The market for energy storage and energy systems is growing rapidly. It is estimated that 245 GWh of batteries will be installed every year until 2030 and that by then, the total installed cost of Li-Ion batteries is less than half of what it is now, and the stationary battery storage market will reach 60 billion dollars. The growth in this market will lead to many opportunities, but also brings along challenges. STEPS has performed an analysis to gain insights on the trends, barriers, opportunities, and challenges in the developing energy storage market in Europe. This article summarizes some insights of the market analysis, the interactive website can be found here.
Trends and barriers in the European market
Though the trends and barriers differ per country, some issues are similar. In the analysed countries, the economic viability is questionable for most energy storage solutions. The value of flexibility provided by e-storage is not reflected in the business case yet and future energy prices are uncertain. Moreover, there is often a lack of available data and track record on energy storage systems. Policies and regulations can play a role in improving economic viability but also form barriers themselves. Regulation obstacles that were identified in the market analysis include permits complexity, uncertainties on future tariff systems and double taxation of stored energy.
Regulation on energy storage is still under development in most European countries. To support successful deployment of e-storage and its financial viability, the market analysis identified four key aspects that should be improved. The energy markets should be reformed so the value of flexibility is properly recognised and remunerated. Secondly, storage should be defined as a specific asset class to apply proper grid fees and taxes. Regulations should also be simplified to favour market accessibility and permitting processes. Finally, decision making should be aligned with the market, so regulatory changes will be reflected into proper services and value offering.
Challenges and opportunities for end-of-life-batteries
The rapidly growing battery market can lead to material scarcity as well as a lot of waste at the end-of-life stage. The market analysis investigated the challenges and opportunities for repurposing or recycling these end-of-life batteries. Repurposing is currently not economically valuable, but regulations that award circularity could enhance their competitiveness and accelerate market evolution. With material prices increasing, this could make repurposing interesting in the future. However, it is difficult to guarantee energy performance of second-life batteries. An opportunity would be to establish “battery passports”, containing data about battery health or to develop risk mitigating warranty models.
Recycling batteries locally would make Europe less dependent on other counties. It would also cut emissions from transportations and mining raw materials, but the current recycling process also has a large environmental impact. The financial viability or recycling is a challenge because the amount of high value material per battery is lower in more modern batteries. However, scaling up the process will lower costs, and new recycling processes are being explored. Recycling has a lot of potential and is the main pathway for end-of-life battery treatment.
Front-of-the-meter storage
Lastly, the market analysis looked at the trends on front-of-the-meter (FTM) storage. This consists of medium-large scale stationary batteries directly connected to the distribution/transmission network. FTM storage is a key enabler for the transition to renewable energy, providing the necessary flexibility services to the grid. However, the current market framework and flat tariffs are not designed to incentivise flexibility and therefore do not properly reflect the value of FTM e-storage systems. Flexible tariffs are needed. Regulatory uncertainty and a rapidly changing market pose a challenge to the resilience and predictability of the FTM business case, although new risk-reward models are emerging to overcome these uncertainties. Clarity about future system requirements is required to develop successful FTM e-storage products and projects.
Curious about the more detailed insights? Go to the interactive website or download the full report.
STEPS is a project within the Interreg North-West Europe (NWE) programme. Interreg NWE falls under the European Cohesion Policy and is financed by the European Regional Development Fund (ERDF).