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Is it worth investing in large-scale battery storage?

Updated: Feb 27

As the world moves towards a more sustainable energy system, the role of energy storage is becoming increasingly important. A recent Bloomberg NEF report provides insight into the current state and an outlook for the global energy storage market.

Global cumulative energy storage instalations 2015-2030
Global cumulative energy storage instalations 2015-2030 source: Bloomberg NEF.

Rapid growth expected

The report forecasts that energy storage expansion will grow by thirteen times the current levels by 2030. Bloomberg NEF report forecasts its global energy storage expansion capacity to be 411GW or 1194GWh by the end of 2030. Pumped hydro storage is not even included in this forecast.

At the end of 2021, the total is still modest at 27GW/56GWh.

Western green policy development as a growth engine

The growth forecast has changed significantly compared to the NEF Bloomberg Report 2021.

In the new NEF Bloomberg Report, the USA and Europe alone account for almost half of the energy storage expansion until 2030. In addition, China, which has been investing heavily in energy storage for some time, accounts for a quarter of the capacity. The growth in these western states is driven by new policy developments in key markets, such as the Inflation Reduction Act in the USA and the REPowerEU plan in Europe. As a result of the Ukraine war, the EU has decided with the REPowerEU plan to increase energy independence and supports investment in a more flexible European power grid. In addition to co-located storage, the EU agreed in December 2022 to promote standalone storage. This fact has not even been priced into the new report yet. The political grants have greatly improved the potential for flexibility systems, including energy storage. In addition, several EU countries have introduced laws to promote energy storage investments instead of hindering them in 2022.

Smart investment lies in multiple markets

Despite the good news from policy reforms, energy storage is currently facing challenges due to high costs and value chain disruptions. The NEF Bloomberg report notes that pricing pressure is slowly easing over the next few years, and companies are meeting demand and expanding capacity, leading to lower prices. So, there are favourable scaling effects for energy storage investors, but the storage expansion also comes with the end of a single-market strategy, as many energy market experts predict. That applies especially to the frequency capacity reserve market (FCR), currently still the only source of revenue for many energy storage facilities. Due to the limited market size, there will be a sustained reduction in the market price for ancillary services. This effect will be accelerated by the merit-order-price mechanism. So for new investors, it will not be this easy to generate an IRR that first movers can expect due to the current high prices.

However, modern AI-optimising software like sunaAS offers the opportunity to serve different markets. Due to the expansion of volatile renewable energies, trading on the spot markets is becoming increasingly attractive. Optimising software like suenAS can forecast large price spreads and trade autonomously to ensure that each energy storage plant becomes a profitable operation.

Next decade belongs to (Co-Located)-Battery storage

According to the NEF Bloomberg report, battery storage will remain the most competitive energy storage technology until 2030. With the help of AI autopilot systems such as suenAS, the optimisation of energy storage will become even more efficient and enable automated, optimal use of energy storage for different applications and in different electricity markets.

Besides, the trend is in the direction of co-location. According to the NEF Bloomberg Report, 61% of the storage systems in 2030 will be co-located storage at renewable energy plants. Co-Located storage at solar parks is particularly suitable for energy shifting, a key component of the energy transition.

To sum up...

Investing in a flexible green power grid infrastructure is essential for a sustainable energy system. Policymakers have realised that energy storage systems play a critical role in mitigating the volatility of renewable energy sources like PV and wind power. With the upcoming intelligent AI optimisation software, this is the moment to invest in energy storage.

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