The world is electrifying at a rapid pace and the mining industry seems to be becoming a quiet but key player in the electrification process. Tesla’s TSLA +4.5% recent ‘Battery Day’ announcements only highlight the incredible challenges facing the electricity storage market, and raise significant questions about how the market will evolve.

We know that demand for energy storage is surging to meet increasing demand for renewable energy and electrified transport. According to Maria Xylia at Sweco Sweden, only 3% of global capacity can be currently stored and energy demand itself is expected to increase over 50% to 2050. Storage is a fundamental necessity for the integration of renewables into a smoothly running and efficient energy system, and it needs to be cost-effective, high performance and safe.

As Dr. Young-hye Na, Manager, Materials Innovations for Next-Gen Batteries, IBM Research says, “Enabling better battery energy storage will be key to a successful energy transition to renewables and net-zero carbon emissions. While lithium-ion batteries have advanced significantly by cutting cost and improving energy density for the last decade, it is still too expensive to be widely adopted for EV and renewable applications, and heavy metals that are needed to make these batteries – ex. cobalt and nickel – have brought environmental concerns associated with their invasive and energy intensive mining.”

Tesla’s ‘Battery Day’ left experts somewhat puzzled. There had been high expectations of breakthrough announcements but the company laid out future plans for building its own batteries and its own supply chain, and for massively ramping up production to 2030. The company announced a new cell design which could cut battery costs in half but it’s yet ready. It can take up to ten years for a battery to move from the lab to commercial production. For an audience expecting significant change, it could be considered a disappointment – given the resulting drop in Tesla’s share price at nearly 10%, it certainly appeared the market thought so.

Energy storage is a tricky issue.

It is fundamental to management of the grid as the proportion of “variable” renewable energy increases.

Its economics are sensitive to the gap between high and low prices, its “round trip” efficiency, and its capacity to capture income from value adding services that stabilise the grid during transient events.

But more investment in storage means less revenue for each storage operator. Developers of large pumped hydro schemes and advocates for renewable hydrogen recognise that it will be difficult to compete with batteries, smaller pumped hydro and demand response to capture value from short-duration peaks and troughs in demand.

Accordingly, they are focusing increasingly on supporting seasonal variation as their core role. Hydro operators and hydrogen producers want to capture excess low-priced seasonal renewable electricity, then generate during supply shortages when prices are higher.

In light of all this, the above graph from the AEMO’s recently published Integrated System Plan is significant. It maps out how a seasonal storage plant might operate.

However, it also highlights—again—that Australian energy policy makers and investors lack focus on the demand side of the energy equation.

It is mainly demand side factors that drive the need for autumn top-up, along with heavy drawdown in winter due to limited solar generation, and the need for storage to build up during the summer.

We must therefore ask what activities are contributing to high demand. What potential is there for energy efficiency to reduce the seasonal variation in demand, not just the short-term peaks?

AEMO’s graph highlights a number of possibilities. The major factors underlying seasonal variation are poorly performing buildings, and inefficient heating and cooling equipment.

These include thermally disastrous buildings (both residential and commercial), widespread use of resistive electric heating and inefficient air conditioners, inefficient lighting, open shop doors, heat loss from poorly insulated hot water tanks and pipes, unnecessary use of pool filter pumps, inefficient industrial processes and so on.

Addressing these would reduce seasonal variation, along with the need for the seasonal storage and seasonal hydrogen-sourced generation shown in AEMO’s graph.

Global energy storage capacity is now expected to grow at a compound annual growth rate (CAGR) of 31 percent through 2030, according to Wood Mackenzie’s new global storage outlook.

The market will hit 741 gigawatt-hours of cumulative capacity by 2030.

Front-of-the-meter storage will continue to dominate annual deployments and will account for up to 70 percent of annual total capacity additions to the end of the decade.

Coronavirus and the global storage market
A 17 percent decrease in deployments is expected in 2020, a decline of 2 gigawatt-hours from our pre-pandemic outlook. The global storage market will see wavering growth in the early 2020s, but growth will likely accelerate in the late 2020s, enabling increased renewables penetration and facilitating the power market transition.

Energy storage is still a nascent market globally, but WoodMac observes that stakeholders — whether end consumers or big equity investors — are interested in continuing to invest in the sector and do not appear to be hindered by the pandemic and economic recession impacts.

If anything, the report notes, the transition may be accelerated as governments around the world grapple with how to recover their economies more sustainably than in the past, with upside for the energy storage industry.

U.S. home to half of all global storage capacity in 2030
The U.S. maintains its leading position and will make up over 49 percent (365 gigawatt-hours) of global cumulative capacity by 2030.

Utility resource planning in the U.S. is set to drive deployments over the coming decade. In the past two years, utility approaches to renewables and particularly storage have shifted seismically, as detailed in WoodMac’s latest Energy Storage Monitor report.

Managing demand on the power grid, at best a never-ending balancing act between generation and load, has become an increasingly complex and challenging responsibility. Along with the urgent need to reduce carbon-based energy generation, consumer demand for energy is continuously growing and shifting. As the energy landscape evolves, power providers across the country, from utilities to retail energy providers, are facing a combination of factors that present significant challenges.

New distributed energy resources, or DERs, are being developed and integrated at an ever-increasing pace, with electric vehicles and renewable generation assets (and their variability) being brought online faster than previously predicted. Indeed, solar photovoltaic and onshore wind are now the cheapest sources of new-build generation for at least two-thirds of the global population, according to Bloomberg New Energy Finance (BNEF).

Despite the impacts on new project deployments and the renewables supply chain due to the COVID-19 pandemic, renewable capacity additions this year are set to total 167 GW globally, according to the International Energy Agency’s Renewable Energy Market Update report. Overall global renewable power capacity is expanding and will grow by 6% in 2020.

1. Commercial and industrial (C&I) refrigerated facilities that serve food businesses have the highest power demand per square foot of any industrial load. These C&I refrigeration sites also consume more electricity from the grid than any usage category, other than lighting. Courtesy: Viking Cold Solutions

All these factors make it more challenging for utilities to meet and manage demand when and where it is needed. This is particularly true when considering food businesses with commercial and industrial (C&I) refrigerated facilities (Figure 1), which have the highest demand per square foot of any industrial load. C&I refrigeration sites also consume more energy from the grid than any other usage category other than lighting. Significantly, energy often accounts for up to 70% of the total electric bill for C&I cold storage companies.

This food supply sector, also referred to as the “cold chain,” is designated as critical infrastructure and is of vital importance—particularly during the type of public health emergency the world has faced over the past several months, and will continue to face until the pandemic is under control.