Energy storage system surge
What’s Fueling the Surge in Energy Storage System Deployment and Where Will the Expansion Lead?
The global energy storage market is expected to grow 8.4% annually until 2030 — and is projected to generate $620 billion in new investments by 2040. While some of the explosive growth in the industry can be attributed to a reduction in the cost of utility-scale lithium-ion batteries, other factors are driving the market’s success, especially in the United States.
So, what’s influencing the massive growth in the energy storage market right now? Here’s what you need to know:
Incentives Spur Massive Growth
For the energy storage sector, federal and state incentives are the largest driver of growth in the industry right now in the United States. This is a result of the enactment of the Inflation Reduction Act (IRA), a 2022 law that allocated billions to clean-energy investments.
In total, the IRA disbursed around $370 billion in grants, loans, tax provisions and incentives to accelerate the deployment of clean energy. This bolstered the industry and provided the necessary means to further develop the clean energy ecosystem. Additionally, the influx of state and federal dollars helped lower costs, close market gaps, and, ultimately, reduce regulatory barriers that were slowing the advancement of green technologies.
Today, 25 states that makeup 53% of the U.S. population have set clean energy goals for the future. All of this has contributed to the fast-paced growth of the clean energy market overall and the strengthening of the energy storage sector in particular.
Current Leadership Prioritizes Clean Energy Innovation
With the enactment of the IRA, the Biden-Harris Administration made the single largest investment in climate and energy in American history. The act put the U.S. on a pathway to achieving climate goals — most notably to become a net-zero economy by 2050.
As a result of the nation’s investment in clean energy, funding for energy storage systems (ESS) has grown significantly. Valued at approximately $210 billion in 2021, the ESS market is projected to nearly double to $400 billion by 2030. ESS are crucial for the global transition to sustainable energy and are also a proven tactic to reduce greenhouse gas emissions, improve grid stability and increase energy security.
However, 2024 is an election year and a change in leadership could lead to policy changes for the energy storage market — and across the clean energy industry as a whole. Without the support of federal and state policymakers and allocation of incentives for energy storage, future development of ESS projects will come to a halt.
Global Economics Elevate Energy Storage Market Surge
In addition to being commonly known as the manufacturing hub of the world, China is also the leading producer and the leading consumer of energy storage systems in the world. The country is responsible for the growth of Asian Pacific energy storage systems — which make up 47% of the market across the entire globe.
More specifically, China became the third-largest lithium manufacturer in 2022 and the world’s top producer of natural graphite, an essential component of lithium-ion batteries. However, China’s volatile economy is concerning and could slow or stop advancements in energy storage systems.
Even though the incentives created by the IRA are creating lucrative opportunities to build manufacturing in the U.S., development is still years away from having the level of sophistication and automation to match current production in the Asian Pacific region. This is why developers and integrators are closely watching the market to monitor suppliers who have promised to create domestic production to scale quickly and meet U.S. Treasury guidance for incentives.
Additionally, with the slow development in the domestic energy storage market and the cost plus availability of raw materials, we see a need, and the trade associations such as the Solar Energy Industries Association (SEIA) agree, to explore alternative technologies that can be viable within the next five years to compete with lithium-ion batteries.
The energy storage market is evolving quickly, both in project size and capacity as well as the technology used. Right now, lithium batteries are the king of the market, but in a few years, we expect to be working on pilot projects and integrations with other forms of storage that will be viable within the next decade. Learn more about IHI Terrasun and how we engineer large-scale energy storage solutions and customize them for today’s market. Contact us.