In his most recent report, Grid-Scale Energy Storage in North America 2013: Applications, Technologies, and Suppliers, author Chet Lyons spoke with dozens of energy storage CEOs and summarized their thoughts. Below is an excerpt of his 311-page report, highlighting eleven common threads shared by energy storage executives.
1.) There is an increased focus on cost reduction. Over the past few years, CEOs have focused on getting technologies to work and scaling them up to commercial size. There are substitutable technologies for every application, so success will ultimately be driven by costs. CEOs are working harder to understand the costs of both conventional and substitute technologies, while creating programs and roadmaps for major cost reduction. There is plenty of room for cost reduction, especially on a total system basis.
2.) The future of Li-ion batteries is still bright. Most CEOs believe that Li-ion batteries will not be quickly obsoleted, as some experts have predicted. Li-ion technology is driven by two markets: EVs and grid-connected storage. No other storage technology can make that claim. In theory, the resulting combined demand for Li-ion batteries should exert a powerful influence in lowering the cost of Li-ion batteries. As noted by one executive, improvements in the cycle life of Li-ion have been significant in recent years. Given all these factors, most CEOs believe that Li-ion will become increasingly cost-competitive and some (the minority) believe that Li-ion batteries may even hold the potential to claim a significant fraction of the stationary energy storage business.
3.) Power versus energy applications still dominate. Most companies are focusing on power applications versus multi-hour energy time-shifting. CEOs tend to believe that for right now, the highest value of energy storage is in its power capacity and locational value, not in the ability to shift large amounts of energy through time. This is expected to change as storage costs drop. Flow batteries about to hit the market are helping to shift industry thinking about the changing economics of energy versus power applications.
4.) Direct regulatory and policy intervention is workable at the state level. CEOs are active in their home states, but avoid federal efforts due to high cost and low return. The cost of regulatory intervention at the federal legislative and FERC levels is seen as highly prohibitive. CEOs are avoiding direct engagement at those levels, and most want their industry associations to pick up the burden of FERC-level regulatory intervention. In contrast, most CEOs said they are deeply and actively engaged in efforts to influence policy and regulations in their home states because it is impactful in the short term.
5.) Transitional business strategies are critical. CEOs are pursuing transitional business strategies as a way to survive the early stages of the industry before the onset of major market demand.
6.) Europe tops China as the most attractive international market. Most U.S.-based storage companies have taken steps to enter or expand activities in the European market via partnerships, agency, subsidiaries or other methods. In contrast, while the enormous technical market potential of China is appreciated, the lack of transparent market mechanisms in China and widespread concerns about theft of intellectual property are keeping most players from making any serious attempt to explore the Chinese market.
7.) Safety and environmental concerns are a key focus area. Safety and to a slightly lesser degree low environmental risk have become far more important issues for CEOs. There is a strong awareness that these will be defining factors in determining whether a technology or system can ultimately achieve broad market acceptance.
8.) Cheap natural gas won't kill storage. CEOs are emphatic that natural gas will not kill the storage industry. However, their plans do take it into account. They believe that application economics are project- and location-specific. Further, they point out that applications that are optimized to provide high power versus energy time-shifting are less impacted by the cost of natural gas.
9.) Multiple value streams are real. CEOs believe that multiple value streams are real and that if a project can capture multiple value streams, it can be a winner. For example, a peak power substitution project can also perform frequency regulation when not injecting peaking energy, while a large solar project that uses storage for ramp mitigation (due to cloud effects) can also bid into the open-bid frequency regulation market after the sun sets. The hard part is finding projects where multiple applications don't significantly cannibalize one another and aren't transactionally too complex.
10.) The probability of disruptive technologies is high. Most CEOs believe the probability is quite high that one or more disruptive energy storage technology will be brought to market within the next few years, five years at most. The arrival of disruptive technologies is generally welcomed because they will expand markets for storage and strengthen the industry.
11.) Project financing is starting to appear. A few companies are starting to take steps to provide or arrange third-party financing for storage projects. The attention that is now being paid to project financing is a sign that the storage industry is beginning to mature. For example, American Vanadium has put a financing vehicle in place so that customers can lease its vanadium redox flow battery system. And Northwater Capital, a Canadian venture capital firm, has invested in NRStor, a firm dedicated to energy storage project development that also provides project financing.
For more on the grid-scale energy storage market, download the report brochure here.