Navigant Research Blog

With A123 Buy, NEC Reveals Its Storage Strategy

— March 27, 2014

NEC has made a major play for a global energy storage system (ESS) business, specifically targeting the Chinese market and information technology (IT) and telecom sectors by acquiring A123 Energy Solutions to create a new company, NEC Energy Solutions.

NEC is no stranger to the grid storage market.  The company is using batteries from Automotive Energy Supply Corp. (AESC), similar to those installed in the Nissan LEAF, for both utility-scale storage (2 MW will be commissioned in Italy by Enel Distribuzione shortly) and the residential storage market.  It has also developed a residential system targeting the Japanese market with a 5.5 kWh home ESS.

There are three pieces to this transaction that will change the storage market going forward.  First, NEC is slated to establish a partnership with A123 Systems’ parent company Wanxiang to target the Chinese storage market.  Having a local partner will set NEC apart from other lithium ion (Li-ion) cell and system vendors targeting China.  Second, the acquisition includes A123 Energy Solutions’ ALM product line, a 12V Li-ion uninterruptible power supply (UPS) product housed in the same form factor as a traditional lead-acid battery.  This, coupled with NEC’s success and relationships in telecom and IT, will put the new company in a strong position to target the UPS market.

Finally, although A123 Energy Solutions has focused on the utility side of the meter using A123 Systems cells, NEC has experience on the customer side and also has its own Li-ion chemistry that’s manufactured in volume by AESC.

Storage Combinations

Navigant Research’s Advanced Batteries for Utility-Scale Energy Storage report forecasts that the market will reach $17 billion in 2023, with Li-ion taking a $7.8 billion share.  This estimate is strictly for the sale of ESSs to customers on the utility side of the meter, not on the customer side.  By definition, it excludes telcos, data centers, and other forms of commercial, industrial, and residential storage.  Navigant Research believes that the telecom market for Li-ion hit an inflection point last year, reaching $100 million in annual revenue, and is poised to grow quickly.  Regardless, NEC Energy Storage will have stiff competition in nearly all of these markets from major Li-ion cell manufacturers such as LG Chem and Samsung SDI.

What can we look forward to from NEC Energy Solutions?  A123 Energy Solutions will bring software, controls, and integration expertise, three facilities in the United States and China, a portfolio of existing installed storage assets, and any new orders to the table, whereas NEC’s strength lies with data, analytics, IT, and the cloud.  In fact, NEC’s original concept for the storage market revolved around the energy cloud.  It makes sense that NEC Energy Solutions would combine the two areas of expertise to deliver new product lines and cultivate new business models.

As a 114-year old company with 270 subsidiaries in its corporate umbrella and total annual sales in the last fiscal year of $30 billion, NEC has the resources and business relationships to use the A123 Energy Solutions acquisition as the platform for building a global business.

 

Turning Point for Renewable Energy Storage

— November 11, 2013

There are two schools of thought regarding the use of advanced energy storage to integrate renewables.  The first is that there is a huge total addressable market for advanced energy storage systems (ESS) when it comes to helping grids cope with variable generation – the challenge is finding the right business model.  The second school of thought is that, although the market for integrating variable generation is sizable, ESS is being displaced by traditional power plants and the business case for ESS is actually quite challenging – not the least because the technology itself is still expensive.

At Navigant Research, we split the difference.

Yes, there is a sizable market for advanced storage to integrate renewables.  Our logic, as laid out in the Navigant Research report, Energy Storage for Wind and Solar Integration, is that the volume of variable generation resources coming online in the next 10 years will have both a direct and an indirect impact on the market opportunity.   Although only a fraction of the amount of wind and solar installed represents the total addressable market for ESWS, the more wind and solar installed, the greater the need for ESWS overall.

Next week, I will have a chance to learn more about how both technology and energy companies are addressing this market for renewable energy storage.  I’m looking forward to participating in the International Renewable Energy Storage (IRES) conference, in Berlin, mainly because we are at the point where a market starts to take shape and begin its upward trajectory, or it flatlines and is forgotten.

Instability Ahead

Grids can cope with modest amounts of variable generation, without special consideration for integration.   Many industry stakeholders cite a tipping point – anywhere from 15% to 30% variable generation – after which the stability of the grid system is threatened.   The reason why this range is so wide is that no one really knows what will happen.  We’ve never done this before.

What we do know is that larger and better interconnected systems (such as those found in Germany) can handle more variable generation without special considerations whereas smaller, more isolated systems (such as Puerto Rico, Hawaii, and the islands of Okinawa, Japan) have a lower tolerance for variable generation without incorporating firming resources.

In our base scenario, we estimate a 5,490.52 MW market for advanced ESS in 2023, which is a tiny fraction of the total wind and solar market between 2013 and 2023.  Even at this modest level of market penetration, the market for advanced energy storage is $10.3 billion in 2023.

Variable Generation Forecast and ESWS Market Penetration Scenarios, World Markets: 2013-2023

IRES 2013 will provide the opportunity to hear from vendors and energy companies such as Younicos, Furukawa, Gildemeister, and E.ON on the progress being made to resolve some of these challenges and carve out a larger market for renewable energy storage.

 

In Energy Storage, Power-to-Gas Seeks a Market

— August 22, 2013

There are no clear technology winners when it comes to energy storage for wind and solar (ESWS) integration.  This is partly because the energy storage sector hasn’t seen the mass-manufacturing, low cost, and commoditization to be expected from a leading technology.  That could change with the expansion of materials-based storage, specifically systems that rely on gas instead of electrochemistry (electrolysis is an electrochemical reaction, but the product, gaseous hydrogen, is the energy carrier).

Gaseous storage – specifically compressed air and hydrogen – accounts for a little more than one-fifth of the total energy storage market, with 4,616 megawatts (MW) forecast to come online in the next 10 years.  This assumes a business-as-usual scenario; if the demonstration projects in Germany and other parts of Europe prove successful, we could see much more accelerated market growth for these technologies.

New Installed Capacity of Energy Storage for Wind and Solar Integration by Technology, Base Scenario, World Markets: 2013-2023

 

(Source: Navigant Research)

With power-to-gas technology (wherein the hydrogen generated is pumped directly into the natural gas grid, or is methanized into syngas and then pumped directly into the gas grid), hydrogen has an advantage over other technologies because the cost of actually storing the energy is at, or close to, zero.  Most of the hydrogen market will be composed of the power-to-gas variety; however, passive electrolyzers paired with small wind and solar PV will also take an increasing share of the ESWS market toward the end of the forecast period.

On the other hand, because the benefits of hydrogen storage are absorbed by the entire gas system, building a business case for power-to-gas systems may be more challenging.  Under the base scenario in Navigant Research’s report, Energy Storage for Wind and Solar Integration, hydrogen will account for 9% of ESWS installed capacity in 2023 and 6% of market revenue ($574.84 million) in the same year.  The market will be led by Europe and parts of North America, which are already funding power-to-gas projects.

The compressed air energy storage (CAES) market, meanwhile, will be led by a handful of promising startups with modular or cavern-based technologies, including SustainX and General Compression, that require little to no natural gas.  Although CAES will take 13% of the market in terms of installed capacity by 2023, the technology’s low marginal cost of energy means its market share in terms of revenue will be about half that of installed capacity – coming in at 5% of the market ($549.05 million) in 2023.

That said, gaseous storage has a low marginal cost of storage, is comprised mostly of inexpensive components (particularly in the case of modular CAES), and offers the benefit of bulk storage without an unwieldy footprint.  If these companies can devise financing and business models for the ESWS market, gaseous storage could overtake advanced batteries.

 

China Moves Beyond Solar

— August 21, 2013

Solar PV panel manufacturers, who have had a rough few years, have recently had reason to celebrate.  The European Union has reached an agreement with Chinese solar panel exporters to avoid the dumping of cheap, state-subsided panels from China in the European market. For years, European makers have charged that China is subsidizing the manufacture of panels, leading manufacturers to sell below cost and  making it impossible for non-Chinese companies to compete.

China is investing heavily in clean energy, and it doesn’t stop at solar PV.  Total electricity consumption in China was forecast to increase an average of 8% per year between 2010 and 2015.  Energy consumption as a portion of GDP is expected to decrease by 16% per year during the same period.  China has a binding target for renewable energy consumption – in 2010, this target was 8.4% of energy consumed; in 2015, this target is 11.8 % of energy consumed.  Considering the increase in overall energy consumption, this should be a windfall for renewables and technologies, such as wind forecasting and energy storage, that optimize renewables and make the grid more efficient.

China has no intention of importing these technologies; it’s building export industries.  The country is currently executing its 12th Five-Year Plan, and the State Council published the supporting Energy Development Plan in January 2013.  China’s R&D pipeline includes wind, solar thermal, distributed energy generation, and storage.

Only One Winner

China is looking to leverage its lithium ion battery manufacturing base to supply the grid storage market. Chinese energy storage vendor BYD already has 18 projects for its containerized, grid-scale, lithium iron phosphate energy storage product.

According to Navigant Research, the EU market for storage (including applications as varied as bulk storage, ancillary services, community/residential storage, and microgrids) will reach $736 million this year and is expected to grow 10-fold to $7 billion by 2018.  Germany Trade and Invest estimates that the market is much larger, and that the global market for energy storage solely for the purposes of solar PV integration will be worth $17 billion by 2019.  Regardless, the market potential is enormous, and China clearly aims to grab a major share.

Unfortunately for the global economy, everyone loses in this scenario except for China.  Under the recent agreement, Chinese solar PV will have a minimum price, or a price floor.  A price floor is less efficient than letting the market decide the best price for solar panels, but considering that dumping results in a market failure, this is the best Europe can hope for.

European, North American, and Japanese battery firms that are targeting the storage market ‑ including SAFT, Altairnano, and Sony ‑ should beware. China’s coming.

 

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