The Rising Demand for Battery Energy Storage (BES) Systems in the Renewable Energy Sector
Experts predict BES market to reach $150 billion globally by 2030
As the global demand for renewable energy surges, battery energy storage (BES) systems are becoming increasingly essential. A recent McKinsey report predicts that the global BES market could reach an astounding $150 billion by 2030. This highlights the growing recognition of the crucial role BES plays in the renewable energy transformation.
India’s Commitment to Clean Energy:
India aims for 500 GW of clean energy capacity by 2030
India has made a clear commitment to achieving net-zero emissions. The nation has set an ambitious target of reaching 500 GW of clean energy capacity by 2030. To achieve this goal, BES is expected to play a crucial role. According to Mordor Intelligence, India’s BES market is projected to grow to $3 billion by the end of 2024 and possibly reach $5.3 billion by 2029. This represents a compound annual growth rate of over 11%.
The Role of BES Across the Renewable Energy Value Chain:
BES addresses key challenges in RE generation and consumption
Battery energy storage systems have the potential take on significant challenges across the renewable energy value chain, from generation to consumption. For front-of-the-meter (FTM) customers such as RE developers and utilities, long-duration BES systems can effectively store intermittent renewable energy from sources such as solar, wind, and tidal energy. These systems can complement power banking facilities provided by transmission companies, releasing stored power into the grid when needed.
For behind-the-meter (BTM) stakeholders including commercial/industrial players and residential consumers, BES offers the ability to have greater control over energy consumption. This control has the potential to reduce the frequent ramp-up/down cycles of conventional power plants, ultimately enhancing the lifespan of power infrastructure and optimizing costs across generation, transmission, and distribution systems.
Overcoming Technological and Financial Hurdles:
Lithium-ion batteries currently accepted, but alternative technologies emerging
Despite its potential, the deployment of grid-scale BES systems faces technological and financial hurdles. Currently, lithium-ion battery (LIB) systems are widely accepted due to their lengthy lifecycle and cost-competitiveness. However, challenges regarding critical mineral supply constraints and overheating risks still persist. Emerging alternatives like sodium-ion (Na-ion) technology offer environmentally friendly and cost-effective solutions; however, further development is required to match the cycle-life and energy density of LIBs.
Problems and Solutions: Meeting Customer Requirements and Project Financing:
Tailored solutions enable larger customer base and unique selling propositions (USPs)
To achieve successful BES projects, it is crucial to meet the specific techno-commercial demands of key customer segments. Providing tailored solutions that address unique requirements can unlock a larger customer base and create unique selling propositions (USPs). By 2030, experts predict that around 600 GWh of BES systems will be added globally, with over 85% serving FTM customers – a clear indication of the importance of effective project design, integration, and execution in mitigating financial risks and ensuring a smooth deployment.
To make BES projects economically viable, it is essential to ensure that the costs of electricity for end-users factor in BES expenses. Pooling low-cost financing options for renewable energy projects with BES can potentially lower the weighted average cost of capital (WACC), thus making BES more accessible and commercially viable.
Innovative project financing frameworks should be introduced to ensure timely repayment while generating reserves for potential risks. Multilateral agencies and financial institutions can actively support BES integration in renewable energy projects through mechanisms such as blended financing, green bonds, and outcome-based debt financing. Additionally, aligning opportunities with India’s growing startup ecosystem could foster models such as BES leasing, green credit swaps, and BES-as-a-Service, attracting investments from various sectors.
The Way Forward:
Collaboration among stakeholders crucial for net-zero transition
As a “sunshine” industry, the success of BES technology relies on collaboration among technology, business, and policy stakeholders. It is through collective efforts that the global economy can be propelled toward a net-zero future. With the rising demand for renewable energy, battery energy storage systems are set to play a critical role in shaping the future of clean energy usage, bolstering sustainability, and driving economic growth.
