Morgan Stanley: US energy storage market could grow to 145 GWh with FERC support

Dive Brief:

  • A new report from Morgan Stanley argues that energy storage is underappreciated and will grow more quickly than “consensus expectation.”

  • Morgan Stanley sees a base case for the “addressable” U.S. storage market of about 85 GWh, but says that with favorable regulatory support from FERC, that number could nearly double to over 140 GWh. 

  • The report estimates that utilities, not individuals and businesses, will deploy most of the storage installed in the coming years because they are better positioned to reap the “collective benefits” from the multiple uses batteries can serve.

Dive Insight:

A key question in Morgan Stanley’s analysis is whether or not utilities will be given regulatory approval to deploy storage in the organized power markets that serve two-thirds of the U.S. population.  

That issue is under review by the Federal Energy Regulatory Commission, along with questions such as whether storage should be considered load or supply.

Morgan Stanley expects FERC will not allow utilities to deploy storage in competitive markets, and acting FERC Chairman Cheryl LaFeur supported that position in a recent dissent on a cost recovery decision. 

But analysts for the bank wrote that if it is wrong in its assessment, the addressable market for energy storage could by about 70% larger, to about 145 GWh in total. 

Morgan Stanley expects utilities to serve most of that emerging demand, reasoning is that single uses for energy storage, such as backup power for solar systems or arbitrage between peak and off-peak power prices, do not provide enough benefits to make storage economically viable for end users. Utilities, meanwhile, are in a better position to aggregate the benefits of storage across their systems.

If utilities are allowed to deploy storage in competitive markets, Morgan Stanley says the margins of competitive power providers could be threatened. The report cited Calpine, Dynegy, Exelon, NRG Energy and Public Service Enterprise Group as at risk.

On the other side of the trend, Morgan Stanley argues that Tesla and LG Chem will emerge as the “two dominant players” in the battery storage market.

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Filed Under: Generation Transmission & Distribution Solar & Renewables Energy Storage Distributed Energy Regulation & Policy
Top image credit: Lockheed Martin