News Release

Advanced lithium-ion technologies on track for record annual investment

More than $350 million was invested in advanced lithium-ion technologies during the first half of 2019. This figure sat at just over $600 million for the whole of 2018, indicating that 2019 will be a record year for expenditure, according to Wood Mackenzie's 'Global energy storage outlook, Q3 2019'.

As the demand for lithium-ion batteries continues to grow, future battery price reductions will be driven by manufacturing ramp-up, improvements in battery energy density and advancements in commercialising advanced lithium-ion technologies.

“Since 2018 the market has seen significant investments in advanced lithium-ion technologies from automotive giants and oil companies alike. Investments have focused on developing batteries that are cobalt-free and use alternate electrode materials or solid-state electrolytes. While not all these technologies will become successful, several of them will make their way into the electric vehicle (EV) and storage markets in the coming years,” said Mitalee Gupta, Wood Mackenzie Analyst.

The pricing differential between LFP and NMC has reversed

Where LFP used to be more expensive than NMC, now the opposite is true. In the future, this differential is expected to shrink as NMC price declines continue to be driven by demand from EVs and energy density improvements.

“While the nickel-manganese-cobalt oxide (NMC) batteries outperform lithium iron-phosphate (LFP) batteries in terms of energy density, the storage market is seeing is lot more interest in LFP.

“In 2018, the demand for NMC batteries from both EVs and the energy storage industry outstripped the available supply, as cell manufacturing capacity couldn’t keep up with the rapidly growing demand. While there was a shortage of NMC batteries in the energy storage market, there were plenty of LFP batteries available - with capacity mostly housed in China.

“As lead times for NMC availability grew and prices stayed flat, LFP vendors began tapping into NMC-constrained markets at fairly competitive prices, thus making these LFP batteries an attractive option for both power and energy application.

“More recently, attributes like improved cycle life, better safety and oversizing ratio have begun to impact the choice of chemistry for different energy storage applications and market segments” added Ms. Gupta.

Global battery manufacturing capacity to increase four-fold by 2026

Planned battery manufacturing capacity expansions are expected to grow to just over 770GWh by 2026. This includes all types of lithium-ion sub chemistries.

“More than 50% of this manufacturing resides in China today and the country will continue to dominate the market in the future.

“Other key markets, including Germany, Sweden, Hungary and Poland, will ramp up production starting in 2021 as Asian and European battery OEMs open new manufacturing facilities and expand production in existing facilities.

“In the west, the U.S. will continue to see further investments in battery manufacturing capacities underpinned by growing demand from EVs, as well as the energy storage industry,” said Ms. Gupta.

Global annual storage market at risk of contracting in 2019

As 2018 was a bumper year for energy storage deployments, high expectations were placed on 2019. Continued annual growth is unlikely for this year.

The global market has slowed down in key regions that saw 2018’s boom, namely South Korea and China. These countries have been plagued with fire incidences, as well as policy and regulatory changes. The US and European markets are also struggling to get capacity on the ground in 2019. Capacity is being pushed to 2020, 2021 and, in some cases, even further out.

Beyond 2019, the global outlook is on the up.

Wood Mackenzie expects 4GW/8GWh of energy storage to be deployed globally in 2019, with these numbers increasing to 15GW/44GWh in 2024.

“The energy storage industry in the Asia-Pacific region is still at an early stage of development. China’s storage market slowed in the first three quarters of 2019, primarily due to policy change. South Korea’s storage market continues to stagnate due to continuous fire incidents. However, Australia’s storage market is on track to hit targets in 2019 and is expected to grow three-fold in 2020. The rest of the Asia-Pacific market is beginning to pick up.

“In the US market, hidden beyond the overall surge in forecasted five-year deployments is an industry hitting growing pains, as the reality of supply chain constraints, regulatory hurdles and performance and safety concerns are set to push back some 2019 and 2020 projects. The market is expected to bounce back quickly from this near-term slowdown by accelerating in 2021, driven by large-scale utility procurements targeting GWs of storage – often paired with renewables – over the next three to five years.

“We are at a crossroads in the UK and Germany. Frequency markets have saturated. Now players are looking for other opportunities. In the UK market, intraday and balancing offer an interesting proposition. In Germany, there are interesting opportunities behind the meter, such as peak shaving and self consumption.

“Germany continues to lead the residential storage market, while Italy is seeing continued growth – partly due to regional subsidies and a favourable tax regime,” said Rory McCarthy, Wood Mackenzie Senior Analyst.

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The Global Energy Storage Outlook is available to Wood Mackenzie Energy Storage Service subscribers. Learn more about the report here.

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