Tom Harries answers questions in a Q&A about battery energy storage systems (BESS)
Q: What is driving the massive growth in the BESS market over the past few years?
A: This is a question of supply and demand. On the demand side, the top-down policy is achieving net-zero fast enough to mitigate the effects of climate change. The bottom-up policies are country-level or state-level policies to support a higher penetration of renewables on the grid. BESS projects are also to supply the grid with capacity, frequency regulation, and voltage control, known as stacking revenue streams. Once combined these services provide enough income to warrant financing and building a BESS project. Renewable tenders in some countries reward developers for “firming” the power output of their proposals. In other words, valuing zero-emission generation when it is needed during peak hours. Other countries provide subsidies for batteries to provide capacity to the grid, effectively acting as backup power. Batteries are also used for capturing power price arbitrage. An example being, buying power when it is cheap and selling it when power is expensive, not forgetting the supply side where sharp reductions in the cost of batteries have turned BESS projects into commercially viable proposals in many markets. According to the learning curve, the more you make of something the quicker and cheaper it becomes. BESS developers are riding on the shoulders of the electric vehicle market where sales in the millions of lithium-ion-based EVs are bringing the volume to battery makers to move along the learning curve. According to BNEF, lithium-ion battery pack prices fell 89% from 2010 to 2020. Technology is also evolving with new chemistries and improved manufacturing techniques, all promising further cost reductions.