2023: Energy storage boom with record-breaking triple expansion

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2024/09/05 – The energy storage market continues to surge, growing threefold in 2023 compared to the previous year. This significant expansion was largely driven by the low prices in China, where the cost of turnkey energy storage systems dropped by approximately 43% within a year, reaching an unprecedented low of $115/kWh. Globally, around 97 GWh of storage capacity was added in 2023.

Germany saw a 46% increase in energy storage capacity in 2023, amounting to about 5.9 GWh. This growth is fueled by the trend toward self-sufficiency, high and volatile energy prices, and the need for flexibility and supply security. However, in Germany, the growth is mainly driven by private demand in the electricity, heating, and mobility sectors. The industrial segment still faces political and regulatory challenges that hinder its growth. Policymakers have recognized this and are working on improvements.

Strong growth in the household sector

The most significant growth in Germany was seen in household energy storage systems, which experienced a growth rate of over 40%. According to the German Energy Storage Systems Association (BVES), by the end of 2024, more than two million single-family homes are expected to have energy storage systems, allowing about 15% of homeowners to achieve a high level of self-sufficiency.

Sector coupling is now standard in the household segment: to maximize the use of their PV systems, households are charging their electric vehicles and running heat pumps with self-generated electricity. Household storage systems are also becoming larger, with about one-third of the installations having a capacity of 20 kWh or more. The total capacity of all household storage systems reached around six gigawatts by the end of 2023, equivalent to the combined capacity of all pumped storage plants in Germany. The home storage market has tripled in terms of number, capacity, and performance over the past two years.

Industry & commerce: room for growth

The industrial and commercial segment, on the other hand, saw only modest growth compared to 2022. The expansion of charging infrastructure for commercial electric vehicles, increasing self-generation, and securing grid connection capacity are the main drivers, presenting significant potential. Furthermore, high-temperature and process heat storage is increasingly seen as a solution for decarbonization and energy efficiency. However, this project-dependent market is still hampered by a lack of incentives for flexibility and decarbonization. Economic, political, and legal uncertainties, bureaucratic hurdles, and a shortage of skilled workers are significantly slowing down growth in the industrial segment.

System infrastructure: Growing demand for energy storage

The growth trend in the sector is based on the importance of energy storage for securing system infrastructure. Capacity now exceeds 1.5 GWh. Fluctuating spot market prices and the potential of co-locations with wind farms and solar power plants, as well as arbitrage, are further driving demand for large-scale batteries.

Positive future outlook for energy storage

The outlook is very positive. RWE alone plans to build 3 GW of battery storage capacity by 2030. Austrian energy company VERBUND plans to install large-scale battery storage systems with a total capacity of 1 GW by 2030, parts of which have already begun operation in Bavaria in early 2023. Lausitz Energie Kraftwerke AG (LEAG) is working on a large-scale storage facility with a prospective capacity of approximately 750 MW.

Growth opportunities highlighted by forecasts

All forecasts indicate a massive increase in global energy storage demand, particularly driven by the expansion of renewable energy. Bloomberg NEF (BNEF) forecasts annual growth rates of 21% through 2030, with a capacity of 442 GWh by the end of the decade. This significantly outpaces the projected growth rates of 9% and 7% for the global solar and wind markets, respectively. A large part of this growth is due to targeted subsidies or mandates, from China's requirements for the combined use of solar and wind energy to the U.S. Inflation Reduction Act. New support programs are also emerging in Australia, Japan, South Korea, and Latin America.

The projected expansion of battery storage in Germany varies significantly, but all estimates point to substantial growth. In 2023, transmission system operators estimated in their draft grid development plan an installed storage capacity of around 91 GW for 2037 and between 141 and 168 GW for 2045. The Fraunhofer ISE Institute predicts a need for 104 GWh of battery storage capacity by 2030 (and 180 GWh by 2045). The long-term outlook in the Federal Association of Renewable Energy's electricity market design study suggests a battery storage capacity of 230 to 330 GWh. Given the current capacity of around 12.5 GWh, a tenfold increase is expected over the next decade.

Lower prices as a growth driver

Future growth will be supported by scale effects in price development: consulting firm Goldman Sachs Research expects battery pack prices to fall by an average of 11% per year from 2023 to 2030. One reason for the declining costs, according to BNEF, is lithium iron phosphate (LFP) batteries, which do not use nickel and continue to gain market share over nickel-manganese-cobalt (NMC) lithium-ion batteries. The growth of LFP's market share is enabled by an expansion of production capacity led by Chinese battery manufacturers. Producers outside China, many of whom have historically specialized in nickel-based lithium-ion batteries, are also shifting to producing energy storage systems (ESS) based on LFP. BNEF expects NMC to hold only about 1% of the market by 2030.

Politics promises to remove growth barriers

In Germany, unpredictable and regionally varying costs for grid connections in the commercial sector have proven to be a clear barrier to the faster expansion of large-scale battery storage systems. Furthermore, the current incentive structure for regional distribution of storage capacity does not meet the overall system's needs. A more targeted distribution of storage capacity, aligned with production and consumption needs, as well as existing and anticipated grid bottlenecks, would be more effective.

However, the Federal Ministry for Economic Affairs and Climate Action (BMWK) has pledged to quickly implement proposals developed in the "Industry Dialogue on Accelerating Grid Connections" in close cooperation with the Federal Network Agency (BNetzA) and the industry. These proposals include, for example, shortening and simplifying approval processes.

Kai-Uwe Wollenhaupt, President SVOLT Europe & Senior Vice President of SVOLT Energy, welcomes this initiative: "We should ensure an integrated strategy for the energy system and the storage industry. All sectors must be considered: electricity, heating, and mobility. This is the most important aspect in order to create a solid planning environment for the industry and to facilitate a secure, sustainable and clean electricity supply for the coming decades."