According to new research from Wood Mackenzie, the Americas region will overtake Asia Pacific by 2025 to lead the global storage market, with a total capacity of 371 GWh in 2030. Most of this growth will come from the US. China will place second (150 GWh), while Japan will sit third (25 GWh) by the end of the decade.
The slowdown in Asia Pacific is partly due to challenges from market incentives and business cases. Though Asia Pacific led the global storage market last year, with deployments reaching 13 GWh, growth has mainly relied on pilots, government subsidies and grid interconnection requirements over the past decade. Without strong policy support, it will be difficult to scale up the front-of-the-meter (FTM) segment across the region.
The US tripled storage installations in 2020, accounting for 38% of new capacity. China, Germany, and the UK saw double-digit growth during the pandemic, while Australia’s installations fell in year-on-year numbers. Steady growth in a number of key countries during the coronavirus pandemic and strong recovery in 2021 will accelerate global energy storage adoption in the long term, says Wood Mackenzie.
Dan Finn-Foley, Wood Mackenzie Head of Energy Storage, said: “2020 was a record year for global energy storage. The market exceeded 15 GW/27 GWh in 2020, increasing 51% in GWh terms, and is expected to grow 27 times by 2030 by adding 70 GWh of storage capacity a year to surpass 729 GWh in 2030.
“Approximately $5.4 billion of new investment was committed to storage projects across the world last year, increasing the total cumulative investment to an estimated $22 billion. By 2025, the overall investment pot will reach $86 billion, with a 24% CAGR despite the economic slowdown caused by COVID-19.”
As noted in Wood Mackenzie’s report, the global market began to move from small-scale short-duration batteries to four-hour batteries last year due to coronavirus impacts. The pandemic caused power demand to fall in 2020, putting downward pressure on wholesale power prices and reducing the need for peaking units. 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.
Le Xu, Wood Mackenzie Senior Research Analyst, said: “China, Japan and South Korea have set climate-neutrality targets, underscoring their commitment to the energy transition. While in Australia, renewables plus storage technology is competing with gas power and already replacing ageing coal units.
“If battery projects can solve the financing challenge they currently face, energy storage will be a key feature of decarbonization plans across the region. Asia Pacific’s energy transition ambitions could be thwarted if this issue is not resolved, as battery storage provides the flexibility power plants and grids require to generate reliable electricity around the clock.”
The Wood Mackenzie report also outlines expected changes in another key storage market: Europe. So far, Europe’s market development has been slower than its US and Chinese counterparts. However, this development will accelerate in the coming years as European member states are required to comply with the Renewable Energy Directive, current overcapacities in electricity markets are reduced with nuclear, and coal exits take place.
According to Wood Mackenzie, Europe will deploy approximately 3 GWh of energy storage capacity in 2021, a 55% increase in 2020, and will see cumulative capacity hit 9 GWh by the end of the year.
Anna Darmani, Wood Mackenzie Lead Analyst, said: “Europe’s storage numbers appear relatively small on the global scale. However, they are remarkable if we consider that Europe did not have a trackable battery market until around four years ago.
“In the past two years, Europe has invested more in its battery value chain than any other region worldwide and its residential segment is growing faster than any other region.”