Short- and long-duration energy storage essential to the clean energy transition

The adoption of renewable energy is accelerating globally, particularly wind and solar power, as governments and corporations work towards meeting climate change-related emissions reduction targets and boosting energy security. The International Energy Agency (IEA) forecasts renewables capacity growth will be 50% higher from 2021–2026 than 2015–2020. In our view, the widespread adoption of energy storage systems is key to reaching the high levels of renewable energy generation required to reduce emissions within the power sector.

In this report, we explore how the global proliferation of renewable energy will drive rapid growth in energy storage over the coming years, with both short- and long-duration energy storage systems essential to the green energy transition.

Key takeaways:

• Energy storage capacity and generation are set to grow rapidly over the coming years, driven by the global proliferation of renewable energy, grid supply challenges, government support, and lower technology prices.
• We expect the rapid adoption of short-duration battery energy storage systems to create investment opportunities across the renewables and battery value chains, including renewables developers, storage system manufactures, and miners of critical minerals.
• Growing government support for long-duration energy storage systems could support power grids while accelerating wind, solar, and hydrogen power development significantly. To reach net-zero power sector targets, the growth of these systems could represent a $1.5–3.0 trillion investment opportunity.

A successful clean energy transition requires energy storage solutions

Technological advancements, including wind turbines and solar modules, make wind and solar power increasingly cost-competitive with traditional power sources while boosting overall performance and efficiencies. Critically, energy storage system technologies are also improving and becoming more cost-competitive due to falling battery costs and increased government support in many countries, including the U.S. and China. Global energy storage is forecast to explode from 17GW/34 gigawatt hour (GWh) in 2020 to 358GW/1,028GWh in 2030, according to BloombergNEF. The U.S. and China appear set to be the largest energy storage markets, with India, Australia, Germany, Japan, and the U.K. also expected to see strong growth.

In our view, the widespread adoption of energy storage systems is essential for renewable energy to comprise high shares of the global power system, and the growing deployment of energy storage has the potential to accelerate wind and solar power growth. As intermittent power sources, wind and solar energy production often does not align with peak energy demand. The variability creates challenges for governments facing growing grid supply challenges, particularly amid increasing risks of extreme weather events that disrupt electricity production. In the U.S., the power crisis in Texas due to extreme cold temperatures in February 2021 and the risk of blackouts in California due to the prevalence of wildfires are two examples that highlight the importance of adopting grid-stabilizing technologies. Renewable energy paired with energy storage systems offers a potential solution.

Growth in Battery Energy Storage Encompasses the Renewables and Battery Supply Chains

Renewables developers could find additional wind and solar development opportunities as energy storage scales, with energy storage being a potential solution for insufficient and congested transmission and distribution infrastrcture. Notably, energy storage systems offer several offer potential benefits including enhancing grid reliability, deferring transmission upgrades, and relieving transmission congestion. A lack of transmission or congested lines are a primary barrier to widespread renewables development in many countries, including the U.S. and Chile.

Development of LDES Systems Has Newfound Momentum

Long-duration energy storage systems offer stable energy output ranging from 10 hours to days, weeks, and even seasons, providing enhanced grid reliability compared to short-duration energy storage systems. LDES systems have been around for decades, most notably in the form of pumped storage hydropower systems. However, cost, permitting, and technological barriers, in addition to a lack of regulatory support, prevented LDES systems from widescale adoption.

Similar to hydrogen-based storage, most other LDES technologies are also in the early stages of adoption. The types of LDES systems that we expect to take off at a commercial scale include compressed air energy storage, liquid air energy storage, non-lithium-ion batteries, and hydrogen-based energy storage systems. The adoption of these technologies is expected to vary due to location suitability and cost constraints.

Conclusion: Energy Storage Plus Renewables Creates Opportunities

Renewable energy sources, primarily wind and solar power, are set to account for the majority of growth within the power sector over the coming years. But to take full advantage of this growth requires reliable energy storage systems that can bolster energy grids already under pressure from increasing variability and climate change. We expect investment opportunities to materialize across the renewables and battery energy storage value chains, including miners of critical minerals, manufacturers of BESS technologies, and renewables developers. Longer-term, we expect the potential that long-duration energy storage systems hold to finally gain traction, accelerating opportunities in the renewables, energy storage, and hydrogen spaces.