There won’t be a global energy transition without robust battery storage

There is no shortage of market chatter on how renewables projects are helping humanity lower its carbon footprint. Governments, investors, and project developers are all responding in kind to what is often projected as at least a trillion dollar a year opportunity.

Firm empirical and anecdotal evidence points to this. For instance, BloombergNEF data suggests total global investments to install renewable energy, buy electric vehicles, build hydrogen production systems and deploy other clean technologies rose 17% to $1.8 trillion in 2023.

Additionally, $900 billion in renewables financing from multilateral development banks and private financial institutions was also secured last year. Calls for more grow with each passing day as the energy mix diversifies to include a steadily rising number of wind and solar farms. This makes it an appropriate time to focus minds and wallets on improving a key cog in the renewable energy supply chain – battery storage.

BESS is the best

Grid-connected battery farms back up renewables when the wind may not be blowing, and the sun may not be shining. Under the colourfully assigned acronym of BESS or “Battery Energy Storage System”, they help secure electrical energy from renewable and non-renewable sources by collecting and saving it in rechargeable batteries for use later.

When needed, power is released from the BESS to lessen any disparity between generation and demand. Such systems may include lead-acid batteries, lithium-ion, flow, high-temperature and zinc batteries, alongside ancillary infrastructure.

Their need cannot be understated if the energy transition is to be taken seriously, especially in the case of mammoth economies of China and India. Both countries have minimal natural gas power generation capacity – a more flexible power source than the coal plants they have in abundance – as back up for a grid supply shift to renewables. Naturally, both are pumping billions into BESS.

“Part of our development work in emerging markets involves a grid assessment study where we advise and support partners and clients to understand what challenges they face in terms of renewable energy grid intermittency and storage. We also delve into what they have to do, not only for that specific project but to open the door for many other renewables projects.”
- Abdulaziz Alobaidli, Chief Operating Officer of Masdar

In 2023, India offered incentives worth nearly $500 million, and attracted $20 billion in venture capital and corporate funding. China has invested several multiples of that.

It is currently projected to have 30.1GW of primarily lithium-ion battery storage in 2024, according to a recent China Energy Storage Alliance (CNESA) white paper. However, that is a decline from 34.5GW of new installed in capacity in 2023. Overall, CNESA puts China’s growth at around 19% year-over-year versus a rate of 35% globally.

Where and watt else?

From a global emissions perspective, what Beijing and Delhi do about storage matters. But it is also encouraging to see that several countries are taking the matter seriously.

According to the International Energy Agency (IEA), 42GW of battery storage capacity was deployed globally across utility-scale, behind-the-meter, off-grid and solar home stationary energy storage installations in 2023.

“Battery storage was the most invested in of all commercially available energy sector technologies in 2023,” it adds. The market’s direction will come under scrutiny at the upcoming Global Energy Transition Congress and Exhibition due to be held in Milan, Italy from July 1-3, 2024.

Much of the growth is currently coming from the US which is expected to almost double capacity in 2024 to more than 30GW. The UK is the BESS market leader in Europe, with the highest installed capacity and growth prospects, according to Aurora Energy Research. The country’s battery storage capacity is projected to expand to 24GW by 2030.

Where’s the Global South?

There have also been palpable BESS moves within OECD countries, especially Australia, Italy, Ireland and Spain. But developers are united in their belief that the Global South needs to be brought onboard in terms of recognising the value of building renewables infrastructure in tandem with electricity storage.

Such conversations regularly feature in global industry discourse, says Abdulaziz Alobaidli, Chief Operating Officer of Masdar, Abu Dhabi’s flagship renewable energy project developer and investor. “Part of our development work in emerging markets involves a grid assessment study where we advise and support partners and clients to understand what challenges they face in terms of renewable energy grid intermittency and storage. We also delve into what they have to do, not only for that specific project but to open the door for many other renewables projects," Alobaidli told Energy Connects.

In the absence of a secured financial model, global developers are advocating for more public private partnerships as plausible pathways for the acceleration of battery storage capacity.

However, the inescapable reality is that the bulk of capital flows remain concentrated in China and a handful of developed markets. This is down to the high cost of capital for clean energy projects in emerging economies.

Stark reality is that the global community is still only scratching the surface. Total utility-scale batteries, behind-the-meter batteries, pumped hydro and other installed storage capacity stands at under 300GW globally.

It needs to be at least five to six times that level if COP28 ambitions of securely tripling the world’s renewable energy capacity by 2030 are to be realized.

Changing this would require a range of public and private partners coupled with blended and outcome-based financing on softer terms until scalability is achieved. Without these, the storage industry is unlikely to take-off meaningfully, and without it there will be no holistic energy transition.

• Gaurav Sharma is a London-based energy market analyst, commentator and a former global investment banking analyst. He is a regular contributor to global academic forums, energy industry events and OPEC conference streams.