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Energy Storage Finally Reaches A Tipping Point

Cost-effective and reliable energy storage has been the holy grail in the energy world for decades and particularly so in the last ten years as the explosive growth in renewable generation (particularly solar PV and wind) has sharpened efforts to find a solution to its intermittency issue. As a business, Verdantix has repeatedly analyzed the energy storage market over the past ten years. Despite enthusiastic press coverage and a massive amount of investment, commercial successes have been limited and a whole slew of energy storage businesses have gone to the wall.

Despite the challenges to date, three important developments convince us that we are finally on the verge of serious and sustained growth in the sector:

1. Cost reduction: There are many types of energy storage technology but lithium-ion batteries have emerged as the preferred technology-type. Costs of these batteries have fallen by around 80% since 2010, fuelled largely by the growth in production from the electric vehicle market.

2. Grid demand: The increasing load of renewables on grid networks is creating new challenges for grid balancing among many grid operators. This has triggered many of these operators to actively seek energy storage assets or to update traditional regulatory frameworks in an effort to incentivize greater deployment of energy storage on the grid

3. Government targets: Beyond grid operators, some governments are beginning to mandate the deployment of energy storage assets. Just a few days ago, New York Governor Andrew Cuomo pledged to build 1,500MW of energy storage by 2025.

Arguably, we should have included a 4th factor – Twitter bets. Earlier this year, Elon Musk made a bet over Twitter with fellow Australian billionaire Mike Cannon-Brookes that Tesla could install the world’s largest lithium-ion battery in South Australia within 100 days of a contract being signed or it would be free. Intended to demonstrate how Tesla could help fix South Australia’s blackout issues, Cannon-Brookes conceded defeat to Musk in November as the 100MW lithium ion battery went live.

The march of energy storage is taking place both at the utility level and the smaller facility level. The sector has not solved every issue but energy storage is finally at a point where it can deliver tangible business value within a timescale competitive with broader business investments.