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Falling costs, flexible supply chains and steady demand continued the rise of energy storage, according to a report from Wood Mackenzie.
In its latest Energy Storage Monitor report, Wood Mackenzie outlined the continuing trend of rapidly increasing battery energy storage deployments across the United States, with data through the first quarter of 2024.
Across all segments, the US energy storage industry deployed 8.7 GW, a record growth of 90% year-on-year. The country deployed 4.2 GW in the fourth quarter of 2023, with installations in California and Texas accounting for 77% of the fourth quarter additions, Wood Mackenzie said.
The US grid-scale storage market broke previous quarterly installation records in Q4 2023, deploying 3,983 MW / 11,769 MWh, leading to an average duration of 2.95 hours. A combination of short-duration energy storage serving sharp peaks in electricity demand and four-hour grid-scale batteries are common configurations in todays market.
The residential energy storage market achieved a marginal record quarter in Q4 2023, deploying 218.5 MW, surpassing the record set in Q3 of 210.9 MW. The community, commercial and industrial (CCI) segment deployed 33.9 MW, with the bulk of the deployment occurring in California, Massachusetts and New York, Wood Mackenzie said.
“The fourth quarter of 2023 was extremely strong for the US energy storage market, helped by easing supply chain challenges and declining system pricing,” said Vanessa Witte, senior analyst at Wood Mackenzie.
The storage boom has been helped in part by the drastic drop in costs. In the fourth quarter, battery prices fell rapidly, largely due to lower-than-expected demand for electric vehicles in the US and EU, and an oversupply of lithium raw material for batteries.
“According to the Wood Mackenzie report, Chinese OEMs are selling DC blocks at aggressively low prices, undercutting their competitors to gain market share. “However, this pricing pressure is not enough to make all developers move away from a more traditional integrators complete AC block solution.”
Since last summer, the price of lithium batteries has plummeted about 50%, according to Contemporary Amperex Technology Co. Limited (CATL), the worlds largest battery manufacturer. As of early summer 2023, publicly available prices ranged from $0.11 to $0.13/Wh, i.e. $110 to $130 per kWh. Goldman Sachs predicts that these price reductions will make electric vehicles as affordable as gasoline vehicles, leading to a surge in demand.
Although the grid-scale segment grew 98% year-on-year in terms of capacity deployment, Wood Mackenzie warns that this growth curve is not likely to continue.
“Growth flattens in 2025 and 2026 as project capacity shifts to the later years of the forecast, largely due to early-stage development challenges such as permitting and siting difficulties, and interconnection deadlines,” says the report.
For its part, Wood Mackenzie expects the residential segment to grow to 2.1 GW annually in 2024, while ICCs are expected to install 1.2 GW annually. He stated that the emergence of storage incentive programs and the transition to NEM 3.0 in California will support the growth of distributed storage in the coming years. He also highlighted the strong growth of distributed energy storage in Puerto Rico.
“Energy storage has unique capabilities to address grid resilience, with the ability to serve as generation, charging and transmission. These benefits to the grid have been evident, especially in recent years, as storage has provided reliability and stability during critical times such as historic heat waves. With a strong pipeline of projects, the future of energy storage deployment is bright,” said John Hensley, vice president of markets and policy analysis at American Clean Power. |
