Lithium-Ion Battery Installations Forecast to Grow 55% a Year Through 2022 Global lithium-ion battery deployment will grow by an average of 55 percent per year over the next five years according to a new forecast from GTM Research. The market is starting from a small baseline and heading into a period of surging demand for electric vehicles and battery storage systems. (Greentech Media)
- The deployment of lithium-ion batteries will grow by 55% a year over the next five years, according to a new report from GTM Research.
- That growth rate translates into an eightfold expansion of li-ion deployments, from 2 GWh in 2017 to 18 GWh in 2022.
- Most of the li-ion deployments will occur in the Unites States, followed by China, Japan and Australia, the authors said.
Li-ion’s growth is the result of several, related trends, the GTM analysts said. There has been a massive build-out in li-ion manufacturing capability in order to meet demand for electric vehicle batteries. That increase in so-called giga factories has aided economies of scale and reduced battery production costs.
Meanwhile, manufacturers are embracing new technological advances that help increase the energy density of batteries. Thirdly, used EV batteries will supply the market with another source of cheap batteries, said the report authors, GTM energy storage analyst Mitalee Gupta and Ravi Manghani, director of energy storage at GTM.
Several energy experts expect that energy storage will continue to build on its recent momentum. The U.S. energy storage market recently hit a landmark, reaching 100 megawatt-hours of grid-connected energy storage deployments in the fourth quarter of 2017, according to a GTM Research-Energy Storage Association report.
One of the factors driving the growth of energy storage is that more utilities are including the technology in their planning process.
In the new GTM report, Gupta and Manghani see lithium-ion battery pack prices falling 82%, from $219 per kWh in 2017 to $39 per kWh in 2040. That should drive further growth in energy storage installations, they said. The authors noted that the cost of energy storage has to date limited its use to specialized applications on the grid, but as costs fall, they expect to see a wider range of use cases become attractive.
Utility-scale projects lead
Utility-scale projects led the market in the third quarter, with a single 30 MW storage project in Texas accounting for about two-thirds of the quarter’s total. That also resulted in behind-the-meter installations taking a smaller share of the market, 26%, in the third quarter, compared with 42% in the second quarter.
In terms of duration, deployments dropped quarter over quarter as many utility scale projects had discharge durations of less than one hour. There were 42.5 MWh of energy storage projects deployed in the third quarter, a 5% increase year-over-year, but a 17% decline compared with the second quarter.
The Texas project put the Lone Star state at the top of the list for utility-scale deployments for the quarter. California topped the list for the non-residential market with 6.5 MW of deployments, and for the residential market with 1.87 MW of deployments. Hawaii ranked second in residential deployments in the quarter with 1.21 MW of projects and was third in non-residential deployments with 5 kW.
GTM expects a total of 295 MW of energy storage to be deployed in 2017, a 28% increase from the 231 MW deployed in 2016.
Looking further out, the report sees the energy storage market growing nine-fold between 2017 and 2022, with the behind-the-meter market, both residential and non-residential, accounting for up to half of the market by 2021. In dollar terms, the report estimates the energy storage market will be worth $3.1 billion by 2022. The authors expect energy storage deployments to cross the 1 GW per year mark in 2019, bolstered by improved economics and procurement programs.
According to Bloomberg New Energy Finance, prices for lithium-ion battery packs have fallen 24% from 2016 levels.
Regulatory and policy initiatives are also likely to drive market growth. Utilities across the country are increasingly including energy storage in their integrated resource plans (IRPs).
“Energy storage is increasingly acknowledged in utilities’ long-term resource planning across the country,” Ravi Manghani, GTM Research’s director of energy storage, said in a statement. “Many utilities that hadn’t considered energy storage in IRPs a year or two ago are now explicitly modeling hundreds of megawatts of storage into their resource stacks.”
The GTM-ESA report identifies 17 states that include energy storage in either their resource planning or in rate cases.
Among recent actions, the Utilities and Transportation Commission in Washington told investor-owned utilities in the state to consider energy storage in future IRPs.
In Oregon, Portland General Electric responded to the state’s energy storage mandate by saying it intends to spend between $50 million and $100 million to install about 39 MW of energy storage.
In New Mexico, Public Service Company of New Mexico has issued a request for proposals for 456 MW of resources, including renewable energy and battery storage. The resources, identified in the utility’s 2017-2036 IRP, will help fill the gap left when the coal-fired San Juan plant closes at the end of 2022.
New Mexico’s IRP is also notable because the state made changes in the methodology it uses to calculate needs that better capture the benefits that energy storage can provide. Rather than using a simple cost to replace a gas-fired turbine, New Mexico created a metric to value flexibility that is based on sudden changes in supply and demand and found that in some scenarios batteries are more cost effective than a gas turbine.
Arizona Public Service has also been expanding its use of energy storage and has proposed a new tariff program that encourages the adoption of non-residential storage that can help shave peak demand.
In Florida, the Jacksonville Electric Authority approved a storage incentive as part of its new net metering compensation program.
Also in Florida, Duke Energy Florida reached a settlement over the cancellation of its Levy nuclear project that calls for 700 MW of solar, 50 MW of battery storage and 500 electric vehicle charging stations that will be built over four years. In North Carolina, Duke said it plans to invest $30 million on two battery storage systems that would be the first the utility’s regulated arm has undertaken.
And Hawaii, which has been frequently mentioned as a good market for energy storage because of its high rooftop solar penetration, could be poised for an increase in energy storage projects now that Hawaiian Electric Companies’ plan on how it intends to implement the state’s 100%-by 2045 renewable portfolio standard has been accepted. Hawaiian Electric also released its updated grid modernization plan, which makes frequent reference to energy storage.
In New York, Gov. Andrew Cuomo (D) in late November signed a bill setting up an “energy storage deployment program” in the state. The final form of the law will not be known until a chapter amendment is passed in the next legislative session, but it is likely to make New York the fourth state to have some form of energy storage target.
The New York ISO is also looking at how its system could adopt more storage as a way of helping integrate more renewable resources into its grid.
Massachusetts, which preceded New York in the adoption of an energy storage target, is now exploring an issue that could have an effect on the energy storage market in the state.
The state’s Department of Public Utilities is looking into the eligibility of energy storage systems to participate in net metering programs and how such a program might fit with ISO-New England’s Forward Capacity Market.
On the federal front, the GTM-ESA report noted that four bills were introduced in the Senate in the fall that could advance energy storage, including another attempt to secure a tax credit for energy storage and multiple efforts to increase resiliency after the 2017 hurricane season.
Meanwhile, the Federal Energy Regulatory Commission is in the midst of a rulemaking process that is examining energy storage and distributed energy resources (RM16-23-000).
Given FERC’s heavy schedule as it tries to work off a backlog of cases that built up during the months the agency did not have a quorum, it is unlikely that the commission could issue a rulemaking on energy storage before next spring.