Table of contents
Ayming Institute : the think tank of the Ayming Group.
The Ayming Institute (AI) aims to help leaders in the private and public sector gain a deeper understanding of the evolving global economy by focusing on three areas.
The first area is sustainability. We believe that the environment and social responsibility are critical issues for businesses today. For this reason, our content aims to help companies integrate these issues into the way they make decisions.
The second area is business development. Through our content, we wish to help companies to develop a stronger business culture and a sustainable approach to growth.
The third area is the people side of the business. With our content, we want to support individuals as they navigate their careers, learn new skills, and find ways to contribute in a world that is constantly changing.
Our strongest commitment is to help organizations better understand how markets are changing, and how they can build better businesses as a result. We aim to do this by providing analysis of the global economy’s transformation; sharing our insights through thought-provoking publications, and engaging business leaders in conversations about the economic changes that are affecting all of us.
Introduction
As the climate emergency forces the pace of decarbonisation of power around the world, geopolitics in Europe is accelerating the transition to renewables. By
weaponising Russian oil and gas supplies and prices, the war in Ukraine has exploded assumptions about energy security.
The economic shocks have forced changes in calculations around the phasing out of fossil fuels. This new energy crisis has pressed the need to ensure the stability of national grids as they become increasingly reliant on renewable sources subject to intermittent supply. Although advances have been made in optimising grid management and expanding storage, progress – as with decarbonisation of energy systems generally – has been inadequate.
Almost all electricity is transmitted and consumed as it is made. Until now, most of the rest has been lost. The cost of renewable energy has dropped dramatically, making it cheaper than power from fossil fuels. But so long as it costs more to store electricity than produce it, the economics of energy storage will impede the transition to a zero-carbon energy system.
Wind and solar power are complementary and, in combination, can partly compensate for lulls in generation by one another. Demand response, whereby consumers are incentivised to cut consumption in peak periods, can help mitigate the risk of blackouts too. But the electrification of economies, from industry to transportation, will drive massive demand that will need to be met at times of peak as well as low usage.
As production of solar and wind energy grows, the parallel development of storage capacity is also required. The need for more efficient, robust and flexible storage technologies is more urgent than ever.
Rising renewables
The transformation of the global power system is underway, but the path to net zero by 2050 is steep.
Zero or low-emission energy sources (wind, solar, hydro and nuclear) generated 38% of the world’s electricity in 2021. Wind and solar together provided over a tenth (10.3%) for the first time, up from 9.3% in 2020. This is more than double their joint market share (4.6%) when the Paris agreement was signed in 2015.1
Both sources set new records in 2021. Wind generation rose by 14% (the highest since 2017), and solar by 23% (the highest since 2018). However, their combined growth rate of 17% was slower in 2021 than the average 20% year-on-year growth of the last decade. And the scale of the conversion required is colossal. Wind and solar combined are now the fourth-largest source of electricity in the world. Fossil fuels still generated 62% of global electricity: mainly coal (36%) and gas (22%). There is still a mountain to climb, as the pace of decarbonisation cannot avert global temperature rises above the 1.5-2°C range envisaged in the Paris Agreement.
The International Energy Agency (IEA) is forecasting that five times more renewable power capacity being installed in the five years to 2027 than in the past two decades.2 Renewables, led by solar, will eclipse coal as the world’s largest source of electrical power by 2025. Russia’s war on Ukraine has sparked a sharp rise in both public and private investment in clean energy. The IEA has upped
its previous global forecast by 30% and lays out an accelerated trajectory for a further 25% growth. But it still predicts that the EU will be some considerable way off its net zero track to 2050. Renewables should make up 55% of the European electricity mix by 2026 – not the 69% share needed to meet the goals of the RePowerEU plan.
The rapid scaling up of energy storage systems will be critical to address the variability of wind and solar photovoltaic (PV) electricity as their share of generation increases rapidly. Backup energy will be required to meet demand during lulls of wind and solar inputs, particularly during weather stress events such as winter wind droughts that occur when wind speeds over the North Sea are low.
By 2050 the UK’s demand for electricity could be met entirely by wind and solar energy supported by large-scale storage. All viable and flexible sources need to be tapped by the power sector – including smart grids and demand-side response, as well as new and existing storage solutions.
Expanding storage
Energy storage must expand rapidly to support the buildout of renewable energy systems.
Global demand is booming. Compared with 2021, installed energy storage is set to grow 15-fold by the end of 2030, according to BloombergNEF.3 In capacity terms, that would be 411GW (or 1,194 gigawatt-hours) – a projection that excludes pumped hydro storage (currently the largest single form of energy storage) and electric vehicle (EV) batteries.
Another market forecast expects cumulative storage deployments to reach 500GW by 2031.4 With up to 160GW forecast for Europe, consultants Wood Mackenzie warned in July 2022 that demand in the region was lagging behind the two leading markets
claiming 75% of forecast global energy storage capacity – the US, which is set to deploy 600GW, and China with 422GW.
Although regulatory barriers have stalled improvement in the project economics for energy storage, in Europe and elsewhere these are now being dismantled to accelerate the shift to renewable power. Meanwhile, the US is doubling down on storage expansion through Biden administration’s Inflation Reduction Act. In Asia Pacific, China is driving the rapid scaling of the market through its 14th five-year plan for developing new energy storage.
Storing technologies
Energy storage technologies can be categorised into five classes: electrochemical (including batteries), chemical, electrical, mechanical and thermal. Within each, the technological readiness of the different contenders varies, along with scalability and flexibility. Such flexibility is required over various timescales: daily, weekly and seasonal. While the discharge time for batteries may be a matter of hours, for pumped-hydro storage the timescale may range from a few hours to several months, meeting seasonal flexibility needs. Given that commercial viability is also governed by the needs of the application and various national/regional factors (such as market structure, regulation, topography, grid configuration, and energy mix) as well as cost and efficiency, a range of storage types and technologies will need to be deployed worldwide.
Batteries
Battery storage installations are increasing fast. They grew by 60% in 2021, taking global capacity close to 16GW. More than 6GW of capacity was added worldwide, including a gigawatt+ in each of the main markets – US, China and Europe.5
Most of Europe’s battery energy storage is distributed rather than grid-scale. The UK is a leader in the residential market, which is forecast to grow 10-fold this decade.6 Home battery installations are being driven by the adoption of solar PV systems and EVs. As well as reducing the need to invest in high-power transmission and substations, a more decentralized power grid is more resilient and better able to respond to extreme weather events and outages. Batteries are grid-scalable and will provide most of the world’s storage growth. A 44-fold increase is needed by 2030 to keep the world on track to net zero, according to the IEA. That would see annual expansion of over 80GW to 2030 – taking total installed capacity to 680GW.
Batteries are typically used for sub-hourly, hourly and daily balancing. Lithium ion is the most widely deployed cell technology. The real price has declined by about 97% since the commercial introduction of this battery type in 1991. A 2020 study found the decline was even greater when energy density was taken into account, and reported improvement rates were underestimated.7
Battery pack prices are set to increase for the first time in a decade due to the rising costs of raw materials, not least lithium. Lithium (Li) and many of other critical minerals are relatively rare, finite, and environmentally destructive to extract; it is estimated that more than 350 new mines are required to meet expected 2035 demand for graphite, lithium, nickel and cobalt.8
Strategically, China has a strong hold on reserves, refining and manufacture of Lithium. Escaping the claws of the Russian bear, Europe could leave its grids and gigafactories at the mercy of the Chinese Li-ion. But investors and governments are backing various emerging cell technologies and other ways of storing energy given its central importance to the net zero transition.
Other cell technologies
There are other risks and drawbacks with Li-ion batteries, such as high flammability and manufacturers’ understandable focus on supplying the huge EV market. A race is underway to develop alternative battery technologies that will be cheaper and better suited to other applications. Some are still lithium-based – lithium-sulphur, for example, and lithium-air, which promises the greatest energy density. However, promoters of other solutions insist that it will be impossible to scale lithium battery production to match the needs of the new markets.
Even if these technologies cannot surpass lithium for lightness and energy density, weight and scale are not such a disadvantage in static storage. For example, redox flow technology promises high efficiency and durability at affordable cost by storing energy in liquid electrolyte solutions that flow through electrochemical cells during charge and discharge.
Sodium cell technology has made great strides and is the alternative used by several ‘classic’ battery challengers such as UK-based Faradion.
Hydrogen
Although better-known for power applications from heavy industry to transport, hydrogen could provide another energy storage solution. Stored hydrogen can be converted back into electrical power via electrolysis.
Electricity provided by hydrogen storage is less than the input because of losses, with overall efficiency of around 41% currently assumed.
Power-to-gas projects show that alkaline or PEM electrolysers can ramp up output quickly to balance intermittent renewable generation. Existing gas networks are preparing to store and transport hydrogen. Massive quantities of hydrogen could also be stored close to large offshore wind farms in salt caverns, which are recognised for being gas tight and therefore suitable for hydrogen storage.
The capacity of this storage option depends on the size of the cavern and the pressure under which hydrogen is kept, nonetheless the UK has an estimated 7 TWh overall capacity for storing hydrogen in this way.
Pumped-storage hydro
Pumped-storage hydropower (PSH), a mechanical storage technology, is the most widely deployed grid-scale storage today. With total installed capacity around 160GW in 2021, PSH accounts for over 90% of total global electricity storage.
Hydropower can not only produce massive quantities of low-carbon electricity, its capabilities for providing flexibility and storage are unmatched. Its long-duration energy storage (LDES) extends to weeks and months as opposed to the multiple hours or days of other technologies. It also sets a high benchmark for ‘round-trip’ efficiency – around 80% of stored energy is recovered.
PSH plants store electricity by pumping water up from a lower reservoir to an upper reservoir and then releasing it through turbines when power is needed. By 2030, global capacity is forecast to increase by 7% (to 9TWh) – still more significant than battery storage after its 10-fold expansion. A further 3.3 TWh of storage capability could come from adding pumping capabilities to existing plants.9
Hydropower generally will require strong government backing to play its full role as expansion (led by China, India, Turkey and Ethiopia) slows compared with the previous decade.10
The Long Duration Energy Storage Council, launched at COP26, reckons that, by 2040, LDES capacity needs to increase to between eight and 15 times its current level — taking it to 1.5-2.5 terawatts (85-140 terawatt hours) — to enable a cost- optimal net zero energy system.11
Flywheels and gravity
Other mechanical systems include flywheels. In advanced form these retrieve energy as generators slow down the motion of dense metal objects spinning in magnetic fields.
The power of gravity can also be exploited for storage in multiple ways. Having grid-tested a 250kW tower system using 25-tonne weights in Edinburgh’s Port of Leigh, Gravitricity has scoped a former coal mine in the Czech Republic for a
4-8MW single-weight project. Part-funded by Innovate UK, it is also working on a multi-weight gravity system earmarked for a site in Yorkshire.
Liquid air
Liquid air energy storage (LAES) could be crucial to grid flexibility as it offers
long-duration energy storage. Renewable energy powers an air liquefaction plant, which compresses and cools air to -196C. The liquid air (or ‘cryogen’) is stored in an insulated tank at low pressure. When power is required, it is pumped at high pressure, producing gaseous air to drive a piston engine or turbine.
Highview Power Storage operated a grid-scale demonstration LAES plant in the UK for two years, and claims its CRYOBattery platform is entirely green, 100% mature and delivers efficient storage from four hours to multiple days. The company is building renewable energy power stations in Manchester and Yorkshire, with further projects promised in Spain and Australia.
Thermal
Thermal energy storage technologies utilise latent heat, thermochemical or ‘sensible heat’ storage – directly raising the temperature of a solid or liquid, and releasing it as required.
For example, the Horizon-funded AMADEUS pathfinder project (2017-2019) developed a new type of ultra-high temperature thermal energy storage (UHTES) using ‘phase change materials’ (PCMs) and thermophotovoltaic (TPV) electricity generation. PCMs absorb heat from sources as they melt and release it as they solidify. This latent heat is stored at temperatures over 1,000°C and converted back to electricity on demand using TPV.
Electrical
The final, and fifth, category used for energy storage technologies is electrical.
Superconducting magnetic energy storage (SMES) and supercapacitors are comparatively immature technologies. Their relatively low energy density and high cost make them less suitable for long-term storage applications. SMES so far promises more of a short-term buffer solution, such as for grid stability in transmission systems.
Several types of capacitors can also smooth voltage from wind farms or provide short-term storage. Apart from charging and braking energy-recovery applications in the automotive sector, they mainly provide UPS (uninterruptible power supply) back-up.
UK funding for energy storage innovation
Government incentives will help to drive the development of energy storage innovation in the UK. In recent years the UK government has offered a range of funding opportunities to support energy storage. Some of these are dedicated funds, while others include energy storage as part of a wider remit. These opportunities are summarised below:
Other funding
The news that the UK has re-joined Horizon Europe (September 2023) has opened up a €95.5 billion R&D budget for 2021-2027. Energy storage projects may share up to €25 million available via Pillar 2 / Cluster 5 of the EU’s flagship R&D programme. While relatively modest, this support covers the critical demonstration and pilot phases of technology development.
In the US, the Inflation Reduction Act, signed into law in August 2022, is a catalyst for investing in energy storage.12 Its investment tax credit for stand- alone storage is expected to boost the competitiveness of new grid-scale storage projects.13 Several states already had set binding targets for storage procured
by private utilities. In New York, for example, the governor in January 2022 committed to doubling the state’s energy storage target to at least 6GW by 2030.14
China, in July 2021, announced plans to install over 30GW of energy storage by 2025 (excluding PSH), an eight-fold increase on its installed capacity as of 2021.15
Securing the path to net zero
The climate emergency already required a faster transition to carbon net zero before the energy shock caused by war in Ukraine. With the US heavily invested in measures to meet the Paris Agreement, there is a fresh challenge as massive American and Chinese subsidies risk undermining the competitiveness of the continent’s cleantech sector.
Geo-political developments (and increasingly severe weather events) have only increased the need to produce clean energy in sufficient quantities. This will require a colossal scaling up of capacity, not just of renewables but also energy storage.
Ramping up the rate of deployment is essential to support the growing UK renewable energy system, meet the country’s challenging climate goals, and bolster energy security. This storage array must be robust and cost-effective, and capable of filling short-term and longer-term storage requirements.
UK strategy has to send the right signals to private investors as well as providing incentives to cleantech developers.
Storage will take various forms, exploiting a range of technologies – some still not yet mature – to fit the varying needs of the national energy system.
1 https://ember-climate.org/insights/research/global-electricity-review-2022/#global-trends-1-wind- and-solar-surpass-10
2 https://www.iea.org/news/renewable-power-s-growth-is-being-turbocharged-as-countries-seek- to-strengthen-energy-security
3 https://www.woodmac.com/press-releases/global-energy-storage-market-to-reach-500gw- by-2031/
5 https://www.iea.org/fuels-and-technologies/energy-storage
6 https://www.woodmac.com/news/opinion/europes-residential-energy-storage-market- to-expand-nearly-tenfold-this-decade/
7 https://pubs.rsc.org/en/content/articlelanding/2021/ee/d0ee02681f
8 https://source.benchmarkminerals.com/article/more-than-300-new-mines-required-to- meet-battery-demand-by-2035/
9 https://www.iea.org/reports/hydropower-special-market-report
10 https://www.iea.org/news/hydropower-has-a-crucial-role-in-accelerating-clean-energy-transitions-to-achieve-countries- climate-ambitions-securely
11 https://www.ft.com/content/4c8919a3-5d94-4772-9aa2-3d6186170009
12 https://www.energy-storage.news/energy-storage-industry-hails-transformational-inflation-reduction-act/
13 https://www.iea.org/reports/grid-scale-storage
14 https://www.utilitydive.com/news/new-york-to-double-energy-storage-target-to-at-least-6-gw-by-2030/616793/
15 https://www.reuters.com/business/energy/china-aims-install-over-30-gw-new-energy-storage-by-2025-2021-07-23/
