Alzbeta Klein, Bernard E. Sheahan
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| Energy storage is a crucial tool for enabling the effective integration of renewable energy and unlocking the benefits of the local generation of clean resilient energy supply. Photo credits: IFC |
For over a hundred years, electrical grids have been built with the assumption that electricity has to be generated, transmitted, distributed, and used in real time because energy storage was not economically feasible.
This is now beginning to change.
Battery storage at grid scale is on the verge of commercial viability. This is good news, not only because of the over 1 billion people worldwide who continue to live without access to electricity, but also because of the enormous contribution energy storage can make to greater supply and use of clean energy.
As clean energy generation becomes more mainstream around the world, its variability and supply fluctuation begin to impact the electricity systems for which energy storage is a key factor. Storage can help even out spikes and dips in solar and wind resource availability and enable energy distribution to be shifted from the time of generation to the time of peak demand. There is no well-defined threshold level of renewable energy supply needed to ensure non-stop supply but in most cases, grid systems operators begin to invest in storage when 10 percent of their overall supply comes through renewable sources of wind and solar.
Over more than a decade, energy storage system vendors and battery manufacturers have been perfecting large-scale battery technology by extending its life cycle, toughening it to harsh environments, evolving management systems and, most importantly, continually driving down the cost. The industry has now reached a pivotal moment, with large storage systems becoming more competitive with other grid assets from a business perspective. The technology has been proven in the markets of North America and Europe, with several vendors offering competing technologies and solutions. What’s more, the capacity for installation and operation already exists. Back-of-the-envelope calculations show more and more cases of clean energy becoming viable in an ever-increasing number of markets. We can see that stationary storage has clearly begun its evolution from a niche solution to a mainstream grid asset. Nonetheless, as with solar, there is a time lag between achieving viability and mainstreaming storage with commercial partners.
According to a recent study commissioned by IFC, the World Bank’s ESMAP and the US Department of Energy, energy storage deployment in emerging markets is expected to grow 40 percent a year over the next decade, up from today’s capacity of 5 GW, resulting in about 80 gigawatts of new storage capacity. This will open up new markets and offer tremendous opportunities.
IFC expects the energy storage sector will grow significantly in coming years, leading to economies of scale. It has been tracking the storage market over several years and continues to support energy storage deployment in emerging markets.
To date, we have engaged by means of early-stage venture capital investments, helping to prepare the market for mainstream investments. Some of our noteworthy investments included Microvast, a China-based manufacturer of especially fast-charging lithium-ion batteries; Fluidic Energy, a manufacturer of zinc-air batteries used to power telecom towers; and AST, from India, which deploys photovoltaic (PV) solar plus batteries to power telecom towers.
While we have observed a remarkable transformation of the market in the last couple of years, with energy storage growing to become part of the mainstream power sector in emerging markets, challenges remain for taking this to scale. Financing appears to be the most pressing of these challenges. Although energy storage costs are expected to continue decreasing in the years to come, their current levels remain relatively high, enough to restrict access to affordable financing across emerging markets. Innovative investment mechanisms, in coordination with improved industry standards and stronger government support, will be needed to unlock the transformative potential of energy storage.
IFC has ambitious goals for creating and opening up markets for clean energy. Supporting energy storage technology is a strategic focus as a means of extending the reach and uses of renewable energy beyond intermittent power. Energy storage will be a key third component in IFC’s clean energy asset mix, in addition to generation and efficiency. The World Bank Group’s Scaling Solar program, which has made it easier and faster to procure solar PV in emerging markets, may be extended to energy storage once costs fall further. Storage technology is well-suited for a similar standardized procurement approach.
Our commitment to stepping up as an advisor, investor, and partner in this important sector has never been stronger.
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