Energy Storage Market: Opportunities Abound for Entrepreneurial Focused Companies Through 2030

Energy Storage Market: Opportunities Abound for Entrepreneurial Focused Companies Through 2030

By Gene Williams, President of Optima Chemical

Climate change and environmental sustainability continue to take center stage around the globe due to increased pressure from world leaders to reduce carbonization. As a result, the global energy storage market is positioned for future growth given that battery storage systems remain crucial to supporting the transition to clean and renewable energy sources. In fact, despite the economic hardships created by the COVID-19 pandemic over the last 18 months, 2020 was a record year for growth in the global energy storage market, according to a recent report by energy market analyst group Wood Mackenzie, entitled “Global Energy Storage Outlook H1 2021.” The report underscores that last year, this sector saw a 51% increase in gigawatt hour (GWh) usage as compared to 2019 and goes on to say that “approximately $5 billion of new investment was committed to storage projects across the world last year, increasing the cumulative total to $22 billion.”

The outlook going forward is also very positive and indicates significant growth over the next decade. The Wood Mackenzie (WoodMac) report estimates that by 2025, investment projects will reach $86 billion, with a 24% compound annual growth rate (CAGR) and will continue to grow 27 times its current size by 2030 “by adding 70GWh of storage capacity a year to surpass 729 GWh in 2030.”

Given the supportive fundamentals of this sector now and into the coming years, there is a tremendous opportunity for companies — both large organizations and start-ups — to enter into the energy storage marketplace during this upswing in order to capitalize on the growth projections within this highly desirable segment. But, before doing so, it is critical to first gain a better understanding of the specific areas of the energy storage market that will likely have the most potential for continued expansion, as well some energy technology trends that could spur innovation and create a pathway to success within this sector. What follows is an overview of those two important topics, as well as the ways in which a toll manufacturing company like Optima Chemical — a leading global supplier of specialty chemicals, toll services, and manufacturing — can be an essential tool for organizations that need help breaking down the barriers to entry.

Understanding the Main Segments of the Energy Storage Market

The expansion of renewable energy and continued decline in the costs of battery energy storage systems are the primary drivers for growth in this marketplace, meaning these types of technologies will likely be included in national and global energy and carbonization plans now and in the years to come.

Companies looking to break into this space must understand the marketplace. To that end, there are three main segments of the energy storage market: pumped storage hydropower (PSH), stationary source, and transportation. Research indicates that the stationary and transportation energy storage subsectors show the most potential for future growth. For example, together these markets are estimated to grow 2.5–4 terawatt-hours (TWh) annually by 2030, which represents a growth rate of 3 to 5 times its current 800-gigawatt-hours (GWh).

Breaking things down further, we turn to the “Energy Storage Grand Challenge: Energy Storage Market Report,” which states that “electrified powertrains (i.e., onboard energy storage) have gained greater acceptance and have transitioned mobility to the largest single demand for energy storage, representing approximately five to ten times greater usage by energy capacity than stationary energy storage. The convergence of electrified transportation, a rapid decrease in battery storage costs, and increased variable renewable generation has led to a surge in research and market deployments of energy storage across the global electric and transportation sectors. Although once considered the missing link for high levels of grid-tied renewable electricity, stationary energy storage is no longer seen as a barrier, but rather a real opportunity to identify the most cost-effective technologies for increasing grid reliability, resilience, and demand management.” In terms of renewable electricity, there is a huge growth potential here given that countries around the world are setting goals to generate 50% of their total energy from renewables by 2030 as part of their decarbonization efforts. With this kind of demand on the horizon, renewable energy plants will need to be outfitted with battery energy storage systems that can store excess energy during times when generation is high, as well as when generation is low but demand remains high, thus illustrating an opportunity for companies that might be in search of pathways into this market.

Of course, the vast majority of growth is due to the adoption of electronic vehicle (xEVs), says the report, and continued adoption (i.e., 30% of vehicle sales) of xEVs could catapult the market into the 4 terawatt hour (TWh) territory. Going forward, the growth seen over the last few years in xEVs is expected to continue as “central and local government incentives for consumers remain in place in many major world markets, and as manufacturers increase the size of manufacturing platforms. Analysts project mobility storage demands in 2030 of 0.8 to 3.0 TWh, with the demand for light-duty EVs dominating near-term markets.” A Bloomberg report notes that by 2022, there will be over 500 different EV models available in the marketplace and that by 2040, over half of all passenger vehicles sold will be electric.

On the stationary energy source front, the report notes that pumped-storage hydropower (PSH) dominates the category currently. However, new projects tend to be focused on lithium-ion (Li-ion) batteries due to decreasing prices. By 2030, “annual global deployments of stationary storage (excluding PSH) is projected to exceed 300 GWh, representing a 27% compound annual growth rate (CAGR) for grid-related storage and an 8% CAGR for use in industrial applications such as warehouse logistics and data centers.”

Key Emerging Energy Technology Trends

The biggest energy technology trend now and into the future is lithium-ion (Li-ion) batteries. This type of battery is utilized in both the stationary and transportation markets, and they also play a big role in powering consumer electronics, meaning there will be continued demand for this product as the xEv market continues to expand. In fact, most industry analysts expect that Li-ion batteries will capture a majority of the market within the next 10 years. The transportation sector dominates the Li-ion market and is also the fastest growing segment of the energy storage sector (only 1% of automotive sales consuming 60% of Li-ion batteries). This demand is bolstered by the current pricing trend of Li-ion battery packs — according to a Bloomberg report, Li-ion battery pack prices “fell 87% from 2010 to 2019, with the volume-weighted average hitting $156/kWh. Underlying material prices will play a larger role in the future, but the introduction of new chemistries, new manufacturing techniques and simplified pack designs will keep prices falling.” Together this demand and falling prices indicate a continued upward tick of activity within the sector going forward. While China is the primary manufacturer of Li-ion battery cells today (accounting for 80% of the global manufacturing capacity, or approximately 525 GWh), the Unites States follows directly behind China, making up “8% of current global capacity, primarily due to the Tesla-Panasonic plants in Nevada. The United States also has 6% (~90 GWh) of the facilities planned/under construction,” illustrating further expansion of the market share in the coming years.

Another key technology in this sector is lead acid batteries, which are prevalent in both the stationary and transportation segments of the market. In addition to providing starting, lighting, and ignition (SLI) power to many on and off-road vehicles in the market, this type of batter also supplies a significant amount of energy storage for the industrial sector, including telecom battery backup, UPS and data centers, as well as forklifts. According to the “Energy Storage Grand Challenge Market Report, global lead–acid battery sales grew annually by more than “20% from 2013–2018 to $37 billion. Currently, they provide more than 70% of all rechargeable markets and 75% of lead–acid sales are in the automotive SLI sector.” It goes on to say that “although lead–acid batteries are currently the most common battery in both stationary and transportation applications (for SLI), they are expected to still lead in capacity (GWh) by 2025, but may lag in sales dollars.” Demand for this type of battery technology is primarily driven by China, with Europe coming next and then the United States at the tail end of the demand lifecycle. Finally, according to the Energy Storage report, industry analysts believe that lead acid chemistry could have a big impact on the stationary storage market in the future, opening up “potential opportunities including the following:

• Investment in bipolar design to increase energy density and reduce cost;
• Behind-the-meter storage and other applications where safety is critical; and
• Telecom reserve power deployment in developing countries and for 5G deployment.”

The third type of battery technology is pumped storage hydropower (PSH), which is one of the earliest energy storage methods available in the marketplace. A majority of the usage of this segment is found in Asia and Europe, and while the “amount of operating PSH is significant, not all of it was designed to meet today’s grid challenges,” which don’t support continued expansion of this technology going forward, particularly in the United States. Industry analysts project the capacity in this segment to “increase 50% to 240 GW by 2030, with 65 of the new projects in China, 19 in the United States, and 10 in both Australia and Indonesia.” The report continues, stating that “from 2020–2026, China is expected to deploy more than 35 GW of PSH, typically as very large plants. For example, China’s $2.8-billion Fengning County plant, intended for the 2022 Winter Olympics, is 3.5 GW.” This shows a growing demand in Asia, without much deployment planned here in the United States.

There are two smaller subsections of energy storage technologies to note. The first is compressed air energy storage (CAES), which is only utilized in the stationary market and has just seven commissioned facilities worldwide. The United States deployed the largest quantity of both capacity and power from 2011–2019. China accounts for the next biggest user of this technology, having secured financing for three facilities which were under construction as of 2019–2020 but according to the Energy Report, “no information was found on whether any of these projects were completed.” The final technology to note is redox flow batteries (RFB), which are also exclusively used in the stationary market and typically have a water solvent base. Asia, and China in particular, are the leaders in RFB deployment within the marketplace. The Energy Report states that “of the 800 MWh of RFB projects deployed since 2008, more than 75% were deployed in the last 2 years,” indicating and increased interest in this technology within recent years. The report continues, stating that redox flow batteries have “an average system duration of 4 hours” and “could compete with lithium-ion for up to 69 GWh (46%) of the total 150 GWh of required capacity in 2030.”

Benefits of Partnering with Third Party Chemical Suppliers and Toll Manufacturers

The WoodMac report makes clear that Li-ion batteries are the future of the energy storage market. It concludes that “long-duration batteries helped to strengthen grid reliability and reduce the risks of power outages during this period. By 2030, the average lithium-ion project size will increase from 100-MWh scale to 1-GWh scale, up sevenfold.”

Given all the opportunities that are presented by the above battery storage demand and technology trends, particularly within the Li-ion subcategory, many start-up companies and large corporations are interested in breaking into the market. However, many of these companies lack the scientific expertise, resources, and facilities to develop the necessary chemistry needed to manufacture these types of products. Partnering with a third-party chemical supplier and toll manufacturer, such as Optima Chemical, presents a viable solution for companies looking to break down the barrier of entry into this marketplace.

As a full-service chemical company with the infrastructure to take ideas through to delivered products and solutions, Optima Chemical has the engineering capabilities needed to manufacture high energy and high hazard, sensitive chemistry safely at large scale. Optima Chemical has two U.S. based plants, where they manufacture products for their partners as well as develop their own proprietary products, which offers one-stop-shopping for its toll partners, with services such as technical support, analytical development, route development, and scale-up available for all customers, be it for custom made products or some short-term use of their facilities.

Simply put, entrepreneurial companies that are looking for a point of entry at the ground floor of the energy storage market should consider working with a third-party chemical toll manufacturing company. With so much growth potential in this expanding and in-demand sector, getting a piece of the pie will come down to understanding the limitations of your company and its expertise. Let them focus on the chemistry while your company manufactures and supplies the batteries to the leading transportation and stationary market players.