anchor technology, the EUs contribution to the market will be concentrated in integration. Finally, North America is betting on innovation from every quarter, without agenda. This region will continue to be at the vanguard of technology in the energy storage space but this will not necessarily translate into a solid and growing industry.