https://www.smart-energy.com/industry-sectors/storage/covid-19-could-derail-energy-storage-growth-says-wood-mackenzie/
[Where a country like Canada has both builders and customers for
(electrical) energy storage technology, interest rates are low, we will
be looking for opportunities to create jobs in weeks to months to come,
and we have an opportunity to displace fossil fuel (notably coal and
natural gas) use for electricity generation, this could be a solid
opportunity for decreasing GHG emissions within the country. But, that
would take a plan and enough support to overcome the oil and gas
industries' continuing bleating for more government assistance despite
ongoing subsidies for decades past and massive profits up until a month
ago. The question is, who has the motivation and resources to move
energy storage forward now.]
COVID-19 could derail energy storage growth says Wood Mackenzie
Apr 6, 2020
If coronavirus containment measures continue to curtail movement of
goods and people through Q2 this year, alongside an economic downturn,
the market impact could trim Wood Mackenzie’s 2020 global energy storage
deployments forecast by 19%.
This equates to a 3GWh reduction over the year. Notably, this would
still make 2020 a record-breaking year with 12.6GWh deployed.
Wood Mackenzie’s early estimates indicated a 10% lithium-ion battery
supply reduction, mainly due to China’s work restriction measures.
Le Xu, Wood Mackenzie Senior Research Analyst, said: “As this happened
in China, Japanese and South Korean facilities ramped up to capitalise
on the shortfall. As of March, restrictions have been lifted and
production facilities in China are now at 60% to 70% of pre-virus levels.
“As such, the major risks to battery supply have been somewhat
mitigated. A similar story has panned out for inverters where major
supply risks have also, so far, been alleviated. However, mitigation
efforts will likely see the battery supply chain accelerate. This will
have far-reaching implications, not just for energy storage but for the
global economy too.”
A recession for 2020 is looking imminent and outside of installation
restrictions there will be additional downward pressure on demand as
consumers spend less on luxury high-cost items, such as residential
energy storage.
“For large scale projects, particularly in markets where energy storage
is predominantly a merchant play, financiers’ appetite for this type of
asset is already being reduced. Final project investment decisions will
be pushed further out to when market conditions make the
risk-return-ratio for this asset class more palatable.
“On the other hand, interest rates are being slashed to record low
levels. This may be a silver lining for financially borderline projects,
with lower costs of capital available to help to tip them into the
investable category. This will be of particular interest to merchant
projects currently seeking finance that typically rely on high-cost
equity capital” said Rory McCarthy, principal analyst at Wood Mackenzie.
The global energy storage market contracted for the first time last
year, falling from 6.2GWh in 2018 to 5.3GWh in 2019. This contraction
was primarily due to market declines in South Korea, China, the UK and
Canada, according to Wood Mackenzie’s analysis.
Despite slowdowns in key markets and this year’s coronavirus crisis, the
industry should return to growth in 2020.
“It did not take long before cracks appeared in South Korea’s
unbelievable 2018 market growth. Since breaking the market record for
most storage deployed in a single year, 28 fire incidents were reported,
pulling this bull market into a 70% year-over-year decline. 2019 saw
over 1GWh in annual deployment reductions – enough to put a generally
slow year into the red in growth terms.
“The reality of the risk involved in energy storage revenue streams, and
the general lack of revenue options, hit deployments in China, the UK
and Canada. One of China’s largest players exited the market and the
Xinjiang government cancelled around 400MWh of projects
post-procurement,” said Xu.
McCarthy added: “The UK was slowed by a saturated frequency market and a
behind-the-meter business case still in disarray as the regulator resets
the country’s demand charge regime. The Canadian market is dominated by
Ontario’s Global Adjustment charge, a relatively small market, so
participants have exited this market or reduced deployment ambitions.”
Looking ahead to the next five years, the global energy storage industry
is set to thrive due to opportunities presented by the energy
transition. Wood Mackenzie expects the global market to grow 13-fold to
230GWh by 2025. Additionally, the total energy storage investment pot is
projected to increase from $18 billion (€16,6 billion) in 2019 to $100
billion (€92.6 billion) by 2025.
“The energy storage market is anything but predictable. As it continues
to mature, more credible pipelines are developing.
“China, Australia and the US all have grand ambitions to deploy
gigawatts’ worth of energy storage each year out to 2025. We expect
these to be the key global growth markets over the outlook period.
“The US will begin pushing ahead of the pack as utilities’ procurement
of storage, particularly solar-plus-storage under the near-term
Investment Tax Credit window, drives the lion’s share of deployments.
Additionally, behind-the-meter (BTM) deployments will continue to surge
in the incentive-heavy US.
“We also see growth returning to other key global markets, and taking
off in other nascent markets, although deployment volumes will be
overshadowed by the three leaders,” said McCarthy.
Looking ahead, one trend to keep an eye on post-2020 is hybrid energy
storage.
As noted in Wood Mackenzie’s analysis, one-third of all storage deployed
in 2019 was part of a hybrid system. Although deployments of wind-paired
projects were negligible in 2018, they tied with solar in 2019.
McCarthy added: “In 2018 and 2019, we began to see a more commercially
viable hybrid storage market take off.
“Solar-paired storage was the clear winner in 2018, with 582MWh deployed
against wind-paired at 57 MWh. However, in 2019, these two technologies
were deployed in equal amounts (227MWh).
“We expect solar-paired storage to take over in the coming years, as
decision-makers overseeing policy and procurement processes come to
regard it as a lower-cost option versus wind-paired storage.”
--
Darryl McMahon
Freelance Project Manager (sustainable systems)
COVID-19 blog: https://www.econogics.com/blog.htm
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