Changing Landscape of the Energy Storage Sector

Governments and Companies across the world, have set ambitious goals to achieve net zero emissions in Transportation, Heating and Cooling and even the Industrial sectors by the middle of the 21st century. This move to renewable energy means that the future of batteries is inextricably linked to the overall energy transition.

Batteries are a key enabling technology, and in many cases considered the ‘glue of the clean-energy economy’. The electrified world requires batteries to store and power the future, and from what we’ve seen in the past few decades, there’s lots to be optimistic about.

Batteries hold the key to transitioning away from fossil fuel dependence. Already now electric vehicles, the largest consumers of batteries, have become commercially viable from both a cost and performance perspective (BNEF -2021 Report). Driven by this development, the next step, and what will define the next decade, is utility-scale battery storage. The power sector offers growing opportunities for the use of battery storage systems to support the integration of variable renewables such as wind and solar PV into electricity systems. Coupled with the growing share of renewables in the global power generation mix, the IEA estimates that the global installation of utility-scale battery storage could increase 25-fold between 2020 and 2040. The potential of battery storage systems in meeting the growing demand for energy system flexibility and in bolstering the demand for battery metals.

The decarbonization of the transport sector requires a rapid expansion of global battery production and an adequate supply with raw materials currently produced in small volumes. The investigation shows from one of the reports that whether battery production can be a bottleneck in the expansion of electric vehicles and specify the investment in capital and skills required to manage the transition. This may require a battery production rate in the range of 4–12 TWh/year, which entails the use of 19–50 Mt/year of materials. Strengthening the battery value chain requires a global effort in many sectors of the economy that will need to grow according to the battery demand, to avoid bottlenecks along the supply chains. Significant investment for the establishment of production facilities (150–300 billion USD in the next 30 years) and the employment of a large global workforce (400k–1 million) with specific knowledge and skillset are essential. However, the employment and investment required are uncertain given the relatively early development stage of the sector, the continuous advancements in the technology and the wide range of possible future demand. Finally, the deployment of novel battery technologies that are still in the development stage could reduce the demand for critical raw materials and require the partial or total redesign of production and recycling facilities affecting the investment needed for each factory

The global energy transition is metal intensive. Electric vehicles, batteries, solar photovoltaic systems, wind turbines, and hydrogen technologies all require significantly more metals than their conventional alternatives to replace fossil fuel needs.

• Electric car production is the major driver for energy transition metals demand (responsible for 50-60% of the overall), followed by electricity networks and solar photovoltaics production (35- 45%), and then other technologies the remaining 5%.

• Lithium, cobalt, nickel, rare earth elements and copper are the higher volume metals that will experience the strongest acceleration in demand growth. Iridium, scandium and tellurium are the low volume commodities most impacted by the energy transition.

• Europe’s plans to establish domestic production for clean energy technologies will increase its demand for a wide range of metals. This includes growth in mature base metals markets (aluminium, copper, nickel) and the initiation of new commodity markets (lithium, rare earth elements).

While batteries were first developed for the use in consumer electronics, the demand for EV batteries now makes up 85% of total battery metal demand and, according to the IEA, could grow by nearly 30 times between 2020 and 2040. Stationary energy storage systems represent only a small part of overall battery demand at the moment. But prospects for utility-scale battery storage look set to improve as advances in technological innovation emerge (see Figure 1).
 

While still in its infancy, battery storage at the grid level is set to play a key part in the future of the renewable energy industry as an alternative energy storage system. Decarbonisation of the power generation fuel mix coupled with the electrification of the transport sector makes a central contribution to achieving net-zero emissions. The share of electricity wind and solar PV, due to their low cost, widespread availability, and policy support is expected by the IEA to rise from under 10% in 2020 to nearly 30% in 2030, which represents a tripling in their capacity. Their inherently intermittent nature necessitates the deployment of energy storage solutions, which effectively integrate with renewable energy, unlock the benefits of local generation, and enable a clean, resilient energy supply. The requirement for grids to maintain a constant flow of electricity has made energy storage systems an integral in the different segments of the electricity supply chain, from generation, to transmission and distribution, to consumption. This creates a lot of new opportunities for technology innovation. Tesla CEO, Elon Musk, said that he expects the company’s energy business – including the supply of solar and huge lithium-ion batteries for the grid – to be as big as its car business in the long term.

Market applications of battery energy storage are commonly differentiated as: front-of-the-meter (FTM) or be hind-the-meter (BTM). FTM batteries are utility-scale storage systems that are connected to distribution or transmission networks or to a generation asset. BTM batteries are interconnected behind the utility meter of commercial, industrial or residential customers, primarily aiming at electricity bill savings through demand-side management.

Our focus is on utility-scale battery storage. Unlike conventional storage systems, such as pumped hydro storage, which accounts for over 90% of the world’s energy storage, utility-scale batteries have the advantage of geographical and sizing flexibility. Their storage capacity typically ranges from around a few megawatt-hours (MWh) to hundreds of MWh. Different battery storage technologies, which prioritise cost, durability and safety over size and weight, such as Li-ion, sodium sulphur and lead acid batteries, can be used for grid applications. However, in recent years, the technology mix has remained largely unchanged, whereby Li-ion batteries continue to be the most widely used.

With the rising importance of electric mobility on the demand side, and of variable renewable energy sources, which are dependent on weather conditions, on the supply side, balancing grid volatility and when and where electricity is needed has become a key challenge. What makes utility-scale battery storage systems unique is their capability to quickly absorb, hold and then reinject electricity. They can respond to system operator’s instructions in milliseconds and generally provide up to four hours of storage. Coupling renewable energy generation sources with a battery both reduces the variability of the power output at the point of grid interconnection, thus facilitating better integration of renewables, and creates a capacity reserve that can be discharged during peak hours. The key services offered by utility-scale batteries are summarised in Figure 2 and can be further read up on in IRENA’s utility-scale batteries innovation landscape brief.
 

However, to fully replace fossil-fuelled power plants and peak-plants that are only used at times of peak demand, cheaper, longer-duration storage technologies – most of which are not yet cost-effective – are needed along with Li-ion batteries. Vanadium flow batteries (VFBs) are one such technology that could emerge as an alternative stationary storage. VFBs are capable of being sized according to energy storage needs with limited investment and have the advantage of very long lifetimes. With eight to ten hours of energy storage, VFBs can be charged during the day and deploy their energy during peak demand, or overnight, helping to put a floor under power prices. The IEA assumes that VFBs first become commercially suitable in 2030 with a small share, growing modestly to capture a wider market for storage applications in large renewables projects. Despite their advantages, it may be challenging for VFBs to reach the same manufacturing scale as Li-ion, which has been driven by the surge of investment in electric cars over the past decade.

Overall, upfront investment costs are still a barrier to the growth of the utility-scale battery storage market despite significant reductions in recent years. Therefore, storage remains heavily dependent on policy support. To make up for the economic viability gap of electricity storage projects governments could provide incentives that are similar to those used to support the deployment of renewables in their early stages of development. These incentives include capacity payment, grants, feed-in-tariffs, peak reduction incentives, investment tax credits or accelerated depreciation. As the prospects for battery storage systems are expected to improve with more effective regulation that adequately reflects the value of the flexibility services they provide, the IEA expects utility-scale battery storage additions to continue its exponential growth path. After annual installations of battery storage technologies fell for the first time in nearly a decade in 2019, largely due to uncertainty and slow progress in establishing rules and regulations for its deployment and use, they rebounded by over 60% in 2020.

In the IEA’s Sustainability Development Scenario, global installation of utility-scale battery storage is projected to increase 25-fold between 2020 and 2040. The largest markets for battery deployment in 2040 are India, the United States and China. Demand for minerals is expected to even outpace battery demand growth due to the use of more mineral-intensive nickel-manganese-cobalt chemistries – the technology of choice in EVs – which already account for around 60% of utility-scale batteries. This is a demonstration of spill over effects from the transport to the energy sector, mentioned in the beginning of the article. Mineral demand for storage in the SDS could, therefore, grow by over 30 times between 2020 and 2040, whereby demand for nickel and cobalt is respectively growing by 140 and 70 times (see Figure 3).
 

As shown in this study, high electrification scenarios, regardless of the socioeconomic pathway, entail substantial effort for the supply of key battery materials, investment needed to build the necessary production and recycling facilities, and the education of a skilled workforce. Our analysis highlights the effort needed for the electrification of the transport sector in a manner both compliant with climate targets and sustainable resource strategies. This combination entails significant investment to build the manufacturing capacity, which consequently requires global coordination to ensure that batteries are properly recycled and mining activities can supply enough materials. At the same time, it is challenging to make such estimates due to the uncertainty related to the future EV uptake, particularly due to the data scarcity regarding the current estimates of mine capacities, and production and recycling facilities in the pipeline. While there is no apparent shortage of resources, the complexity of the supply chains involved in the LIB sector combined with the lack of enough geographical diversification for key resources, both virgin and refined, can pose a future threat to the entire supply chain. A shortage of either LIBs or materials for LIBs due to the disruption of the supply chain at any random point may hinder the ability to fully electrify the fleet of passenger LDVs by 2050.

New clean energy demand will transform several global metals markets out look says as:
 

- A. K. Shukla, Founder and MD, Sanvaru Technology Ltd