The global deployment of grid-connected energy storage will grow from 1.3 GW in 2016 to 4.7 GW in 2020 and 8.8 GW in 2025, according to a new report from IHS Markit.
In dollar terms, the market intelligence group sees the grid-connected storage market growing at a compound annual growth rate (CAGR) of 16%, with annual revenues of $1.5 billion in 2016 rising to more than $7 billion in 2025.
IHS project that the United States will be the largest market for energy storage with 1.2 GW of installations by 2020 and a CAGR of 21% from 2017 to 2025.
The growth of energy storage is being driven by rapidly falling lithium-ion module prices, which according to IHS have fallen 70% since 2012 and will fall below $200/kWh by 2019.
As li-ion prices continue to decline, IHS’ new report says previously uneconomical applications, such as the co-location of battery storage with solar panel, are becoming feasible.
Early on, the energy storage market was driven by single applications such as frequency regulation in the PJM Interconnection market or self-consumption in the German residential market. But since 2016, there has been a growing use of energy storage for capacity requirements, renewables integration and for microgrids, especially on island locations.
In the behind-the-meter market, system aggregation and demand response applications are allowing for revenue stacking, which can improve the economics of storage, the report says.
IHS expects a particularly strong behind-the-meter storage growth in markets such as California with its Self-Generation Incentive Program (SGIP) and revisions to net metering rules, which often spurs the growth of energy storage.
The report also sees strong growth for energy storage in South Korea, with utility programs for renewable integration and for energy storage in public buildings, and in Australia where companies such as Tesla and Lyon Group are planning large energy storage projects.