The global grid-connected energy storage market remains poised for growth, with the market outlook strengthening until 2025, when it will reach a total installed base of 52 GW, according to a new research note from IHS Markit.
Authored by Julian Jansen, senior analyst of solar and energy storage at the firm, the research note says the U.S. is expected to be the largest storage market, deploying 1.2 GW in 2020 and seeing a CAGR of 21% from 2017 to 2025. In the short term, South Korea, Japan, Germany, Australia and the U.K. will be the next biggest markets.
Globally, IHS Markit predicts that annual deployment of grid-connected energy storage will grow from 1.3 GW in 2016 to 4.7 GW in 2020 and 8.8 GW in 2025. Furthermore, the grid-connected energy storage market is projected to grow from annual revenues of $1.5 billion in 2016 to more than $7 billion in 2025 with a CAGR of 16%.
As part of the continuous research carried out by IHS Markit across the energy storage industry, a number of macro-trends are emerging. For example, early markets for energy storage from 2013 to 2015 were driven by single applications, such as frequency regulation in the PJM market, or self-consumption in the German residential segment. However, over the course of 2016 and the first half of 2017, new value is emerging for utility-side-of-meter storage, primarily from capacity requirements, the integration of utility-scale solar and island microgrids, according to IHS Markit. This leads to greater growth in the longer-duration storage segment, especially systems of two- to four-hour duration.
In the behind-the-meter segment, IHS Markit adds, system aggregation and demand response programs are enabling value stacking and improving economics, aided by regulatory support and subsidy programs in California, South Korea, Japan or Germany. Therefore, although utility-scale storage dominates the global market today, IHS Markit predicts behind-the-meter deployments will make up – for the first time – more than 50% of cumulative annual storage installs in 2020.
On a regional level, IHS Markit says three key markets currently stand out:
- IHS Markit is seeing a continuous increase in the forecast for the U.S. behind-the-meter market, with Self-Generation Incentive Program (SGIP) funding in California driving deployment across the various applications and revisions to net energy metering programs supporting the long-term development of residential markets.
- There will be sustained market growth in South Korea, despite the completion of major frequency regulation projects this year. Over the coming years, IHS Markit says increasing utility-lead programs for renewables integration and mandates for energy storage in public building will support annual deployment.
- Public tenders and large-scale solar+storage are igniting the Australian utility-side-of-meter market, as shown by major announcements from players such as Lyon Group and Tesla, which was recently tapped to build the largest lithium-ion battery project in the world.
IHS Markit says that as prices for energy storage systems continue to fall, previously uneconomical applications, such as the co-location of battery storage with solar PV, are becoming feasible. Driven by declining lithium-ion battery module prices, which have fallen 70% since 2012, the technology is expected to dominate the market over the coming years. With prices for lithium-ion battery modules predicted to fall further, reaching less than $200/kWh by 2019, IHS Markit expects such batteries to also establish themselves as the leading chemistry in longer-duration systems aimed at the two- to four-hour duration segment.