What is the outlook for energy storage?

Strong demand for lithium-ion batteries

The energy storage market has seen explosive growth in recent years, and a fair portion of that growth can be attributed to strong demand for lithium-ion (Li-ion) batteries. Compared to other battery technologies, Li-ion batteries offer many advantages, like high energy density, portability, and long life, which have contributed to their use in everything from cell phones to electric vehicles (EVs). For these reasons, strong demand for Li-ion batteries is expected to continue to drive growth in the energy storage sector.

But this growth trend is complicated by a couple of things: first, lithium is incredibly scarce, with deposits scattered in only a few remote locations throughout the world. Second, extraction and processing of lithium takes a lot of lead time, and it requires lots of water, often in water-stressed regions. So even though demand for lithium batteries is expected to continue to rise in the coming years, there are some significant challenges that may very well throttle the growth potential for lithium batteries. In anticipation of future lithium shortages, some analysts are recommending that battery manufacturers and the miners that supply them take steps now to aggressively adopt sustainability measures to make more efficient use of limited resources, like water and lithium.

Alternative battery technologies are gaining ground

Today, lithium-ion batteries are the obvious pick for a lightweight, long-lived energy storage option. But given the scarcity of lithium, there is a lot of incentive to identify alternative battery technologies that rival the performance of Li-ion batteries, while using more readily available materials. Recently, there have been some breakthroughs on this front, with some emerging technologies showing promise in their ability to compete with Li-ion batteries.

Sodium-ion (Na-ion) batteries, for example, offer fast-charging and improved safety over lithium-ion batteries, and are manufactured from one of the most abundant chemicals on Earth, making them more cost-effective as well. The downside of Na-ion batteries is that they offer less energy density than Li-ion batteries, so their greater bulk and weight has mostly limited their use to stationary applications, like home or grid energy storage. But that’s starting to change, as recent developments are improving the energy density of Na-ion batteries and making them viable for a wider array of energy storage applications—including electric vehicles.

Another technology that is gaining ground is the flow battery. Like Na-ion batteries, flow batteries have been around for some time, but they are often passed over in favor of Li-ion batteries. Recently, however, sharp increases in costs for lithium have been driving greater adoption of flow batteries, particularly for large-scale renewable energy storage applications, where they offer some distinct performance advantages over lithium, including longer performance life, better safety, and unlimited energy storage capacity.

Solid-state batteries are yet another energy storage technology to watch. Today, they are seeing a lot of investment in research and development due to their promise in providing even greater energy density than Li-ion batteries, and improved safety. Solid-state batteries are well on their way to becoming a game-changer for electric vehicles, but the technology is still quite young, so it will likely be at least a few years until they see broad commercial use.

Increasing emphasis on water management

It’s all but certain that demand for energy storage systems will continue to accelerate in the coming years. As issues of water scarcity persist, however, those in the energy storage industry and the closely related mining industry will need to contend with challenges such as more restrictions on water use and discharge and increases in cost for water.

Take, for example, the production and use of ultra-pure water (UPW) in battery manufacturing. Batteries and their components require precise chemical formulations to ensure proper conductivity. For this reason, a battery manufacturer will likely need to use a combination of water treatment technologies to attain the high level of purity needed to make the electrolyte solution contained in the finished battery. This will likely entail multiple treatment steps, including:

• Pretreatment: Source water is first treated for removal of total suspended solids (TSS) and organic contaminants. This step is done in preparation for additional downstream purification, as appropriate to the application at hand, and can be achieved through various methods, including media filtration, membrane filtration, and/or chemical treatment. Water treated to this basic level of quality may be routed for use as cooling water, or it may be treated further for use as process water.
• Demineralization: The stream then undergoes additional treatment for removal of total dissolved solids (TDS), typically using ion exchange (IX) or reverse osmosis (RO).
• Polishing: Finally, a process such as electrodeionization (EDI) is used to remove residual contaminants from the stream, resulting in UPW that is ready for direct use in battery production.

At each step of the treatment process, water is lost as a reject or a wastewater stream. That is, unless the facility employs a closed loop approach. By employing wastewater treatment or zero liquid discharge (ZLD) system, the facility can essentially recirculate reject water and waste streams to make the most of every drop of water that they draw in. These types of systems also provide added benefits, like facilitating recovery of materials from reject streams, including valuable resources like lithium. 

Taking steps to recycle and reuse water and other materials will be critical to keep up with increasing demand for energy storage systems, not just for battery manufacturers and other ESS manufacturers, but for lithium mining operations as well. In short, for many analysts, embracing a more circular resource economy through ZLD systems, battery recycling, and other sustainability measures will help the energy storage market live up to its full growth potential in the coming decades.

By Helen Kou, Energy Storage, BloombergNEF

Three years into the decade of energy storage, deployments are on track to hit 42GW/99GWh, up 34% in gigawatt hours from our previous forecast. China is solidifying its position as the largest energy storage market in the world for the rest of the decade. Government investments and policies are starting to bear fruit as project pipelines grow larger due to new capacity auctions and utility proposals. Yet, there are still uncertainties within the market. The case for long-duration energy storage remains unclear despite a flurry of new project announcements across the US and China.

• Global energy storage’s record additions in 2023 will be followed by a 27% compound annual growth rate to 2030, with annual additions reaching 110GW/372GWh, or 2.6 times expected 2023 gigawatt installations.
• Targets and subsidies are translating into project development and power market reforms that favor energy storage. Our increase in deployments is driven by a wave of new projects prompted by energy shifting needs. Markets are increasingly seeking energy storage for capacity services (including through capacity markets). Japan, Poland, the UK, Chile, the US Southwest, New York and Australia are new markets opening up these opportunities.
• On the technology front, lithium-ion batteries using nickel manganese cobalt (NMC) chemistries are losing market share due to their relatively higher cost when compared to lithium iron phosphate (LFP) batteries. Beyond lithium-ion batteries, alternative technologies focused primarily on long-duration energy storage (LDES) needs remain limited, with 1.4GW/8.2GWh of commissioned capacity worldwide. The Asia Pacific (APAC) region has accounted for 85% of new installations since 2020.
• Asia Pacific (APAC) maintains its lead in build on a gigawatt basis, representing almost half (47%) of the additions in 2030. China leads largely due to top-down compulsory requirements to pair storage with utility-scale wind and solar. Other markets have also set new policies to promote storage. South Korea will hold an auction for storage to reduce renewable curtailment and published a new policy to revive its commercial storage sector. Australia and Japan are both executing new capacity auctions for clean firm capacity which benefit energy storage installation by providing long-term capacity payments. India’s new ancillary service product may provide opportunities for stationary storage in wholesale markets. We increased our cumulative deployment for APAC by 42% in gigawatt terms to 39GW/105GWh in 2030, largely due to China’s forecast outlook and methodology updates.
• Europe, Middle East and Africa (EMEA) represents 24% of annual energy storage deployments on a gigawatt basis by 2030. The region added 4.5GW/7.1GWh in 2022, with residential battery installations in Germany and Italy outpacing our previous expectations. Residential batteries are now the largest source of storage demand in the region and will remain so until 2025. Separately, over €1 billion ($1.1 billion) of subsidies have been allocated to storage projects in 2023, supporting a fresh pipeline of projects in Greece, Romania, Spain, Croatia, Finland and Lithuania. EMEA is expected to reach 114GW/285GWh cumulatively by the end of 2030, a 10-fold growth in gigawatt terms, with the UK, Germany, Italy, Greece, and Turkey leading additions.
• Americas lags behind the other regions, representing 18% of gigawatts deployed in 2030. The geographical spread and broadening scope in activity across the US indicates it has become a mainstream resource for various US utilities’ decarbonization strategy. Projects delayed due to higher-than-expected storage costs are finally coming online in California and the Southwest. Market reforms in Chile’s capacity market could pave the way for larger energy storage additions in Latin America’s nascent energy storage market.
• We added 9% of energy storage capacity (in GW terms) by 2030 globally as a buffer. The buffer addresses uncertainties, such as markets where we lack visibility and where more ambitious policies may develop that we haven’t predicted. We revised our buffer calculation methodology in this market outlook. In this iteration, we based the buffer on battery shipment analysis, where we identified gaps in historical and near-term battery demand and applied that forward. Based on our analysis, we added a buffer of 485MW/1.9 GWh in 2022 and 1.9GW/5.1GWh in 2023. We added a 10% buffer each year from 2024 to 2030. Historically, our buffer was based on previous outlook forecast accuracy.
• (Chart above corrected to present latest data on October 4, 2023.)

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