The stationary battery market may be dwarfed by demand for EV batteries, but future energy needs mean growth is baked in, experts told RBC’s inaugural Global Battery Value Chain conference.
Demand and returns spark growth
More storage will be required to balance energy volatility during the transition to renewables, said Paul Massara, CEO of Pulse Clean Energy. This need had only been accelerated by the effects on energy strategy of Russia’s invasion of Ukraine.
“We are still the poor cousin to the EV market,” Massara said. “We’re 10% of the market, they’re 90% in terms of battery demand, which means that a lot of battery plant and design is going to be constructed around that demand.”
However, EV demand would fluctuate too: “When you have a slowdown in the car market and you’ve got too many battery productions, you may well see batteries flowing into the storage market quicker.”
Tim Mortlock, CEO of energy infrastructure company SMS, said that he had seen “a flood of capital” coming into the storage space over the past two years, as investors recognized the need for future capacity and the long-term returns to be made from these assets.
Besides enabling the energy transition, batteries were also the cheapest and most effective solution for customers, said Rupert Newland, CEO of storage provider Arkenko. “It’s something we should really be championing for the business logic, as much as the positives that come from net zero.”
“When you have a slowdown in the car market, you may well see batteries flowing into the storage market quicker.”
PAUL MASSARA, CEO, PULSE CLEAN ENERGY
Equipped for volatility
Like the rest of the energy market, stationary storage has experienced a turbulent couple of years. Capital costs soared because of the commodity price increases.
However, Peter Kavanagh, CEO of Harmony Energy Income Trust, noted that lithium carbonate costs, which make up 30% of battery price, had now cooled to the same point as 18 months ago.
Volatility is, in any case, the norm for a market that exists to help balance energy supply and demand on the energy system in real time.
“There’s going to be periods of low volatility and high volatility,” Kavanagh said. “You have to be able to construct a business model, both in terms of the battery technology you use and your financing and debt provision, that allows you to manage that volatility.”
“You have to be able to construct a business model, both in terms of technology and financing, that allows you to manage volatility.”
PETER KAVANAGH, CEO, HARMONY ENERGY INCOME TRUST
Responding in real time
Digitization would be increasingly important to maximizing asset performance and revenues, said Newland. “It’s about responding when a cloud goes overhead and there’s a lag in power output of the solar farm, that a second later has disappeared. That just can’t be processed by humans.”
While much of the battery generation was highly digitized, the UK’s grid system still featured “lots of humans pressing buttons”, he said. However, he said National Grid was making big efforts to digitize.
“The more we see the overall grid digitizing, the better the opportunity for batteries,” Newland said, “but also the better opportunity for cheaper, greener and more efficient grid for households, consumers and businesses.”
“It’s about responding when a cloud goes overhead and there’s a lag in power output… that just can’t be processed by humans.”
RUPERT NEWLAND, CEO, ARENKO
Solar pairings: benefits and obstacles
Panelists foresaw exponential growth in both standalone battery systems and those co-located with solar energy plants. In planning terms, however, it was far easier to gain permission for a standalone site.
Kavanagh pointed out that it would take over 400 acres of land to build out all the solar capacity of his company’s Pillswood project, near Hull in the UK. This size of scheme would involve many planning hurdles.
However, he predicted that many providers would be adding batteries to existing solar sites, and vice versa. And with solar farms currently offering relatively low efficiency, further growth was critical.
“As a nation, in the interest of energy security and driving down energy prices, we should be looking at the most cost-efficient solutions,” Kavanagh added.
He predicted a tenfold increase in standalone storage over the next decade, and a potentially similar growth in co-location.
This would depend on restrictions to grid access, however. “Certainly for standalone grid battery projects, the grid connection is probably the biggest challenge and the biggest blocker to deployment,” said Mortlock.
“For standalone grid battery projects, the grid connection is probably the biggest challenge and the biggest blocker to deployment.”
TIM MORTLOCK, CEO, SMS
Systemic change required
While the UK system was ahead of many other markets, panelists saw opportunities to dispense with some regulatory barriers.
Mortlock noted the government’s Contracts for Difference scheme to incentivize investment with protection from volatile wholesale prices. However, he saw a lack of overall strategy.
“Have we built the capacity into the grid to accommodate renewable generation, and to accommodate storage, which is an inherent requirement of that more intermittent volatile world? No,” he said.
He and other panelists also urged the adoption of a “use it or lose it” regime, to unlock grid capacity where owners did not achieve milestones for bringing assets onstream. Training of staff to install and operate battery systems was another requirement.
“Those things do not require capital, grants or tax credits, but would actually speed up deployment significantly,” Massara said.
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