Jul. 30 2019 — Almost 10 GW of utility-scale and grid-connected battery storage will be operating in the U.S. by 2023, S&P Global Platts Analytics forecast in its latest U.S. Power Storage Outlook.
A combination of dropping costs and diversification of use cases points to accelerating storage uptake, with annual storage investments set to increase tenfold from under $0.3 billion in 2019 to around $3 billion in 2023. However, new policy and technology risks are emerging.
State policies will remain instrumental to this multi-GW deployment in the coming years. In 2018, New Jersey, Massachusetts and New York joined California and Oregon in enacting state-level storage targets. New Jersey and New York now have the two most ambitious targets: 2 GW by 2030 and 3 GW by 2030, respectively.
However, even states without dedicated policies are seeing increasing interest from storage developers. Utility-scale battery capacity in regional transmission organization (RTO) and independent system operator (ISO) interconnection queues as of May 2019 almost tripled levels seen in June 2018, reaching over 40 GW of capacity, though the fate of many of these projects is less than certain.
The largest capacity increase was in California, supported by storage mandates, and in ERCOT (a market area that covers Texas) where generation margins are at record low.
The New York battery storage market is warming up, supported by a $350 million incentive program from the New York State Energy Research and Development Authority (NYSERDA) finalized in June that will support both large-scale and small-scale installations. Several developers have this year entered the interconnection queue for NYISO, which covers New York State, positioning themselves for future RFPs.
Just in May, an additional 1 GW of utility-scale battery storage joined the ISO queue, with 75% located in downstate New York, after the April publication of the draft NYSERDA incentive program. In addition, ConEdison in New York launched on July 15 its RFP for 300 MW of bulk storage dispatch rights contracts.
At the federal level, storage is seeing support with the introduction of bipartisan bills in the Senate and House to add standalone storage to the list of ITC-eligible technologies. In addition, Senator Collins Heinrich introduced the Better Energy Storage Technology (BEST) Act to accelerate storage cost reduction with $280M funding following the Department of Energy’s solar PV SunShot model.
The use-cases for battery storage are starting to diversify. Early installations mostly provided frequency regulations, for example in the PJM and CAISO markets, situated on the east and west coast, respectively. However, newer installations are coming with longer storage duration. These will layer on multiple revenue streams as no single service – be it provision of capacity, energy arbitrage, spinning reserve – provides sufficient revenues to break even. The provision of peaking capacity with time-shifting solar PV generation is likely to become a key storage usage, particularly in the southwest and southeast regions.
The scale of projects and procurements is also increasing. APS announced a plan to install 850 MW by 2025, Florida Power and Light a 409 MW co-located with solar PV, and NV energy announced 1.2 GW of new solar PV and battery storage.
Lithium-ion has eclipsed all other technologies in terms of new deployments. Platts Analytics expects the technology will continue to lead in the short- to medium-term. Prices have plummeted in the past years as manufacturing capacity increased, driven by the expectation of a rapid electric vehicle uptake.
However, raw material prices, fire protection and potential import tariffs are some of the key risks to future price reductions identified in the report. Lithium supply will have to ramp up quickly in the coming years to respond to booming electric vehicle and stationary storage battery demand.
Safety concerns have increased with the fire at an APS facility in April, and the 23 recent fires at battery facilities in South Korea, which saw exponential growth in battery storage in 2018.
Meanwhile, rising tensions between the US and China opened the door to a 25% tariff on battery imports from China, though US President Trump and Chinese President Xi Jinping agreed at the G-20 summit to hold off on new tariffs and to proceed with trade negotiations.