2024
Energy Storage Report
Outlook
Outlook
Regulatory bodies worldwide are progressively integrating energy storage into long-term power procurement strategies.
Pointers in Growth and Challenges
Regulatory authorities, alongside policy-level support, are poised to play a pivotal role in shaping the energy storage project pipeline and market opportunities. An emerging trend is the inclusion of battery storage in bulk renewable energy tenders in an increasing number of countries. Many upcoming contracts are designed as technology-neutral, where battery-based projects compete with other clean energy technologies to provide the required energy solutions. This trend is particularly noticeable in European and other markets’ auction announcements. In the US, there is a mixture of procurement plans and targets, with 10 states having specific targets for energy storage procurement. Additionally, states like California, Connecticut, Illinois, and others offer fiscal incentives to achieve similar objectives (S&P Global, 2023).
There is considerable interest in forthcoming regulatory changes due to the European Union’s planned power market structure reform. This initiative aims to overhaul the existing market structure, which currently favours fossil fuel generation, in favour of clean energy resources and flexible power generation, including energy storage. As of December 15, 2023, the European Parliament proposed a set of rules reflecting discussions and proposals aimed at promoting the integration of energy storage systems (European Parliament, 2023). However, industry associations have highlighted areas of concern, such as ‘double charging,’ where storage units may be subjected to grid fees both as generation and additional supply units in many European regulatory regimes (Energy Storage News, 2023).
Progressive Adoption of Storage-based Auctions and Tenders in Countries (Illustrative)
| Country | Development | |
|---|---|---|
| Brazil |
The energy auctions of 2024 will have battery-based and other storage technologies actively compete for securing the power reserve auctions (peak demand capacity). |
|
| Italy |
Grid operator Terna’s capacity market auctions initiated since 2022, would have deliveries commence from 2024. This marks an important start to the country’s storage market. |
|
| Greece |
A second auction is in the works for 2024, to award 10-year guarantee, Contracts-for-Difference to the winning projects. |
|
| Chile |
Auctions planned in 2024, after the regulator took note of the dissenting points in the previously planned auction of 2023. |
|
| Japan |
|
Source: Reuters, Energy Storage News, PV Magazine, Wood Mackenzie
Regulatory signals indicate increasing demands on energy storage systems, posing challenges not only in terms of technological robustness but also market depth and developer efficiency. A recent example is the California Energy Commission’s approval in December 2023 for the development of the state’s first multi-day (100 hours) battery storage resource (S&P Global, 2023). The project, supported by a $30 million state funding, aims to demonstrate iron-air battery technology and establish use-cases for targeted commissioning by 2025, driven by CEC’s policy goals on long-duration energy storage (Energy Storage News, 2022).
Note: Projections above are based on pledges/targets by national governments in emission reduction, energy transition and renewable energy expansion. It includes transmission and distribution network.
Source: IEA
The readiness of grid infrastructure will also be crucial for regulatory frameworks and market development. Many mature power markets face challenges in this regard, especially concerning grid connectivity pressure for renewable energy developers. Projections from the IEA on grid investments suggest a doubling of investment outlay between 2016-2022 and 2031-2040 to fulfill government pledges to reduce emissions and enable energy transition. Delays in grid interconnections for storage projects are exacerbating challenges, particularly as renewable energy developers increasingly opt for co-located battery storage (IEA, 2023).