Key Highlights
- With growing commitment to the Paris Agreement goals globally, battery energy storage systems (BESS) have become a key player in worldwide energy decarbonisation efforts, given their vast potential to address the intermittency of renewable energy supply.
- These systems are showcasing unprecedented expansion, with McKinsey predicting a market expansion of up to $120 billion to $150 billion by 2030.
- Front-of-the-metre (FTM) utility-scale systems are projected to dominate the BESS market. On the other hand, behind-the-metre (BTM) installations grapple with cost-related challenges, safety concerns, and extended payback periods in both the C&I and residential subsegments.
- Experts suggest exploring diverse, financially viable business models to attract potential investors. For residential applications, they discuss how innovators need to focus on user-centric solutions to cater to homeowners.
- Beyond lithium-ion, emerging technologies like sodium-ion batteries, with enhanced safety and sustainability, contribute to the evolution of BESS.
As global efforts towards renewable and zero-carbon energy intensify, the significance of battery energy storage systems (BESS) is soaring to new heights. McKinsey reported that in 2022 alone, investments in BESS surpassed $5 billion, marking a threefold increase from the previous year. Their projections suggest that the global BESS market could reach an impressive $120 billion to $150 billion by 2030, more than doubling its current size.
With the next phase of the Paris Agreement goals on the horizon and increasing legislative backing worldwide, the BESS market is experiencing unprecedented growth, earning it a spot as one of the pivotal players in the world’s energy transition.
Defining BESS: What’s So Special About It?
BESS play a crucial role in the energy sector by providing a means to store electrical energy generated from renewable sources. These systems allow for the storage of excess energy generated during periods of high renewable energy production, such as peak solar hours or stronger wind gusts. Given the intermittent nature of renewables, the stored energy can be utilised during times of high energy demand or when renewable generation is low, ensuring a reliable and consistent power supply.
These energy systems also offer high flexibility and a swift response to demand fluctuations, contributing to lower energy costs and optimised grid efficiency.
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Opportunities and Strategies in the BESS Landscape
To capitalise on the flourishing BESS market, McKinsey discusses how industry players must strategically navigate its diverse landscape. Segmenting the market based on applications and user sizes reveals three primary categories: front-of-the-metre (FTM) utility-scale installations, behind-the-metre (BTM) commercial and industrial installations, and BTM residential installations.
- Front-of-the-Metre (FTM) - Typically larger than 10 MWh, FTMs are utility-scale projects deployed at the grid level. They are often integrated into the electricity grid infrastructure and are used for applications such as grid stability services, centralised power generation, and managing the demand and load balancing of energy sources.
Forecasted for a compound annual growth rate (CAGR) of 29.1%, these utility-scale BESS installations are expected to dominate the market, accounting for up to 90 percent by 2030.
- Behind-the-Metre (BTM) Commercial and Industrial (C&I) - BTM C&I installations are deployed on-site at commercial and industrial facilities, sized at around 30 kWh to 10 MWh.
With a forecasted 13% CAGR, the C&I segment presents diverse opportunities for professionals and decision-makers in the energy industry. The potential applications of BTM C&I are expansive, ranging from electric vehicle charging infrastructure to critical infrastructure, public infrastructure, and harsh environments.
But despite the clear advantages, widespread C&I adoption is still faced with obstacles, primarily associated with high capital costs and long payback periods. The difficulty in estimating potential savings and the uncertainties in financial models can be unappealing to potential investors.
In one of their publications, the National Renewable Energy Laboratory explored various business models to facilitate the deployment of BTM systems, emphasising that such models can help address existing technical, regulatory, and financial barriers to BTM implementation and ultimately transform BTM systems into a more viable and attractive option for stakeholders in the energy sector.
- Behind-the-Meter (BTM) Residential - Representing the smallest BESS segment, residential installations offer unique opportunities for innovation. Users of such installations are typically individual homeowners and residential communities, catering to applications such as traditional home storage, solar panels, integration into smart homes, or home EV charging systems. According to the International Renewable Energy Agency (IRENA), factors such as price, safety, and ease of installation are critical considerations for residential consumers. With this, innovators can prioritise user-centric solutions, focusing on intuitive interfaces, enhanced safety features, and personalised energy management. Software development is a critical area that can transform BESS from hardware-focused to software-driven solutions, enhancing flexibility and unlocking new market segments. By leveraging these opportunities, developers and companies can contribute to the broader adoption of BTM residential energy storage systems, making them more accessible and aligned with the evolving needs of homeowners.
Current Advancements: Beyond Lithium-ion Batteries
Lithium-ion batteries dominate the current market, but sodium-ion batteries are emerging as a cost-effective and safer alternative. With a potential 20% cost advantage over lithium iron phosphate, sodium-ion batteries offer improved safety and sustainability, making them a viable choice in the long run. Sodium-ion technology also offers enhanced safety features, reducing the risks associated with thermal runaway—a concern in some lithium-ion chemistries.
While sodium-ion battery applications are still emerging, companies like Faradion are actively involved in advancing this technology. Founded in 2011, Faradion was the world’s first non-aqueous sodium-ion battery company, promoting the commercialisation of sodium-ion batteries for various applications, including grid-scale energy storage, and leveraging the cost advantages and safety features of sodium-ion technology.
Conclusion
Battery energy storage systems stand as indispensable catalysts in the ongoing global energy transition. Their pivotal role in mitigating the challenges of renewable energy intermittency and unlocking household-level flexibility positions them as valuable tools for decarbonising the power sector. With substantial investments and market projections, BESS presents diverse opportunities, ranging from utility-scale installations to innovative residential solutions.
From front-of-the-metre to behind-the-metre applications, these systems offer transformative potential, making it imperative for energy sector professionals and companies to come up with strategies to effectively navigate its ever-evolving landscape. Innovations and business models that focus on flexibility, cost-effectiveness, and accessibility will play a key role in shaping the future of BESS as we propel towards a cleaner, more sustainable energy paradigm.