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PAF Insights

Energy Transition


Energy Storage Report

Executive Summary

The growing significance of energy storage solutions within the context of the clean energy market underscores a pivotal transition towards sustainable power systems. The upsurge in investments in battery storage, soaring to $37 billion in 2023, reflects a threefold increase compared to 2021. This surge of capital is attributable to the rapid maturation and commercialization of energy storage technologies, coupled with the implementation of supportive regulatory frameworks that fortify the economic viability of grid-scale storage units.

While the concept of energy storage is not novel—fossil fuels and hydroelectricity serve as traditional reservoirs of stored energy—its recent relevance has been magnified by the ascendancy of renewable energy sources such as solar and wind. Unlike their conventional counterparts, renewable sources lack inherent storage capacity, necessitating bespoke storage solutions to effectively manage the intermittency of power generation.

Two primary storage technologies, namely pumped hydro and battery energy storage systems (BESS), emerge as pivotal low-carbon storage technologies that complement renewable energy assets. The inherent variability of renewable energy generation poses challenges for network operators, manifesting in unpredictable power supply dynamics and grid capacity constraints. Energy storage interventions offer a solution to alleviate these challenges, equipping operators with enhanced grid flexibility to optimize the balance between supply and demand.

Europe, a vanguard in renewable energy adoption, has grappled with grid capacity inadequacies precipitated by the growing share of renewable energy sources. In response, concerted efforts have been directed towards bolstering energy storage solutions, supported by financial incentives that have catalyzed the proliferation of both stand-alone and co-located storage facilities. These strategic interventions not only facilitate grid management utilities but also enable optimized power scheduling, thereby creating a compelling business case for investment.

Despite encountering supply chain vicissitudes, battery storage power capacity soared to 85GW by the end of 2023, marking a twofold surge in annual growth. However, this expansionary trajectory still falls short of addressing the scale necessitated for robust integration of renewable energy into the grid. Concurrently, ongoing technological strides, inclusive of refinements in Lithium-Ion batteries and the ascendancy of alternatives like Sodium-Ion batteries, are anticipated to galvanize further innovation and deployment within the energy storage domain.

Long-duration energy storage (LDES) has attracted a significant focus within the energy storage industry, as attention shifts from not only the power capacity but also the total storage capacity. This is crucial in ensuring grid reliability amidst the escalating penetration of renewable energy sources. While pumped hydro remains the quintessential LDES option, ongoing endeavours are underway to commercialize nascent battery technologies capable of meeting evolving storage requisites.

Projections predict a surpassing of the 200GW threshold in battery storage capacity within the ensuing five years, underpinned by every expanding project magnitudes and compelling pricing dynamics. Nonetheless, the regulatory framework and market dynamics have substantial influence over revenue potential for storage developers, underscoring the value of bespoke localized strategies and strategic collaborations to optimally harness the economic potential of the storage industry.

The main purpose of the initial 6 chapters of this report is to provide an overview of the essential factors that influence the energy storage market, such as the basic principles of the business case, the technologies, the trends and drivers including policy support and economics, and the prospects for the industry at a global level. After that, the report splits into geographical regions, Northern Americas, Europe and Latin America, and gives country-level profiles for each.

Our Annual Global Energy Storage market report adds to our continued series of key energy transition focused industry reports. The collective works are the result of a valued research collaboration between ourselves and Alchemy Research and Analytics, a leading industry research group working actively across the energy transition markets. The report draws on macroeconomic data from multilateral institutions and industry-specific data from sources such as industry associations, government authorities / statistical departments, and the International Energy Agency (IEA). This was supplemented by news reports, trade journals, and related sources. The report provides a current market overview of the global energy storage industry, including recent trends, drivers, challenges, and outlook in major countries across Europe and the Americas. The structure of the report begins with a summary of the industry’s dynamics, including regional variations, and analyses of their implications. It then delves into detailed profiles of major markets by country, offering a holistic view of the industry’s state in these countries, and highlighting growth opportunities, demand drivers, and current challenges.

PAF’s INSIGHTS series of industry reports, aims to provide a comprehensive understanding of the key characteristics and trends prevalent in major markets for various technologies that will shape the energy transition over the coming decades. We hope you find our annual review of the Global Energy Storage market informative and enjoyable to read and we look forward to briefing you on other renewable energy technologies in the upcoming months.

Pan American Finance

Alchemy Research and Analytics

  • Tapas Bhowmik
    Senior Manager
    Alchemy Research and Analytics
  • Souradeep Basu
    Associate Manager
    Alchemy Research and Analytics
  • Maurya Mukherjee
    Senior Analyst
    Alchemy Research and Analytics

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