MARKET INSIGHTS

2.1. INTRODUCTION

This chapter covers all the major market dynamics and their impacts on the overall growth of the global battery energy storage systems market. This chapter also covers the value chain analysis of the battery energy storage systems market.

2.2. FACTORS AFFECTING MARKET GROWTH

The global battery energy storage systems market is expected to reach USD XX million by 2030 from an estimated USD XX million in 2023, at a CAGR of XX% during the forecast period (2023–2030). The growth of the battery energy storage systems market is driven by government funding for battery energy storage systems and the growing benefits of battery energy storage systems for EV charging. Moreover, the growing demand for battery energy storage systems for commercial applications and the decline in the prices of lithium-ion batteries provide significant opportunities for the key players in the global battery energy storage systems market. However, the high capital required for installing battery energy storage systems restrains the market's growth to some extent.

Additionally, the lack of standardization in storage systems and overheating of lithium-ion batteries pose challenges to the growth of the battery energy storage systems market.

2.2.1. IMPACT ANALYSIS OF MARKET DRIVERS, RESTRAINTS, OPPORTUNITIES, AND CHALLENGES

In recent years, governments have been allocating funds to implement battery energy storage systems.

Following are some of the important government initiatives across the globe supporting the implementation of battery energy storage systems:

• In February 2023, the Government of Canada and the local government of Ontario started working together to build the largest battery storage project in Canada. The 250-megawatt (MW) Oneida Energy storage project is being developed in partnership with the Six Nations of the Grand River Development Corporation, Northland Power, NRStor and Aecon Group. The federal government allocated a further USD XX million in funding, and the Canada Infrastructure Bank has played a key role in supporting project development and has collaborated with the Oneida Energy storage project on an investment agreement.
• In July 2022, the public sector undertakings of India invested in the commercial-scale implementation of Battery Energy Storage Systems along with Solar PV Projects. The Government of India is also supporting some of the storage projects through grant support:
  • A 1.4 MW Solar PV Project with a 1.4 MWh Battery Energy Storage System was started in Kavaratti Island, Lakshadweep (supported through MNRE Grant)
  • A 50 MWp SPV Project with 20 MW/50 MWh BESS initiated at Phyang, Leh, Ladakh (supported by the grant of the Indian government under the PMDP 2015)
  • A 100 MW SPV Project with 40 MW/120 MWh BESS started in Rajnandgaon, Chhattisgarh
  • In September 2021, the U.S. Department of Energy (DOE) announced USD XX million in funding for four research and development projects to scale up American manufacturing of flow battery and long-duration storage systems. DOE also launched a new USD XX million project—the Energy Storage for Social Equity Initiative—to assist 15 underserved and frontline communities leverage energy storage to increase resilience and lower energy burdens. This funding will also help procure the materials needed to expand the grid with new, clean energy sources, deliver affordable electricity to disadvantaged communities, and help reach the government’s goal of net-zero carbon emissions by 2050.

According to the International Energy Agency (IEA)(France), the electric car market is witnessing exponential growth, with over XX million sales in 2022. Nearly XX% of all new cars sold were electric in 2022, up from around XX% in 2021 and less than XX% in 2020. China was the frontrunner, accounting for around XX% of global electric car sales. More than half of the electric cars on the roads worldwide are now in China, and the country has already surpassed its 2025 target for new energy vehicle sales. In Europe, the second largest market, electric car sales increased by over XX% in 2022, meaning that more than one in every five cars sold was electric. Electric car sales in the United States – the third largest market – increased by XX% in 2022, reaching a sales share of XX%.

This increase in popularity has also created the need for more EV charging stations globally. The increased need for EV chargers has raised the question of sustainability. Energy storage systems help address this issue effectively. The combination of energy storage with EV chargers creates a cost-effective solution to electric vehicle charging. Companies can integrate energy storage with EV chargers because of benefits such as lower demand charges, faster charging, and increased security. Further, they provide benefits such as avoiding peak-demand charges and making EV charging stations more cost-effective.

In case of a blackout, energy storage offers a separate power source and ensures that drivers can still charge their cars. Due to such benefits, the demand for BESS for EV charging is improving rapidly, in turn supporting the growth of the market. Further, companies are taking initiatives to develop battery energy storage systems for electric vehicle (EV) charging stations, which supports the growth of the market. For instance, in March 2023, EverCharge, Inc. (U.S.) partnered with PassKey Inc. (U.S.) (subsidiaries of SK Group) (South Korea) to develop a battery energy storage system (BESS) to supplement EverCharge’s electric vehicle charging stations. The new BESS developed by Passkey and EverCharge will be used to consolidate power during off-peak hours and deploy the energy via EV charging stations during periods of high demand. By combining EV charging with battery storage to mitigate demand peaks, sites can benefit from lower operating costs and additional energy resiliency.

Battery energy storage technologies, including lithium-ion batteries, flow batteries, and lead-acid batteries, require increased installation investments due to their high energy density and improved performance. Lithium-ion batteries are costly as they offer high energy density, have a low self-discharge rate, and require less maintenance. However, the costs of lithium-ion batteries are expected to decline in the future. These batteries are

Also used in electric vehicles (EVs) as they are lightweight and compact, and have a large capacity. The costs of battery energy storage systems depend on the type and the number of batteries and different components used in them. They also vary according to the intended application, such as residential, commercial, and utility applications of these systems. The integration of different batteries (in the form of packs, modules, and racks), inverters, battery management systems, energy management systems, and wiring in BESS results in their increased costs. During the installation of battery energy storage systems, the capital cost is determined by the spatial requirements of storage systems, components, and facility infrastructures (communications and control, environmental control, and grid interconnection). Moreover, the capital required for installing battery energy storage systems includes the cost of charging batteries, labor associated with their installation, maintenance of plants wherein they are installed, replacement and repair costs of these systems, and their decommissioning and disposal costs. The high capital required for installing battery energy storage systems is a restraint to the growth of the BESS market.

The data center sector traditionally used lead-acid batteries with a static UPS system. The deployment of BESS in data centers is increasing rapidly due to its benefits, such as low cost, backup power for the data center in case of emergency, and reducing GHG emissions to reach their environmental, social, and governance (ESG) goals. In July 2022, Microsoft Corporation (U.S.) announced the addition of banks of lithium-ion batteries at a Microsoft data center in Dublin. These batteries, which typically provide backup power for the data center in case of emergency, have been certified, tested and approved for connection to the grid in a way that helps grid operators provide uninterrupted service when demand exceeds the supply generated elsewhere on the grid by wind, solar and other sources. Further, companies are taking initiatives to launch battery energy storage systems for commercial applications, in turn providing opportunities for the growth of this market. For instance, in April 2023, Generac Industrial Power (U.S.) (a part of Generac Power Systems, Inc.) launched its new zero-emissions SBE series of stationary battery energy storage systems (BESS). Available in energy capacities ranging from 200 kWh to 1,000 kWh, the new stationary battery energy storage systems enable commercial and industrial customers to save on energy costs by reducing peak charges and taking advantage of utility time-of-use rates. Such development is expected to support the growth of the market. 

According to the Our World In Data (U.K.) article published in June 2021, battery prices have declined by XX% in the last three decades. Since 1991, prices have fallen by around XX%. Prices fell by an average of XX% for every doubling of capacity, and this reduction rate does not yet appear to be slowing down.

Prices of lithium-ion battery technologies have fallen rapidly and substantially. The cost reductions in lithium-ion can be attributed to research and development efforts and economies of scale in battery production.

Improvements to lithium-ion technology through research and development have been responsible for the price reductions. The majority of the R&D contribution can be attributed to advancements in chemistry and materials science. These results suggest that the nature of electrochemical battery technology, which often allows for many different combinations of electrode materials and electrolyte chemistries, presents further opportunities for new approaches and cost decline in lithium-ion batteries.

Lithium-ion battery prices will continue to drop as more companies start producing them to cater to the increasing demand. Further, the decline in raw material prices has translated to lower battery costs. Collectively, the decline in prices of lithium-ion batteries is expected to provide growth opportunities for battery energy storage system market players.

In the absence of effective standardization, each manufacturer creates its batteries. This often challenges evolving projects as storage systems do not always fit the project's needs, and sometimes batteries need to be replaced. Hence, the lack of standardization in battery energy storage systems poses challenges to the market's growth.

The use of lithium-ion batteries is widespread, from cell phones to power tools to Automated External Defibrillators (AEDs). They carry risks like any energy-storing device, such as overheating, fire, and explosion and are known to be more susceptible to damage. If a lithium-ion battery overheats, it can quickly create an incident of thermal runaway in batteries that are stored nearby. This domino effect will amplify the probability and impact of a fire or explosion, causing severe damage to the organization, staff, and surroundings. The temperature for storing lithium-ion batteries can affect the safety of the product. Extreme cold or heat will result in damage to the battery, as well as a reduction in its performance. Thus, the overheating of lithium-ion batteries poses challenges to the growth of the BESS market.

To overcome this challenge, consumers must ensure that their lithium-ion batteries are stored, charged, and discharged in an environment that is not prone to extreme temperatures. Consumers must refer to the battery manufacturer’s guidelines on the operational temperature range of batteries. However, the provision of indoor storage, temperature control and adequate ventilation can assist with the safe storage of lithium-ion batteries to avoid overheating of lithium-ion batteries.

BATTERY ENERGY STORAGE SYSTEMS MARKET ASSESSMENT— BY APPLICATION

3.1. OVERVIEW

Based on application, the global battery energy storage systems market is segmented into residential, commercial, and utility. In 2023, the utilities segment is expected to account for the largest share of 53.6% of the

global battery energy storage systems market. The large market share of this segment is attributed to the initiatives taken by companies to launch flow batteries for meeting the environmental, longevity, and safety

objectives of utilities and the growing usage of BESS for peak shaving, load shifting, black start, microgrids, renewable integration, and grid service applications.

This segment is also slated to register the highest CAGR of XX% during the forecast period. The high growth of this segment is driven by the surge in demand for battery energy storage systems for power distribution, the rising need to store electricity, and the increasing need for grid services.

3.2. UTILITIES

The growth of this segment is driven by the efforts of companies to launch flow batteries to meet the environmental, longevity, and safety objectives of utilities and the growing usage of BESS for applications such as

peak shaving, load shifting, black start, microgrids, renewable integration, and grid services.

BESS are rechargeable batteries that can store energy from different sources and discharge when needed. BESS consists of one or more batteries and can be used to balance the electric grid, provide backup power, and improve grid stability. BESS stabilizes grid conditions and balances loads through frequency responses and ancillary services. They also reduce grid extension pressure by storing energy close to its use. BESS provides several applications for utilities such as peak shaving, load shifting, black start, microgrids, renewable integration, and grid services.

• Peak Shaving: Peak shaving is the ability to manage energy demand to avoid a sudden short-term spike in consumption
• Load Shifting: Load shifting allows businesses to shift their energy consumption from one time period to another by tapping the battery when energy costs more.
• Microgrid: A microgrid is a small-scale power grid that can operate independently or collaboratively with other small power grids.
• Black Start: Black start is the process of restoring an electric power station or a part of an electric grid to operation without relying on the external electric power transmission network to recover from a total or partial shutdown.
• Renewable Integration: Most renewable energy systems use batteries to perform two different essential operations - one is the storage of the energy produced, and the other is a connection to smooth the energy produced.
• Grid Services: A battery energy storage system charges (or collects energy) from the grid or a power plant and then discharges that energy later to provide electricity or other grid services when needed.

Some of the recent developments in this market space are as follows:

• In September 2022, Canadian Solar Inc. (Canada) announced that CSI Energy Storage (a part of its majority-owned subsidiary, CSI Solar Co., Ltd. (China) will launch the SolBank, a proprietary, designed and manufactured energy storage battery solution for utility-scale applications.
• In October 2021, Honeywell International Inc. (U.S.) launched a new flow battery technology that works with renewable generation sources, such as wind and solar, to meet the demand for sustainable energy storage. The new flow battery uses a safe, non-flammable electrolyte that converts chemical energy into electricity to store energy for later while meeting the environmental, longevity, and safety objectives of utilities.

Such developments are expected to support the growth of this segment.

3.2.1. BLACK START

Black start is the ability of generation to restart parts of the power system to recover from a blackout. This entails isolated power stations being started individually and gradually reconnected to one another to form an interconnected system again. It is used when the grid experiences a blackout and must be restarted from scratch. Black start is a critical resource for maintaining the reliability and resilience of the electric power system and is central to system restoration and recovery plans for system operators.

Some of the recent developments in this market space are as follows:

• In January 2021, Siemens Energy (a business unit of Siemens AG) (Germany) announced the designing, building, and commissioning of a black-start system at Clearway’s Marsh Landing Generating Station near Antioch, California (“Marsh Landing”). Black-start capabilities will allow the station to restart the flow of electricity to the facility’s auxiliary systems without the support of an external power supply in the case of an outage or blackout situation.
• In February 2020, General Electric Company (U.S.) announced the completion of the first battery energy storage-assisted black start of a GE 7F.03 gas turbine at the 150 megawatts (MW) simple cycle unit at Entergy Louisiana’s Perryville Power Station.

Such developments are expected to support the growth of this segment.

BATTERY ENERGY STORAGE SYSTEMS MARKET ASSESSMENT— BY GEOGRAPHY

4.1. OVERVIEW

Based on geography, the battery energy storage systems market is segmented into North America, Europe, Asia-Pacific, Latin America, and the Middle East & Africa. In 2023, Asia-Pacific is expected to account for the largest share of XX% of the global battery energy storage systems market, followed by North America and Europe. The presence of prominent players offering advanced BESS components & services, residential energy storage technology, government policies to improve the reliability and quality of the power distribution facilities to the residential customers, and increased access to electricity for remote and island communities are some of the major drivers for the growth of this regional segment. Furthermore, the lower technology costs and increased technological advancement across the region encourage consumers to install battery energy storage systems is supporting the growth of this regional market.