The global energy storage market space is vast

The global energy storage market space is vast

The development of new energy in Europe and the United States is relatively fast, and the development of storage energy in the United States is leading. From the perspective of countries around the world, the progress of energy transformation in different countries in the world is different, and the development of storage energy is also different.
 
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Analysis of global energy storage development

Among the new energy storage installed capacity in 2021, the United States, China, and South Korea are the TOP3 countries with installed capacity, with newly installed capacity of 3.4GW, 1.8GW, and 0.5GW;

In 2021, the proportion of renewable energy power generation in various countries in the world, the United States, the United Kingdom, Ireland, and Australia accounted for 21%, 43%, 37%, and 26% respectively, while China accounted for only 12%, which is at a relatively low level.

Although China’s new installed capacity is already at the forefront of the world, its energy transformation process is still lagging behind.

Proportion of new energy power generation in various countries in 2021

The development of new energy has a long way to go, and the installed capacity of wind and solar is expected to accelerate growth.

Due to insufficient understanding of the instability of new energy power generation, Europe’s installed wind power generation plan before 2020 cannot meet the goal of reducing greenhouse gases by 55%. The planning increment is 69% of the original plan.

The proportion of new energy has increased, and the duration of storage energy has increased. It is currently in the development stage of short-term storage energy.

The proportion of 60% of wind power generation is the key node of energy storage configuration: below 60%, basically hour-level energy storage can meet the demand;

More than 60%, longer-term energy storage is needed as a resource for grid regulation.

Judging from the proportion of wind power and photovoltaic power generation in various countries in the world, it is basically still in the stage of short-term storage energy demand, but the distribution and storage market is expected to gradually increase in the future.

The grid construction in the United States, China and Europe is relatively developed, and they are also the main markets for large storage.

Power grid construction is mainly used for charge transportation, which is related to land area and power consumption. Power grid construction demand is measured by power consumption per unit area (the limitation is that the area needs to be an effective living area), the smaller the power consumption per unit area, the greater the demand for cross-regional power transportation, and the greater the corresponding demand for power grid construction.

Europe (the European power grid is interconnected, so it is counted as a main body), the United States and China have the smallest power consumption per unit area, low power consumption density, large demand for power grid construction, and relatively developed power grid construction.

From the perspective of cumulative installed capacity in 2021, China and the United States have the largest cumulative installed capacity, 6.36GW and 5.73GW respectively, and the grid-side storage energy accounts for a large proportion.

They are 34% and 35% respectively. The grid-side storage energy in the UK, one of the main European entities, accounts for 45%, and the auxiliary service storage energy on the power supply side accounts for 48%.

The United States, China and Europe have developed power grids and are also major markets for large-scale energy storage.

Energy storage industry development in the US and Europe

United States

The U.S. federal government and state government subsidy policies continue to exert force, driving the development of the large reserve market.

The energy storage subsidy policy in the United States has been implemented for more than 10 years.

As early as 2011, California began to implement the household storage subsidy policy, and then gradually expanded to grid-side subsidies.

2021 is the key node for the decline of ITC subsidies, and the U.S. House of Representatives decided to extend the ITC subsidies for 10 years in 21 years, and gradually reduce the credit value between 2032 and 2033.

In addition, the United States will pass the Inflation Reduction Act in 2022, which mentions that US$369 billion will be invested in energy security and climate change.

The long-term plans of each state clearly define the development trend of energy storage.

According to statistics, 9 states in the United States have issued long-term plans for energy storage installations, including California’s 2024 energy storage installation plan of 1.8GW, New York’s 2030 energy storage installation plan of 3GW, and New Jersey’s 2030 plan of 2GW.

If the forecast is based on the 3-hour allocation and storage time (currently roughly 2 hours, but the future allocation and storage market will continue to increase), it corresponds to 5.4GWh, 9GWh, and 6GWh respectively.

Other states also have corresponding plans at different time points, and the trend of promoting the development of the energy storage industry in the states of the United States is relatively clear.

The energy storage structure in the United States is mainly based on grid-side public storage energy.

On the whole, from 2021 to 2022H1, the large storage installed capacity in the United States will be 10.85GWh and 5.92GWh respectively;

From a structural point of view, grid-side public large-scale storage installations account for the majority, with grid-side storage energy accounting for 88% in 2021 and 85% in H1 in 2022;

In terms of quarters, the installed capacity of grid-side storage energy in 2021Q4 is 4.3GWh, which is the highest installed capacity in history. The installed capacity of Q1/Q2 in 2022 will be 2.4GWh/2.6GWh respectively.

Most public storage energy plants are used for frequency modulation services.

In 2020, in the application scenario structure of public energy storage power stations (energy storage power stations can be used in multiple scenarios), frequency regulation large storage accounted for 59%, ramping and spinning reserve accounted for 39%, spot arbitrage accounted for 37%, and peak storage accounted for 15%.
2016-2020 Application Scenarios of U.S. Public Energy Storage Power Stations

Europe

European grid-side storage energy is mainly concentrated in the UK, Italy, and Germany ranks first in top 5 home energy storage system countries. According to the data, grid-side storage energy in Europe is expected to develop steadily, increasing from 3GW/4GWh at the end of 2021 to 33GW/95GWh.

In terms of countries, the United Kingdom, Italy, and Germany are the main countries with installed capacity of grid-side energy storage. British policy mainly focuses on technology iteration, business model, market construction and innovation.

The British policy is different from the direct economic subsidy (or ITC subsidy) promotion of the United States, mainly through the following ways to promote the development of the energy storage industry:

1. Promote the iteration of storage energy battery technology. The UK government launched the Faraday Challenge in 2017, allocating £246 million to advance battery technology.

2. Construct market rules and straighten out the power system status of energy storage. In 2016, the UK clarified the asset category and planning system for storage energy, and launched “ten key plans” in 2020 to improve the regulatory mechanism for storage energy and market rules.

3. Market construction and innovation. In 2015, the British National Grid launched a new frequency regulation storage energy service market.

Before 2017, the frequency regulation energy storage was used for a short time due to the long signing time of capacity electricity price.

Therefore, in 2017, relevant institutions in the UK adjusted the auction downgrade factors for energy storage to make the energy storage market more healthy and orderly.

The UK has a mature business model and a wide range of sources of income. Generally speaking, the business models of storage energy in the UK are relatively diverse, and the market structure is relatively mature.

The overall market is divided into frequency response, backup and arbitrage:

1) Frequency response is further divided into five revenue sources: enhanced frequency response, fixed frequency response, dynamic containment, demand-side response, and rapid reserve capacity;

2) Backup energy storage is divided into five revenue sources: user backup power, short-term operating capacity, capacity auction market, reduction in transmission costs, and reduction in distribution costs;

3) Arbitrage can be divided into three types: self-use by power generators, reduction in curtailment by power generators, and price arbitrage.

It is precisely because of the perfect business model and market mechanism in the UK that the large reserves can achieve considerable development without excessive policy subsidies.

European grid-side energy storage is mainly concentrated in the UK, Italy, and Germany.

The global energy storage market space is vast

The policies of China, the United States and Europe continue to increase, the economics of storage energy is expected to continue to improve, and the development space of energy storage is vast.

According to estimates, the newly installed capacity in the world will be 122.46GWh in 2023, and 327.22GWh in 2025, with a compound growth rate of 89.5% in 21-25.

United States: New installed capacity is expected to be 38GWh in 2023, and 81.47GWh in 2025, with a CAGR of 66% in 21-25 years. 

Europe (the main incremental contribution is household energy storage systems): The new installed capacity is expected to be 27GWh in 2023, and the new installed capacity is expected to be 54.3GWh in 2025, with a compound growth rate of 89% in 21-25 years.

The calculation logic and core assumptions are as follows:
1) With the recent release of newly-added production capacity of polysilicon, the tight supply has been eased, and the supply bottleneck of the industrial chain has been opened.

I predict that the inflection point of polysilicon price will also come, and the demand for ground installation in China may start.

Looking forward to 2023, with the decline in the cost of the industrial chain, breakthroughs in new technologies, and centralized starting volumes, demand in China and Europe is expected to continue to grow rapidly, and demand in the United States will pick up, and will maintain relatively high growth in the future.

2) The United States’ large storage is the main driving force for storage energy installations. Judging from the data of H1 in 2022, the growth rate is relatively high this year, ITC and IRA policies continue to exert force, and energy storage subsidies continue to increase, and it is expected to maintain high growth in the future.

3) The main driving force in Europe comes from household storage installations. Governments in various countries in Europe are promoting natural gas reserves, and the weather in Europe is warmer, and the weak supply and demand have caused European electricity prices to drop sharply, and the economy of household storage has been affected.

However, the short-term increase in natural gas inventories has not changed the fundamental problem of energy shortage. The following is the introduction of the very popular household energy storage powerwall battery recently.

According to a report released by the International Monetary Fund, even if the remaining fuel reserves in Europe can survive this winter, they may face the risk of record prices for natural gas and electricity again in 2023.

Household storage is still economical to a certain extent, and in the context of European policies suppressing electricity demand, the importance of self-sufficiency has become more prominent.

It is expected that the installed capacity of household storage will grow rapidly in the future, and the large storages are mainly concentrated in the United Kingdom, Germany and other regions, and the new installed capacity will increase slowly every year.

The storage time is gradually increased. With the increase in the proportion of new energy installed capacity, the fluctuation of new energy power generation output will have a greater impact on the power grid, and the demand for distribution and storage time will gradually increase.

In the future, daily/quarterly adjustment resources may be needed.

At present, it is expected that by 2025, the duration of electrochemical storage in various countries will increase to varying degrees.

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