Wall Street analysts are once again cautioning the market not to underestimate distributed energy technologies. Over the years, Goldman Sachs, UBS and Morgan Stanley have all warned investors about the disruptive potential of wind, solar, batteries and electric vehicles on energy markets.
This week, Morgan Stanley says the growth of battery storage is “underappreciated” by many in the electricity business.
According to a new report from the firm, the U.S. addressable market for energy storage totals $30 billion without significant regulatory change. If the Federal Energy Regulatory Commission clears the way for storage deployments in deregulated markets, though, the storage market could become 70 percent larger.
That’s bad news for companies with lots of natural-gas generation in markets favorable to storage, but good news for Tesla and LG Chem, which the analysts predict will control the industry.
Equity analyst Stephen Byrd and his co-authors calculate the actual annual demand for storage will rise from less than $300 million currently to $2 billion to $4 billion by 2020. For comparison, GTM Research pegs the U.S. storage market at $408 million for 2016, growing to $2.1 billion in 2020. That puts the Wall Street titan on roughly the same page as the clean energy research specialists when it comes to the growth of energy storage.
That’s worth taking a moment to absorb.
One of the key obstacles storage vendors have encountered is a lack of access to capital for investment and project financing. Most banks have been leery of putting their balance sheet behind newly developed chemistries from companies that have only existed for a decade or less. With firms like Morgan Stanley offering stock assessments based on an expanded market for energy storage, new sources of capital could soon be opening up for battery makers.
The question, then, is which ones.
The authors think the market “will be dominated by two suppliers, Tesla and LG Chem,” due to their prominent roles currently and their immense production capacity coming on-line in the next few years. The base case has Tesla reaching 30 percent U.S. market share, and the bullish case puts it at 50 percent.
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