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Market Insight

Market outlook for energy storage strengthens due to demand for utility-scale solar co-location, growth in China and new residential incentives

May 07, 2019

Julian Jansen Julian Jansen Research & Analysis Manager - Energy Storage, IHS Markit
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By Julian Jansen, research and analysis manager, energy storage, IHS Markit

Highlights

  • A total of 4.3 gigawatts (GW) of grid-connected energy storage will be deployed   globally in 2019 – annual installations will grow to more than 10.6 GW by 2025.
  • Annual grid-connected energy storage hardware revenues are projected to grow from $3.7 billion in 2018 to $8.4 billion in 2025 at a compound annual growth rate (CAGR) of 12 percent.
  • The United States will grow to be the largest market in 2019 overtaking South Korea, as solar-plus-storage and peaking capacity requirements drive procurement.
  • Demand for battery energy storage is ramping up in China, driven by grid infrastructure investments and regulatory reform.
  • The expiration of feed-in-tariffs (FiT) and new incentives will accelerate the growth of residential energy storage in Japan and Australia.

Our analysis

The year 2018 set a record for deployment of grid-connected battery energy storage. Global installations almost doubled, especially driven by growth in South Korea in the first half of the year. The four largest markets in 2018 were South Korea, the United Kingdom, China and the United States, together accounting for more than 60 percent of total installations.

In 2019, IHS Markit is already observing a significant acceleration in market activity driven by significant regulatory and policy developments, as well as the diversification in major applications and geographic activity.

Other developments include:

  • The market showed a strong performance in 2018 owing to project delays shifting installation from 2017 to 2018, and an uptick in the front-of-the meter segments in the United States, China and South Korea in the second half of 2018. Stronger outlooks in the United States, China and residential markets in Japan and Australia mean that the total forecast has been increased by 3.53 GW from 2019 to 2025 (compared to the previous first-half 2018 edition of the report).
  • The United States will grow to be the largest market in 2019, as solar-plus-storage and peaking capacity requirements are driving procurement.
  • Historically, specific countries were dominated by utility-scale projects (United States) or behind-the-meter residential installations (Japan or Germany). However, IHS Markit predicts a more even split between sitings to evolve. Stronger drivers for renewable co-location mean that IHS Markit expects front-of-the-meter installations to account for more than 50 percent of annual additions over the forecast period.
  • Frequency regulation kickstarted the global energy storage market, but renewable enhancement is becoming the dominant application. With new applications such as peaking capacity, time-shifting renewable generation and transmission and distribution (T&D) infrastructure enhancement becoming feasible, battery solutions with durations longer than two hours are becoming increasingly dominant, as seen in South Korea, China and the United States. Short-duration systems will continue play a valuable role for providing frequency regulation and ramp-rate control.
  • Pressure on Li-ion battery prices has softened at the start of 2019 as cobalt prices have decreased, new production capacity has come online and a continued shift towards lithium iron phosphate (LFP) has influenced global average pricing. Supply, especially in Europe, remains constrained, as total demand for Li-ion batteries continues to accelerate in the stationary and electric vehicle (EV) markets. Li-ion is the most cost-effective technology, but as long-duration applications are becoming more valuable, alternative technologies will become more competitive.

Following are the key battery energy storage global trends now emerging:

  • The solar-plus-storage market is flourishing, kickstarted by the investment tax credit (ITC) in the United States and renewable energy credit (REC) multipliers in South Korea.
  • Virtual power plants are moving from pilot and demonstration phases to real deployment, as software companies are acquired and integrated into utility business models.
  • Fire safety and the development of internationally applicable standards are becoming key challenges for the industry.
  • Exploiting synergies with the growing demand of EVs will be crucial for the growth of energy storage.

IHS Markit energy storage research

The IHS Markit Energy Storage Intelligence Service provides a detailed and accurate view of the market for energy storage systems across all key segments of the industry, including small- and large-scale renewable integration, grid support and behind-the-meter storage. It provides the market intelligence and insight needed to understand the highly dynamic market trends and capitalize on new opportunities.

 

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Global
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Power & Energy Technology
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