Financial services giant Morgan Stanley has anticipated that the US energy storage market will grow faster than current consensus expectations, while Deloitte has earmarked the technology for exponential growth – although not perhaps this year.
Morgan Stanley’s “Energy storage: An underappreciated disruptor” says it expects US utilities to “deploy a large amount of storage in the next two to five years”, driven forward primarily by the need to accommodate ever-growing amounts of wind and solar on power networks. It projects growth in the industry from less than US$300 million per year now to a value of US$2- US$4 billion per year by 2020.
Looking at some of the key players in the space, the investment company also identified LG Chem and Tesla as likely dominators of the supply chain, with the scale and manufacturing efficiency to outpace rivals. It expects LG Chem’s production output for energy storage system batteries to reach 11GWh by 2020, while Tesla’s well-documented Gigafactory should be churning out 35GWh of cells and 50GWh of battery packs by 2018, albeit to also serve its electric vehicle range. Nonetheless it rated stock price upside on both of these players as “modest”.
The report’s base case scenario sees the US addressable market for energy storage as around 85GWh, worth US$30 billion. This addressable market could vary greatly in size based on ongoing regulatory wrangling, primarily whether the Federal Energy Regulatory Committee (FERC) will allow utilities to deploy storage in deregulated markets as competitive generator assets.
This could mean a boost of as much as 60GWh over the base case scenario if allowed. The outcome of this dynamic is partly dependent on President Trump’s new appointees to FERC and the answer is likely to be found by late in this year or early next. However, the report’s authors, led by analyst Stephen Byrd, said they did not believe FERC would decide to allow utilities to deploy storage in those deregulated power markets due to the commission’s recent record on the matter.
The report claims utilities will be the majority customers of energy storage systems, rather than individuals or businesses, because the range of benefits offered to utilities is much greater, allowing greater utilisation of grid infrastructure, for example, and also because utilities can factor investment of storage into their business planning.
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