The phenomenon of the shared economy has already changed many industries, such as hospitality and transportation,to wit Airbnb and Uber. Energy storage, thus far immune from such models, may soon be dramatically affected.
Batteries commonly found in consumer electronics are moving beyond this traditional sector and gravitating towards electric vehicles and energy storage systems (ESS). The emerging business models applying the “sharing” idea will force utilities to overcome the inertia of an unchanged structure and exert pressure for regulatory changes, which will help this industry achieve a $6 billion market value by 2026.
Moving beyond automotive and consumer electronics into ESS
Multiple consumer electronics players have recognized that consumers no longer want to change their mobile phones every two years This means the growth rate of consumer electronic batteries is plateauing.
In order to find new growth points, battery makers and electronics manufacturers are exploring new business areas. Automakers, already active in the residential, commercial, industrial, and grid ESS businesses are also entering the vehicle to home areas.
In essence, a cross-industry business is taking shape, as evidenced by the large number of recent acquisitions, joint ventures, and investment deals. The market is fragmented with all manner of companies jumping in: solar cell integrators, automotive players, cell makers, battery manufacturers, chemical suppliers, trading companies, power utilities, etc.
With Tesla’s Powerwall and Gigafactory bringing global attention to the market, residential or home batteries for behind-the-meter applications are gradually becoming accepted as backup power and as assets to store electricity for PV systems. This allows consumers the flexibility to buy and store electricity when rates are low, and consume it as needed.
Beyond residential systems, batteries are being used on a larger scale for a variety of commercial and industrial applications. Their use is also being explored by utility companies, even at the grid and utility levels. The National Grid Electricity Transmission's enhanced frequency response (frequency response at 1 second or less of registering a frequency deviation) tender is also a potential game changer.
Besides frequency services, battery storage can offer other benefits such as energy capacity, investment deferral, transmission congestion relief, voltage control, load following, arbitrage, etc.
Reality behind the hype
However, this is not yet a market-oriented industry. Government support plays an important role in both residential and grid applications. Two examples of this are Germany and California. For instance, Italian residential battery players are pursuing the German market instead of the local market. In the commercial and industrial (C&I) sector, incentives and electricity pricing structure are important considerations. Many California C&I entities use battery storage systems for demand charge reduction, which helps them save a significant amount in electricity charges.
For front-of-the-meter applications, the driver for supporting energy storage is often linked directly with renewable energy, particularly in areas of the grid with high penetrations of renewable generation. Pilot and demonstration projects take the majority.
For behind-the-meter applications, when the end-users already have a PV system, the differences between wholesale electricity rates and earning for selling electricity is vital. For end-users without an existing PV system, wholesale electricity rates are important.
Lessons from PV growth
Similarities are found between the history of the rapid uptake of solar PV and what is happening in the battery storage market, especially in the behind-the-meter sector. The opportunities and risks of the battery storage boom are more complex than those of PV, because of the multitude of applications and value streams involved, more safety concerns, and their cumulative impact on the continued growth of rooftop solar. Based on historical data, the PV industry has experienced boom-bust cycles due to excess capacity caused by over-investment in this area. Battery storage may experience similar conditions if investments exceed demand. Regional policies and regulations may impact the industry as well.
Technology is not the major driver
The interests in current and future choices for battery solutions are largely stimulated by further battery cost reduction, especially lithium-ion batteries. At the same time, cost is one of the major barriers for further large deployment. Therefore, how to use the same asset efficiently is an important consideration based on current prices.
Sharing economy, revolutionizing the energy industry
It is widely accepted that a battery system used for a single application is not economic, based on current prices. However, it can be used for numerous applications to generate multiple value streams. Like Uber and Airbnb, these same assets can be utilized for owners and others; battery systems can be simultaneously shared by residential owners and utilities. Of course, barriers and difficulties such as regulatory structures, lack of common codes and standards, and safety concerns are temporary hurdles that may hamper growth. But we have already seen companies applying the "sharing" idea emerging in the energy industry. Those who can follow this rising trend will seize the opportunity and win.
Dr. Xiaoxi He is a technology analyst for IDTechEx Research specialized in energy storage. She obtained her PhD from University of Cambridge and holds a Master’s degree from Universität Ulm. Established in 1999, IDTechEx provides independent market research, business intelligence, and events on emerging technology to clients in over 80 countries. IDTechEx is headquartered in Cambridge UK; additional offices are in Berlin, Boston and Tokyo.
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