What’s New in the BESS Market in 2022

Tom Harries reviews what’s changed this year in the BESS market

Price and supply volatility in 2022 has forced operators and manufacturers to refine their approach to BESS. Higher material and battery prices this year have delayed the growth of manufacturing capacity and encouraged the exploration of alternative cathode chemistries. Energy price volatility in wholesale electricity markets means operators can expect higher revenues from BESS sites through to 2023. Seeking to maximise energy efficiency and mitigate fire risk, cells are getting bigger and cabinets more modular. A difficult market in 2022 may prompt the emergence of a more robust BESS value-chain.

In providing critical grid services, such as ancillary services, frequency regulation, peak shaving and energy arbitrage, widespread adoption of BESS is essential to increasing the proportion of renewables connected to the grid. Global BESS capacity is projected to exceed 1 terrawatt-hours by 2030, requiring more than $262 billion in investment.[1]

Rising Prices and Revenues

Battery prices rose in 2022 for the first time in ten years. BloombergNEF reports that batteries now cost $135/kWh, up 2% from 2021.[2] One of the drivers is the underlying cost of materials. For example, the cost of lithium has risen 470% from 2021 to $79,600 per ton.[3] At the same time, demand for battery metals is forecast to jump by 50% this year to 4.8 million metric tons.[4] Andy Tang, head of storage at Wärtsilä, identified a 25% increase in the base cost of BESS systems over the last year.[5]

Rising prices are only a near-term limiting factor on BESS. They are expected to delay, rather than curtail, adoption of the technology. Material supply shortages are expected to resolve within the decade. Lithium supply is projected to expand over 300% by 2030.[6] More mining and recent discoveries of large lithium deposits, such as at Thacker Pass, Nevada, promise a significant expansion in the long-term supply of lithium.[7] Higher battery sales within the decade will also drive down costs through economies of scale and manufacturer innovation.

For investors, the hit on returns from a higher capex is smoothed by expected higher revenues from soaring wholesale power prices in Europe and North America. BESS projects generate revenue from multiple sources within their ‘revenue stack’. One source is price arbitrage: charging at low prices and discharging at high prices. Day-ahead BESS price spreads have broadly tripled across major European energy markets since 2020 and are likely to experience significant growth during extreme price volatility this winter.[8]

Delayed growth for manufacturing capacity

Global battery manufacturing capacity has expanded beyond East Asia thanks to a glut of new factories opening this year. Major battery factories opening or under development include Tesla’s Berlin Gigafactory, the 60 gigawatt-hours Northvolt Drei gigafactory in Germany and the iM3NY factory in New York.[9]

Europe is projected to emerge as a major BESS manufacturer this decade. It is expected to host 25% of total manufacturing capacity by 2029.[10] While most plants in Europe under construction have been delayed within the last year, these deferrals are short-term. Currently, only the Farasis-Daimler joint venture in Germany is delayed for more than six months.[11]

Commodity price rises have encouraged BESS developers to adopt and explore different battery cathode chemistries. Battery storage systems increasingly use lithium-phosphate-iron (LFP) cathodes over nickel-manganese-cobalt (NMC) cathodes. LFP batteries are safer but less energy-dense than NMC batteries. For BESS projects, safety and high nickel and cobalt prices have encouraged the switch to LFP. In 2021, Tesla began to switch its Megapacks from NMC to LFP.[12] Other suppliers, including Fluence and BYD, have announced similar transitions this year.[13]

High lithium prices have also encouraged the development of alternative battery chemistries. Several start-ups like Group1 and Invinity are experimenting with non-lithium batteries, such as potassium-ion and vanadium redox flow batteries (VRFB) respectively.[14] In August, Invinity energised a 1.8 megawatt-hour VRFB at the European Marine Energy Centre test site in Scotland.[15] If developed and scaled, alternative battery types could compete with lithium-ion batteries in the energy storage market.

Modularity in cell and cabinet design

Storage design increasingly favours modular battery cabinets over large containers. For example, the Fluence Cube and Trina Storage’s Elementa Battery Cabinet. Battery cabinets are smaller and more modular than battery containers (think shipping containers); the Fluence Cube, for example, is five times more modular than previous manufacturer releases.[16] A Modular design makes it easier to integrate individual batteries within a large storage system. This shortens transport and assembly times, as well as enabling fast access to batteries for maintenance and replacement.

This modularity also reduces installation times associated with battery cabinets. Trina Storage claims that the Elementa achieves a 70% reduction in installation time compared to earlier models.[17] Shorter installation times lowers capital expenditure (capex) costs in the construction phase; in the case of the Elementa, Trina Storage claims this saving can be as much as 5% of all capex costs.[18]

Battery cells, such as CATL’s CTP 3.0 prismatic cell battery and the BYD Blade, are evolving to meet a market demand for higher levels of efficiency and safety essential for the widespread use of lithium-ion battery systems. The larger size of prismatic cells over the more common cylindrical cells means they contain as much energy as 20-100 cylindrical cells with fewer electrical connections to the wider battery system.[19] These fewer connections entail fewer points of failure for manufacturing defects or electrical faults, therefore mitigating the risk of thermal events. Similarly, the BYD Blade’s large surface area helps it to dissipate heat. This apparently makes it more resistant to thermal runaway, high temperatures and overcharging.

[1] https://about.bnef.com/blog/global-energy-storage-market-set-to-hit-one-terawatt-hour-by-2030/
[2] https://about.bnef.com/blog/global-energy-storage-market-set-to-hit-one-terawatt-hour-by-2030/
[3] https://www.energytoolbase.com/newsroom/blog/etbs-battery-energy-storage-system-supply-chain-and-pricing-report-q2-2022
[4] https://about.bnef.com/blog/race-to-net-zero-the-pressures-of-the-battery-boom-in-five-charts/
[5] https://www.energy-storage.news/bess-cost-base-has-gone-up-25-year-on-year-says-wartsila/
[6] https://www.mckinsey.com/industries/metals-and-mining/our-insights/lithium-mining-how-new-production-technologies-could-fuel-the-global-ev-revolution
[7] https://www.mckinsey.com/industries/metals-and-mining/our-insights/lithium-mining-how-new-production-technologies-could-fuel-the-global-ev-revolution
[8] https://www.mckinsey.com/industries/metals-and-mining/our-insights/lithium-mining-how-new-production-technologies-could-fuel-the-global-ev-revolution
[9] https://www.teslarati.com/tesla-giga-berlin-impresses-jefferies-and-ubs-factory-visit/; https://northvolt.com/articles/northvolt-drei/; https://www.energy-storage.news/north-americas-only-pure-homegrown-battery-gigafactory-serving-ev-and-bess-sectors-opens-in-new-york/
[10] https://insideevs.com/news/517931/europe-plans-38-battery-factories/; https://www.pveurope.eu/energy-storage/green-economy-battery-manufacturing-coming-europe
[11] https://www.electrive.com/2022/05/04/bitterfeld-wolfen-is-cancelling-contract-with-farasis/
[12] https://insideevs.com/news/563506/tesla-transition-ess-lfp-batteries/
[13] https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/metals/032222-nickel-market-turmoil-spurring-ev-price-hike-switch-in-battery-chemistry-panel
[14] https://cen.acs.org/energy/energy-storage/Start-up-Group1-seeks-commercialize-potassium-ion/100/web/2022/07; https://www.electrive.com/2021/11/13/ses-unveils-hybrid-li-metal-battery-cell-and-factory-plans/
[15] https://invinity.com/flow_battery_plus_tidal_green_hydrogen_orkney/
[16] https://blog.fluenceenergy.com/energy-storage-safety-fluence
[17] https://energystoragepro.com/2022/05/10/trina-storage-launches-the-all-new-elementa-battery-cabinet/
[18] https://www.electricaltimes.co.uk/trina-storage-unveils-elementa-an-industry-leading-lfp-battery-cabinet-at-intersolar/
[19] https://www.laserax.com/blog/prismatic-vs-cylindrical-cells

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