Pike Research anticipates that among the various application segments in this market, the integration of renewable energy—primarily wind power—will represent approximately 50% of the total capacity deployed for long duration energy storage. The firm forecasts that load leveling/peak shifting will represent 31% of the total market, followed by arbitrage (12%) and T&D upgrade deferral (7%).

The energy storage market is currently limited by a number of factors, Pike notes, including:

• Inflexible electricity market structures;
• Displaced cost and benefits (i.e., assets owned and managed by one party, while some benefits are accrued by another);
• Difficulty in commoditizing some of the benefits of energy storage;
• High CAPEX; and
• Technology costs.

On the other hand, the market for energy storage is being driven by inherent instability in the grid; instability due to renewables integration; high transmission and distribution costs coupled with pressure for expansion; strict power quality obligations; moderated feed-in tariffs for renewables; legal requirements; and pricing that favors baseload generation or baseload generation equivalents.

Energy storage on the grid is reaching a turning point. Currently, a number of new technologies—and variations on ‘old’ technologies such as compressed air and pumped storage—are being demonstrated in countries around the world. The market is ripe with opportunity and utilities, grid service providers, and equipment suppliers are all intensifying their efforts in the energy storage arena.

—research analyst Anissa Dehamna

For the long-duration segment of the energy storage market, pumped hydro storage and advanced flow batteries will represent the largest portions of the total revenue opportunity during the next decade. Advanced lithium ion batteries, sodium sulfur (NaS) batteries, and compressed air energy storage (CAES) are other key technologies that will be utilized for bulk storage applications during the forecast period.

2010 vs 2011 forecasts. Pike made four major changes in the methodology it uses to forecast the value of the ESG market since the 2010 forecast (ESG-10):

• The load following application has been moved to the ancillary services market forecast, which is included in a separate report on that subject.

• The value of the ESG market is now measured by using the value of energy ($/kWh), not power ($/kW). The ESG market is focused on delivering energy; however, the ancillary services market is focused on delivering power. Thus, the ancillary services forecasts are based on a value of power ($/kW).

• The cost figures that Pike Research bases its forecast on have also changed. In December 2010, Electric Power Research Institute (EPRI) revised its methodology and cost figures for technologies within specific applications. Pike Research now uses the revised cost figures for bulk storage applications for each technology.

• Pike fine-tuned its forecasts for Europe and Asia Pacific. With more granularity in the regional analysis has come “a more nuanced interpretation” of the ESG market for Europe and Asia Pacific.

Aside from the amended market valuation, the installed MW figures for the ESG market have decreased compared to ESG-10. At the writing of ESG-10, the expectation for progress in the grid storage market was high. However, legislation, progress in modifying market structures, and even demonstrations have been slower to move forward. Therefore, the deployment projections for ESG were pared back to allow for more modest growth in the market up to 2016 and more significant sales toward the end of the forecast period. The figures in this report (ESG-11) also account for a longer project demonstration time and assume that only once technologies are demonstrated and proven will widespread adoption take hold.

Applications for ESG are primarily bulk storage applications. That, coupled with the change in forecasting methodology...has reduced the overall value of the ESG market vis-à-vis Pike Research’s projections in 2010.

—Energy Storage on the Grid (2011)

The Pike report notes that while industry players anticipate that economies of scale provided by the motive market for Li-ion will translate into lower costs for grid-scale applications, this has yet to happen. In addition, Pike notes, large-scale deployments of plug-in vehicles with large packs will not likely take hold until the middle of the forecast period.

Furthermore, although Li-ion batteries themselves are likely to come down in price thanks to advances in battery chemistry, certain expensive components for grid storage—such as inverters—will remain expensive and will not see such a rapid decrease in cost. Economies of scale for such components will rely on the number of installations, not the size of the project. These adjusted costs for Li-ion account for why the installed revenue of Li-ion is different from the ESG-10 forecast.

—Energy Storage on the Grid (2011)