With advanced battery technology powering the era of clean electrification, utility leaders must look ahead to understand how quickly lower-cost batteries will accelerate the transition to zero-carbon grids, open new pathways for mobility electrification.
This article explores implications for grid-tied storage in the United States, concluding with recommendations for utility sector leaders.
Implications for Utilities and Other Ecosystem Actors in the United States
The current state of government and other ecosystem support for battery storage technology focuses heavily on mobility applications and encouraging domestic manufacturing capacity, with emerging efforts tailored to grid-tied storage applications.
In this section, we will examine battery technology support ecosystems in the United States, as well as in a global context among the three other largest greenhouse-gas emitters (China, the European Union, and India).
Two Major Trends are Evident Across Each Ecosystem
Mobility markets are driving demand and cost declines. The anticipated exponential growth in EV adoption has driven government focus primarily toward mobile applications for advanced battery technologies.
- End-use demand support in the form of EV targets or incentives (or outright bans on internal combustion engine vehicles) are the most common shared elements. More recently, several countries have announced investments to support advanced research and development (R&D), or to bolster the development of domestic battery manufacturing capacity.
- The nascent grid storage market is about to take off. Manufacturing and supply chain-focused support specifically for grid-focused storage are harder to find. More effort is currently focused on ongoing R&D, demonstration projects, and, in particular, regulations to better enable storage to compete on level terms with primary power sources. In the past two years, the United States, China, and the European Commission have all taken steps to allow energy storage better access to power markets. As utilities, grid operators, and integrators gain more experience with Li-ion and other advanced (and longer-duration) batteries, cost and regulatory barriers will quickly diminish, unlocking a flood of new storage demand to balance the variability of renewable energy generation with zero emissions.
Globally, China currently dominates the advanced battery market, thanks in large part to its early support for EVs and domestic manufacturing, and its relatively consistent, large-scale efforts since. The magnitude of its targets and the associated subsidies (~US$10,000 per vehicle produced) have been key drivers for a surge in battery and vehicle manufacturing. While many vehicle manufacturers may wind down as subsidies tighten, market leaders will have gained a significant lead in production volumes and associated learning rates compared with their global competitors.
The European Commission for its part has briskly accelerated support for the advanced battery value chain over the past three years, driven largely by a fear of dependence on and lost economic opportunity to China and the rest of Asia. Analysts now expect Europe to overtake the United States in terms of installed manufacturing capacity in the next few years. Notably, a large share of that new capacity will be built by Chinese and other Asian companies.
Meanwhile India has made significant progress in the past two years in signaling its commitment to both an electric fleet and supporting a robust domestic industry across the EV value chain, including battery and cell manufacturing. As evidenced by the adoption of the National Mission on Transformative Mobility and Battery Storage, India’s ministers appear determined to maximize the economic benefits of a swift shift to electric mobility in India’s rapidly growing urban areas.
By contrast, the United States has taken more of a start-and-stop approach. U.S. demand for EVs has grown steadily thanks to a combination of federal tax credits and state and local incentives. However, lack of more cohesive or comprehensive federal support has kept demand growth to only a fraction of that seen in China and has not been enough to drive significant domestic battery manufacturing capacity. Some analysts cite the lack of consistent federal EV demand support as a critical contributor to what may be future U.S. dependence on Chinese suppliers.
On grid-tied storage, the United States has taken some significant initial steps to support market development, but it remains unclear whether the speed and scale of those efforts will be enough to accelerate adoption in places without supporting state policy. These efforts include a handful of state-level energy storage targets and incentives, as well as the Federal Energy Regulatory Commission’s (FERC) adoption of two orders that would facilitate batteries’ participation in electricity markets. However, the details of how grid operators will address those FERC requirements are still pending. Just this month, the U.S. Department of Energy (DOE) also announced an Energy Storage Grand Challenge that will aim to improve R&D and commercialization efforts in the United States, but as of this article’s publication there are few details on the associated timing or budgetary commitment.