The global grid-connected energy storage market could reach a total installed capacity of 28 gigawatts by 2022, from just 3 gigawatts in 2016, if an IHS Markit projection cited recently by AES and Siemens proves correct. By 2025, cumulative installations could grow to 52 gigawatts worldwide.
IHS Markit also projects that lithium-ion storage prices will continue to fall, driving industry expansion. The London-based research firm projects battery module prices below $200 per kilowatt-hour by 2019. Just a year ago, GTM Research projected costs of $217 per kilowatt-hour by 2020.
In monetary terms, IHS forecasts that a compound annual growth rate of 16 percent will push grid-connected storage revenue from $1.5 billion last year to more than $7 billion by 2025.
AES and Siemens hope to capture a large portion of this growing market through their planned battery joint venture, named Fluence. To date, the two firms “have deployed or have been awarded 48 projects totaling 463 megawatts of battery-based energy storage across 13 countries.” AES brings to the joint venture a specialty in utility-scale batteries, while Siemens has expertise in behind-the-meter batteries for commercial and industrial users. The 50-50 joint venture is expected to close in the fourth quarter.
Reflecting on the IHS Markit projection in an earnings presentation earlier this month, AES said that it is “well positioned to take advantage and see it as an upside to our outlook.”
AES is a larger battery player than Siemens at present, with 116 megawatts of energy storage projects deployed worldwide as of June 2016, and “with an additional 278 megawatts under construction or in late-stage development.” This compares to 463 megawatts of deployed or awarded projects for both firms.
AES has three selling points for its grid-scale batteries: “improving the reliability of the electric grid, mitigating the intermittency of renewable generation, and lowering costs to operate the system.”
One notable competitor is Tesla, which is catching up to AES and Siemens on big contracts, including one in South Australia for 100 megawatts of battery storage.
To boost its U.S. presence, AES recently purchased sPower -- previously the largest independent solar developer in the country. Meanwhile, Siemens has merged its wind power business with the wind turbine manufacturer Gamesa. AES and Siemens may thus have an interest in selling solar and wind farms to electric utilities along with reasonably priced batteries, adding value through the combination of reliability, renewables integration and cost savings.
Electric utilities are traditionally cautious and slow to change, however, which could present sales challenges to the AES/Siemens joint venture and its competitors.
Just last year, a utility owned by AES Corp., Indianapolis Power & Light, projected no significant use of batteries until 2032 (see the dark purple wedge at the top right of the following graph). This is despite the utility’s deployment of 20 megawatts of AES batteries in 2016 -- a relatively modest amount compared to the purple wedge that grows to about 500 megawatts in the graph.
Source: Indianapolis Power & Light company presentation on its 2016 integrated resource plan
If and when one or both of AES’ own utilities -- Indianapolis Power & Light and Dayton Power & Light -- becomes a major customer of Fluence, it could be a signal that the economics of renewables-plus-battery-storage are becoming too good to resist.
IHS Markit predicts the U.S. energy storage market will assert growing dominance on the global stage, with a CAGR of 21 percent between now and 2025, while surpassing 1.2 gigawatts of annual deployment as soon as 2020.
A total of 1.3 gigawatts of grid-connected storage was deployed worldwide in 2016, according to IHS. The global growth rate is expected to accelerate to 4.7 gigawatts annually by 2020 and to 8.8 gigawatts annually by 2025.
Will Driscoll is a writer and analyst. Previously, he served as a project manager at ICF Consulting, where he conducted analyses for the U.S. Environmental Protection Agency.