Nearly 37 GW of new energy storage for microgrids capacity is expected to be installed globally over the next 10 years, generating approximately $40.1 billion in revenue, a report released Tuesday by Guidehouse Insights concludes.
"Innovation in business models and financing" in energy storage systems for microgrids "are key drivers propelling the market forward, and the most successful companies are unlocking the potential of these new business and financing models to reduce the risk and upfront costs to customers," Guidehouse Insights said in a statement.
"The fastest growing segment is commercial and industrial clients concerned with high utility rates in California and the Northeast," report co-author Peter Asmus told Utility Dive. In addition, while the leading storage technology for microgrids is the lithium-ion battery, that product may give way to flow batteries as microgrids seek longer-term storage, he added.
"Interest in microgrids with enabled energy storage is growing rapidly across stakeholder segments," with the addition of variable renewable generation into new and existing microgrids the main driver for adding storage, the report said.
"Microgrids are typically centered around generators providing electricity or combined heat and power that often run on natural gas or diesel," Guidehouse noted.
While energy storage is not required for these traditional microgrids, storage can provide benefits by reducing fuel consumption through the increased efficiency of fossil-fueled generators. But the integration of renewable generation is the key benefit provided by energy storage solutions for microgrids, the report said.
And there are several factors driving corporate pursuit of microgrids.
Not only is commercial and industrial interest in microgrids driven by utility rates, but also by the growing availability of energy-as-a-service options and reliability concerns during the Atlantic and Gulf Coast hurricane season and California’s wildfire season, Asmus, an associate director for utilities and energy company research with Guidehouse Insights, told Utility Dive.
Major energy storage vendors include Tesla with its battery products and controls technology, LG Chem and NantEnergy, which offers a zinc-air energy storage solution, Asmus said.
"The trend is not just a demand for batteries, but also for the software and technology to manage energy resources," Asmus said.
"Lithium-ion batteries are the dominant technology today. Ten years ago, it would have been lead-acid. For longer-term storage needs, microgrids may be more interested in flow batteries," Asmus told Utility Dive.
As technology preferences evolve. innovations in business models and financing will be key drivers in the growth in energy storage for microgrids, according to the report. Top competitors in the field will be the ones that can unlock those business and financing models to reduce customers’ risk and upfront costs, the report added.
"Looking ahead, the global market in [energy storage for microgrids] is expected to grow rapidly, with total annual capacity additions increasing from 650.4 MW in 2020 to 8,633.4 MW in 2029," Ricardo F. Rodriguez, research analyst with Guidehouse Insights, said in a company statement.