Explore the development trend of the battery energy storage system market

According to a survey by cleaning technology consultancy Apricum, the number of battery energy storage systems (BESS) for stationary applications has begun to increase dramatically, including utility scale and distributed applications. According to recent estimates, sales are expected to increase from approximately $1 billion in 2018 to $20 billion to $25 billion in 2024.

Apricum identified three major drivers of growth in fixed battery energy storage systems (BESS): First, positive developments in battery costs. The second is an improved regulatory framework, both of which increase battery competitiveness. Third, the Fixed Battery Energy Storage System (BESS) is a growing market for addressable services.

Battery cost

A key prerequisite for the widespread use of fixed battery energy storage systems (BESS) is the associated cost reduction during battery life. This is mainly achieved by cutting capital expenditures, improving performance or improving financing conditions.

Capital expenditures:

The fixed battery energy storage system (BESS) technology with the largest cost reduction in recent years is a lithium-ion battery, which has dropped from about $500-600/kWh in 2012 to $300-$500/kWh. This is mainly due to the dominant position of the technology in mobile applications such as the "3C" industry (computers, communications, consumer electronics) and electric vehicles, and the resulting economies of scale. In this context, Tesla plans to further reduce the cost of lithium-ion batteries through its production of the 35 GWh/kW "Giga-Factory" plant in Nevada, Alevo, a US energy storage battery manufacturer, has also announced a similar plan to transform an abandoned cigarette factory into a 16 GWh battery manufacturing facility.

Today, most energy storage technology startups are working on other ways to adopt low capital expenditures. They realized that it would be difficult to meet the production of lithium-ion batteries, and companies like Eos, Aquion or Ambri were designing their batteries to meet certain cost requirements from the start. This can be achieved by using a large number of inexpensive raw materials and highly automated technologies for electrodes, proton exchange membranes and electrolytes, and outsourcing their production to global-scale manufacturing contractors such as Foxconn. As a result, Eos said its megawatt system is priced at only $160/kWh.

In addition, innovative procurement can help reduce the investment cost of a fixed battery energy storage system (BESS). For example, Bosch, BMW and Swedish utility Vattenfall are installing a 2MW/2MWh fixed energy storage system based on lithium-ion batteries used in the BMW i3 and ActiveE sedan.

Performance:

Battery performance parameters can be improved by the efforts of manufacturers and operators to reduce the cost of battery energy storage systems (BESS). Battery life (life cycle and cycle life) clearly has a large impact on the economics of the battery. At the manufacturing level, working life can be extended by adding proprietary additives to the active chemicals and improving the production process to achieve a more uniform battery quality.

Obviously, the battery should always work effectively within the operating range of its design, for example when it comes to depth of discharge (DOD). Cycle life can be significantly extended by limiting the potential depth of discharge (DOD) in the application or by using a system with a higher capacity than required. A detailed knowledge of the optimal operating limits obtained through rigorous laboratory testing, as well as having a proper battery management system (BMS), is a major advantage. The round-trip efficiency loss is mainly due to the hysteresis inherent in battery cell chemistry. Using an appropriate charge or discharge rate, as well as maintaining a good depth of discharge (DOD), helps maintain high efficiency.

In addition, the electrical energy consumed by the components of the battery system (cooling, heating, or battery management system) affects efficiency and should be kept to a minimum. For example, by adding mechanical elements to a lead-acid battery to prevent dendrite formation, degradation of battery capacity over time can be alleviated.

Financing conditions:

The banking operations of the Fixed Battery Energy Storage System (BESS) program are often affected by limited performance records and the inexperience of financing institutions in the performance, maintenance and business models of battery energy storage.

Suppliers and developers of the Battery Energy Storage System (BESS) program should attempt to improve investment conditions, for example, through standardized warranty efforts or through a comprehensive testing process for implementing batteries.

In general, as the above capital expenditures decline and the number of batteries continuing to increase, investors' confidence will increase and their financing costs will fall.

2. Regulatory framework

Battery energy storage system deployed by WEMAG/Younicos

Like all relatively new technologies entering mature markets, the Battery Energy Storage System (BESS) relies to some extent on a favorable regulatory framework. At least this means that the Battery Energy Storage System (BESS) has no barriers to market participation. Ideally, government agencies will see the value of fixed storage systems and motivate their applications accordingly.

An example of eliminating the effects of its application barrier is the US Federal Energy Regulatory Commission (FERC) Order No. 755, which requires ISOs3 and RTOs4 to provide faster, more accurate and higher performance payments for MW-MILIEE55 resources. Since the independent operator PJM has correspondingly adapted its wholesale power market in October 2012, the scale of energy storage has been increasing. The result is that in the US 62 megawatts of energy storage equipment deployed in 2014, three points the second is PJM's energy storage products.

In Germany, residential users who purchase solar and energy storage systems can get low-interest loans from the German government-owned development bank KfW and receive up to 30% rebates on the purchase price. So far, this has prompted the installation of approximately 12,000 energy storage systems, but it should be noted that another 13,000 energy storage systems are built outside the program.

In 2013, the California State Regulatory Authority (CPUC) requested that by 2020, the utility sector must purchase 1.325 GW of energy storage capacity. The procurement program is designed to demonstrate how batteries can modernize the grid and help integrate solar and wind energy.

The above examples are all major events that have attracted significant attention in the field of energy storage. However, smaller, often unnoticed changes in the rules may have a strong impact on the regional applicability of the Battery Energy Storage System (BESS). Potential examples include:

By simply reducing the minimum capacity requirements of Germany's main energy storage market, residential energy storage systems will be allowed to participate as virtual power plants, further strengthening the business case of the Distributed Battery Energy Storage System (BESS).

The core element of the EU's Third Energy Reform Program, which came into effect in 2009, is the separation of power companies' power generation and sales operations from their transmission networks. In this case, due to some legal uncertainties, the conditions under which the Transmission System Operator (TSO) will be allowed to operate the energy storage system are not fully understood. Legislative improvements will lay the foundation for the wider application of battery energy storage systems (BESS) in grid support.

3. Market for addressable services

AEG Power Solutions

Specific trends in the global electricity market are triggering increasing demand for services, and in principle fixed battery energy storage systems (BESS) services can be used. The relevant trends are:

Due to the volatility of renewable energy and the increased flexibility of electricity supply during natural disasters, the demand for flexibility in power systems is increasing. Here, energy storage projects can provide auxiliary services such as frequency and voltage control, grid congestion mitigation, renewable energy tightening and black start.

Expansion and implementation of power generation and transmission and distribution infrastructure due to aging or insufficient capacity, and increased electrification in rural areas, in this case, the Battery Energy Storage System (BESS) can be used as an alternative to delaying or avoiding infrastructure investments to stabilize island grids or improve the efficiency of diesel generator sets in off-grid systems.

Industrial, commercial and residential end users are struggling to cope with higher electricity bills, especially due to price changes and demand costs. For (potential) residential solar power owners, the decline in feed-in tariffs will affect economic viability. In addition, power supply is often unreliable and power quality is poor. Stationary batteries can help increase self-consumption perform "peak clipping" and "peak shift" while providing an uninterruptible power supply (UPS).

Obviously, to meet this demand, there are various traditional non-energy storage options. Whether the battery constitutes a better choice must be evaluated on a case-by-case basis and may vary greatly from region to region. For example, although there are some positive business cases in Australia and Texas, etc., these cases need to overcome the problem of long-distance transmission. The typical cable length of the medium-voltage level in Germany is less than 10 km, which makes the traditional grid. Expansion is a lower cost alternative in most cases.

In general, it is not enough to provide services using only the Battery Energy Storage System (BESS). Therefore, services should be incorporated into the “benefit stack” to reduce costs and compensate through multiple mechanisms. Starting with the application with the largest source of revenue, you should first use spare capacity to seize on-site opportunities and avoid regulatory barriers like UPS power. For any remaining capacity, services delivered to the grid (such as frequency adjustment) can also be considered. Needless to say, additional services cannot hinder the development of major services.

Impact on energy storage market participants

Improvements in these drivers will lead to new business opportunities and the accompanying market growth. However, negative developments in turn can lead to business models failing to achieve or even losing economic viability. For example, due to an unexpected shortage of certain raw materials, the expected cost reduction may not be achieved, or the commercialization of new technologies is not as expected. Changes in regulations may form a framework in which the Fixed Battery Energy Storage System (BESS) cannot participate. In addition, the development of neighboring industries may create additional competition for fixed battery energy storage systems (BESS), such as the use of renewable energy for frequency control: in some markets (such as Ireland), grid standards have required wind farms as the main Power reserve.

Therefore, companies must closely monitor, predict and positively influence battery costs, regulatory frameworks, and the need to successfully participate in the global market for fixed battery storage.

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