By Allison Proffitt
March 28, 2023 | While others at the International Battery Seminar last week were estimating eventual sustainable power demands, Iola Hughes, a research manager at consultancy Rho Motion, reported that 2023 was the first year that battery demand reached one tWH (tera-watt hours). That reflects dramatic growth since 2020. Electric vehicles have driven much of that growth, but battery energy storage systems (BESS) have also grown notably in the past four years, making it the fastest growing portion of energy demands.
Broadly, ESS can be divided into the energy grid market and “behind-the-meter” market including residential energy storage, telecom networks, hospitals, factory lines, and so much more. The grid market is currently driving ESS, particularly in the US and China, Hughes said. She highlighted the comparison of grid-scale projects to come online in 2022 verses 2023: the size of planned projects has generally increased by a factor of 10.
China’s growth could serve as a case study for how a storage market could evolve, Hughes said. Legislation was enacted at the provincial level requiring storage to be installed alongside renewable energy projects, and their national energy association also proposed bans on certain chemistries for energy storage, which Hughes predicts will impact which chemistries other nations view as safest and most fit for energy storage.
In the US, the Inflation Reduction Act (passed in August 2022) authorized $396 billion in spending on energy security. Among the incentives introduced or extended in the IRA: both investment tax credits and production tax credits for renewable energy. The production tax credits, in particular, are “a really interesting one for the storage market,” Hughes said, “because it brings though support for the manufacturing of cells, manufacturing of packs, within that system, a set of benefits as well.”
IRA prompted significant announcements from the battery industry including cell manufacturers, system integrators, and developers. Hughes highlighted just a few: Fluence plans to manufacture its own packs in Utah, both KORE Power and American Battery Factory announced LFP gigafactories in Arizona, and LG Energy Solution and Hanwha Group announced plans to establish ESS battery manufacturing capabilities.
In Europe, however, the story is different. “The energy storage market in Europe has really suffered over the last few years because of this double taxation that’s in place,” Hughes said.
The European Commission’s responses to the IRA include the Green Deal Industrial Plan, the Net-Zero Innovation Act, and, most recently, Electricity Market Reform. The Green Deal Industrial Plan has set out to target four pillars: ease permitting, provide financing through grants and loans, enhance skills for net-zero related industries, and facilitate open and fair trade for supply chains. The Electricity Market Reform is a 10-point plan; addressing double taxation is point one, she said.
“Energy storage has, I’d say, been ignored in the past but it’s becoming a more pressing and more central issue,” she said. “Lots to come from Europe in the next few weeks, few months, and that should start to help the European market and maybe allow it to catch up in some way with where the US and China are,” she said.
Specifically for Storage
Across geographies, there have been recent shifts in market thinking, Hughes said. One of particular interest is the number of cell-manufacturers who are specifically targeting the energy storage market for new products. “Historically, the way the energy storage market has really worked has been an energy surplus market. So cells that were sort of left over from the EV space were then funneled into energy storage,” Hughes explained. “But recently we’ve seen a need from both the integrators and the developers to ensure security of supply, and that’s come in the form of offtake agreements.” She listed several battery manufacturers—CATL, FREYR, Gotion, and Hithium—who have committed storage to BESS developers and integrators. “It’s no longer a surplus market; it’s no longer someone’s second choice. You have cell capacity being developed which is directly for the energy storage market,” Hughes said.
Hughes predicts this trend will have direct impact on not only the size of the battery market, but also the types of technologies being developed. The priorities of the energy storage market are generally quite different from those of the electric vehicle market, she pointed out. Gravimetric and volumetric energy are generally very low priority in ESS, while cost, cycle life, and safety are of top priority. “This is really starting to dictate some of the chemistry choices and technology choices that we are seeing in this market,” Hughes said.
Since 2020, LFP chemistries have grown from slightly less than half of the ESS market to more than three-quarters of the market. Hughes credits that shift with the move from a surplus market to a direct market for energy storage. LFP is cheap and safe, but Hughes highlighted new chemistries for the ESS applications that are particularly interesting: sodium ion, flow batteries, and air batteries.
Long duration—air and flow batteries—are gaining ground. Air batteries currently have one large announced, planned project according to Rho Motion’s estimates; vanadium flow batteries are dominating the flow battery space, particularly in the Chinese market.
Sodium ion is also gaining competitive ground—or at least hype—against lithium ion, realizing potential cost savings from raw materials prices and current collector prices. Hughes said she’s heard potential costs for sodium ion to be as low as $80/kWh. Projects are underway already using sodium ion batteries. Hughes cited HiNa Battery, which is ramping up its 1gWh production facility this year and a 60 mWh project in China set to launch in June 2023. But, Hughes cautioned, “it’s going to take time for these supply chains to develop. There’s a lot of work going on right now in developing the raw materials side of things, the processing, the cathode facilities… It’s an exciting thing to watch!”
