The global renewable energy sector is growing at a breakneck pace as world leaders invest record amounts in expanding clean energy technologies and infrastructure. The International Energy Agency (IEA) projects that energy investment around the world will exceed USD 3 trillion for the first time in 2024. A significant portion of this money is going toward solar photovoltaics, for which investments have eclipsed all other generation technologies combined.
While this explosive growth in renewable energy production capacity is great news for the climate, it could spell short-term trouble for global energy security if mismanaged. Solar and wind energy are variable, meaning that their production levels fluctuate according to the weather, time of day, and the seasons. The inconsistency of production places a significant strain on electric grids designed for a steady and easily manipulated supply of fossil fuels, and has created newfound issues with energy markets.
In some places, when renewable energy production outstrips demand, energy prices have even dipped below zero. “This lowers the potential for spot market earnings for producers and highlights the need for complementary investments in flexibility and storage capacity,” the IEA reports.
Put simply, energy storage is utilized to capture and stockpile excess energy when supply outstrips demand, and feed that energy back into the grid when demand outstrips supply. This stabilizes inflows and outflows to the grid while also mitigating market volatility through a process known as arbitrage, among other key energy security services. In other words, energy storage is the backbone of the renewable revolution.
Indeed, energy storage is heating up to be “clean energy’s next trillion-dollar business” according to a recent report from the Economist. Markets for energy storage are growing at a rapid clip in the United States, Europe, and China. Emerging markets are lagging far behind in energy storage investments, but at a global level energy storage is set to be a massive and massively lucrative industry.
Law firm Morgan Lewis describes the storage sector as “the technology that will cash the checks written by the renewable energy industry,” and went on to describe that “the global energy storage market will continue its rapid growth, with an estimated 387 gigawatts (GW) of new energy storage capacity expected to be added by 2030—a 15-fold increase in global energy storage capacity compared to the end of 2021.”
It is estimated that to reach zero-emissions targets, worldwide installed capacity of battery storage will need to grow to more than a terawatt (TW) by 2030, and nearly 5TW by 2050. For context, last year capacity totalled less than 200 gigawatts (GW). The writing is on the wall, and battery storage investments are on the rise, set to exceed USD 50 billion in 2024 according to the IEA.
While energy storage investments are booming, there is still some uncertainty about the best energy storage methods. The sector is relatively nascent, and many promising technologies are in research and development phases. Currently, pumped hydro makes up more than 90% of the globe's current high-capacity energy storage, but creating new pumped hydro facilities is costly and requires specific topographical conditions.
Lithium-ion battery storage is rapidly growing and is currently favored as a much less expensive, more flexible option. However, lithium-ion batteries are only capable of short-term energy storage, measured in hours, while true energy security will require the ability to store renewable energy for weeks and months at a time. However, lithium-ion battery technology is improving, and they’re currently extremely cheap as the market remains oversaturated even with the boom in storage demand.
As investment in energy storage increases, technologies will keep improving, and as technologies keep improving, investment and employment will increase in turn, creating a positive feedback loop for what is sure to be a fast-growing sector for a long time to come.
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By Haley Zaremba for Oilprice.com
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