Batteries represent the fastest-growing segment of the rapidly expanding energy storage market, which saw 1.4 gigawatts and 2.3 gigawatt-hours of capacity deployed globally in 2017.
Although the battery industry encompasses a wide range of technologies and has historically been dominated by lead acid, the most widely used chemical family in energy storage is lithium-ion.
Behind-the-meter and front-of-meter applications
Battery storage installations are usually classed as being either behind-the-meter or front-of-meter.
Behind-the-meter installations are typically on commercial, industrial or residential premises and tend to be aimed at increasing solar energy self-consumption and avoiding demand charges.
Front-of-meter installations are usually owned by or installed on behalf of utilities. They are mostly used for grid services such as frequency regulation and short-term peak capacity provision.
So far, energy storage markets worldwide have grown in diverse ways. America has a large volume of front-of-meter battery storage. In Germany, on the other hand, most of the batteries deployed to date have been behind the meter.
Major battery storage markets
The U.S. has the world’s largest battery storage market, with 61.8 megawatts of power capacity installed in the second quarter of 2018, according to the Wood Mackenzie Power & Renewables and Energy Storage Association report series, the Energy Storage Monitor.
The market grew 60 percent year-over-year, thanks in large part to strong growth in residential deployment.
California had a 90 percent share of the U.S. battery storage market in the second quarter of 2018, based on data from Wood Mackenzie’s Global Energy Storage Briefing.
In Europe, the two biggest battery markets are Germany and the U.K. Germany has little front-of-meter storage, but is the world’s largest behind-the-meter battery market thanks to a high level of residential installations.
Helped by a government subsidy scheme, German installers have delivered more than 600 megawatt-hours of home storage capacity. In contrast, the U.K. market is dominated by front-of-meter capacity.
The country has Europe’s second-largest battery storage market, mainly thanks to a series of National Grid procurement rounds that began with a 201-megawatt enhanced frequency response tender in 2016.
In the Asia-Pacific region, the top markets are South Korea, Australia and Japan, accounting for 40 percent, 27 percent and 17 percent of the region’s market share, respectively.
The Asia-Pacific battery storage market has grown at a compound annual growth rate of 76 percent, from 81.85 megawatts in 2013 to 1.34 gigawatts in 2018.
Battery-integrated renewables have accounted for 95 percent of battery power capacity in the region, with 58 percent of deployments paired with utility solar plants, 25 percent with wind, 12 percent with both solar and wind and 5 percent with coal.
The Australian market is notable for hosting the world’s biggest battery system, the 129-megawatt-hour Hornsdale Power Reserve, although several larger systems are now planned, including several more in Australia.
The U.S. may take the title in 2020, when Vistra Energy switches on a 300-megawatt, 4-hour lithium-ion battery system as part of plans by Pacific Gas and Electric to replace gas peaker plants with energy storage.
Battery production and pricing
Global lithium-ion battery cell production is expected to increase from 109 gigawatt-hours in 2017, with most units serving the consumer electronics market, to 523 gigawatt-hours by 2025, underpinned by demand from the EV industry.
Battery manufacturing is dominated by Asia, which accounts for 65 percent of capacity today, although Europe is on track to increase its battery-making capacity by 20 times in the next seven years, rising to 90 gigawatt-hours of manufacturing output per year by 2025.
The scale of growth in lithium-ion battery manufacturing has led to questions over whether there will be enough basic materials to meet demand. Concern centers on five materials in particular: lithium, cobalt, nickel, graphite and copper.
As an example of the volatility of the battery materials market, there was concern in November 2018 when the mining firm Glencore said the export and sale of cobalt from its Kamoto project in the Democratic Republic of Congo (DRC) would be suspended until further notice.
The halt, introduced after the metal was found to be contaminated with uranium, affected annual production that was anticipated to rise to 34 kilotons of cobalt in 2019, equivalent to 21 percent of global supplies.
Because growing demand for cobalt is expected to be mostly satisfied from mining concerns within the DRC, a market subject to ethical concerns, some lithium-ion battery manufacturers are now moving toward chemistries that don’t require it.
