The global annual energy storage market is at risk of contracting in 2019, following a bumper year of growth in 2018, according to new research by Wood Mackenzie.
The report – ‘Global energy storage outlook, Q3 2019’ – said the global market has slowed down in key regions that saw 2018’s boom, namely South Korea and China.
These countries have been plagued with fire incidences, as well as policy and regulatory changes, Wood Mackenzie said.
The US and European markets are also struggling to get capacity on the ground in 2019, with capacity being pushed to 2020, 2021 and, in some cases, even further out, it said.
However, beyond 2019, the global storage outlook is on the up.
Wood Mackenzie expects 4GW of energy storage to be deployed globally in 2019, with these numbers increasing to 15GW in 2024.
Wood Mackenzie senior analyst Rory McCarthy said: “The energy storage industry in the Asia-Pacific region is still at an early stage of development.
“China’s storage market slowed in the first three quarters of 2019, primarily due to policy change.
“South Korea’s storage market continues to stagnate due to continuous fire incidents. However, Australia’s storage market is on track to hit targets in 2019 and is expected to grow three-fold in 2020.
“The rest of the Asia-Pacific market is beginning to pick up.
“In the US market, hidden beyond the overall surge in forecasted five-year deployments is an industry hitting growing pains, as the reality of supply chain constraints, regulatory hurdles and performance and safety concerns are set to push back some 2019 and 2020 projects.
“The market is expected to bounce back quickly from this near-term slowdown by accelerating in 2021, driven by large-scale utility procurements targeting GWs of storage – often paired with renewables – over the next three to five years.
“We are at a crossroads in the UK and Germany. Frequency markets have saturated. Now players are looking for other opportunities.
“In the UK market, intraday and balancing offer an interesting proposition. In Germany, there are interesting opportunities behind the meter, such as peak shaving and self consumption.
“Germany continues to lead the residential storage market, while Italy is seeing continued growth – partly due to regional subsidies and a favourable tax regime.”
In the first six months of 2019, over $350m was invested in advanced lithium-ion technologies, Wood Mackenzie said.
The report said the first half figures indicate that 2019 will be a record year with total investment expected to surpass the $600m invested in 2018.
Wood Mackenzie analyst Mitalee Gupta said: “Since 2018 the market has seen significant investments in advanced lithium-ion technologies from automotive giants and oil companies alike.
“Investments have focused on developing batteries that are cobalt-free and use alternate electrode materials or solid-state electrolytes.
“While not all these technologies will become successful, several of them will make their way into the electric vehicle and storage markets in the coming years.”
The report said that while lithium iron-phosphate technologies (LFP) used to be more expensive than nickel-manganese-cobalt oxide (NMC), now the opposite is true.
But in the future, this differential is expected to shrink as NMC price declines continue to be driven by demand from electric vehicles and energy density improvements.
Gupta said: “While the nickel-manganese-cobalt oxide batteries outperform lithium iron-phosphate batteries in terms of energy density, the storage market is seeing is lot more interest in LFP.
“In 2018, the demand for NMC batteries from both EVs and the energy storage industry outstripped the available supply, as cell manufacturing capacity couldn’t keep up with the rapidly growing demand.
“While there was a shortage of NMC batteries in the energy storage market, there were plenty of LFP batteries available – with capacity mostly housed in China.
“As lead times for NMC availability grew and prices stayed flat, LFP vendors began tapping into NMC-constrained markets at fairly competitive prices, thus making these LFP batteries an attractive option for both power and energy application.
“More recently, attributes like improved cycle life, better safety and oversizing ratio have begun to impact the choice of chemistry for different energy storage applications and market segments.”
The report added that planned battery manufacturing capacity expansions are expected to grow to just over 770 gigawatt-hours by 2026. This includes all types of lithium-ion sub chemistries.
“More than 50% of this manufacturing resides in China today and the country will continue to dominate the market in the future,” said Gupta.
“Other key markets, including Germany, Sweden, Hungary and Poland, will ramp up production starting in 2021 as Asian and European battery OEMs open new manufacturing facilities and expand production in existing facilities,” she said.
“In the west, the US will continue to see further investments in battery manufacturing capacities underpinned by growing demand from EVs, as well as the energy storage industry,” Gupta added.