"For batteries to play the ultimate backup system, we're so far away from that it's not funny. To really make the vision that we like to get to, a highly decarbonized electric system, you're going to have to have batteries deployed in many orders of magnitude beyond what we have now."
This grim reality was exposed by Jim Robb, President and CEO of the North American Electric Reliability Corp (NERC), in 2021 shortly after the infamous Texas power grid failure as he lamented the country’s limited power backup system. Robb’s observation came at a time when large-scale energy storage was just taking off following a nearly 90% decline in prices of lithium-ion batteries over the past decade. Unfortunately, the sector suffered a massive blow after Covid-19 triggered huge supply chain disruptions leading to hundreds of clean energy projects being canceled or delayed.
Thankfully, the crisis appears to be finally over: a new report by Wood Mackenzie and the American Clean Power Association (ACP) has revealed that U.S. grid-scale energy storage hit a new record in the second quarter of 2023. The U.S. energy storage market added 5,597 megawatt hours (MWh) in Q2 2023, a quarterly record and good for 172% Y/Y growth. California saw the lion’s share of installations at 738 megawatts (MW).
"We saw a huge bounce back in Q2 after consecutive quarterly declines in the market. Many projects delayed from prior quarters, largely due to supply chain issues, were able to come to fruition this past quarter," the Wood Mackenzie’s energy storage team said.
"The energy storage market is on pace for a record year, as utilities and larger power users increasingly turn to storage to enhance the grid and improve reliability," said ACP VP of Research and Analytics, John Hensley.
Grid-scale energy storage is considered absolutely essential in stabilizing and regulating a clean energy supply grid due to the intermittency of wind and solar power. Wood Mackenzie has predicted that the grid-scale segment will be the main driver of the market from 2023-2027, accounting for 83% of the total installations.
Source: US Energy Storage Monitor Q3 2023 | American Clean Power Association, Wood Mackenzie
IRA Boost
The utility-scale energy storage sector has received a big shot in the arm from President Biden’s Inflation Reduction Act (IRA) signed last year. The IRA has been hailed as the most significant climate legislation in U.S. history. It offers funding, programs, and incentives to accelerate the transition to a clean energy economy, with most of its provisions effective he most significant climate legislation in U.S. history, offering funding, programs, and incentives to accelerate the transition to a clean energy economy. Most provisions of the Inflation Reduction Act of 2022 became effective on January 1, 2023.
The IRA has improved the outlook for both mobile and stationary storage markets and injected at least $63 billion in private- and public-sector investments into the battery storage sector since it came alive a year ago.
Hardly surprisingly, energy storage companies and stocks are flying, with many outperforming the broad-market benchmark, S&P 500. Popular EV manufacturer, Tesla Inc.(NASDAQ:TSLA), is the biggest beneficiary of battery production credits under the IRA. Tesla produces batteries with supplier Panasonic Holdings (OTCPK:PCRFY) in Nevada and is also ramping up output at its own Texas plant. The tax credits for battery manufacturing give Tesla a considerable competitive edge over rivals that make fewer batteries. TSLA has gained 123.9% in the year-to-date while Panasonic is up 40.3% over the timeframe. The S&P 500 has managed a 13.5% YTD return.
Eos Energy Enterprises Inc. (NASDAQ:EOSE) manufactures zinc-based energy storage solutions for utility, commercial and industrial markets. Last month, the company unveiled Project AMAZE - American Made Zinc Energy, a $500 million planned expansion to build 8 GWh of clean energy storage production capacity. AMAZE supports the company’s strategy to address increased long-duration energy storage demand driven by the Inflation Reduction Act (IRA). EOSE stock has gained 76.1% YTD.
Fluence Energy Inc. (NASDAQ:FLNC) offers energy storage products and AI-enabled digital applications for renewables and storage applications. Last month, Barclays rated the stock Overweight, saying the company is poised for gains amid rising demand for renewable power.
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“Given the rapid expected buildout of renewables and the intermittency issues inherent in wind and solar projects, energy storage will be a key piece in the energy transition. While the hardware is a critical part of the offering, we expect penetration of service/software solutions to rise, enabling project owners to better maintain their assets and optimize their grid participation,” Barclays said in the bullish report.
FLNC stock has returned 37.9% YTD.
By Alex Kimani for Oilprice.com
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