Grid-scale Storage

Countries and regions making notable progress to advance development include: 

• China led the market in grid-scale battery storage additions in 2022, with annual installations approaching 5 GW. 
• This was followed closely by the United States, which commissioned 4 GW over the course of the year. The Inflation Reduction Act, passed in August 2022, includes an investment tax credit for stand-alone storage, promising to further boost deployments in the future. 
• In its draft national electricity plan, released in September 2022, India has included ambitious targets for the development of battery energy storage. 
• In March 2023, the European Commission published a series of recommendations on policy actions to support greater deployment of electricity storage in the European Union. 
  

The total installed capacity of pumped-storage hydropower stood at around 160 GW in 2021. Global capability was around 8 500 GWh in 2020, accounting for over 90% of total global electricity storage. The world’s largest capacity is found in the United States. The majority of plants in operation today are used to provide daily balancing. 

Grid-scale batteries are catching up, however. Although currently far smaller than pumped-storage hydropower capacity, grid-scale batteries are projected to account for the majority of storage growth world wide. Batteries are typically employed for sub-hourly, hourly and daily balancing. Total installed grid-scale battery storage capacity stood at close to 28 GW at the end of 2022, most of which was added over the course of the previous 6 years. Compared with 2021, installations rose by more than 75% in 2022, as around 11 GW of storage capacity was added. The United States and China led the market, each registering gigawatt-scale additions.  

The grid-scale battery technology mix in 2022 remained largely unchanged from 2021. Lithium-ion battery storage continued to be the most widely used, making up the majority of all new capacity installed. 

The rapid scaling up of energy storage systems will be critical to address the hour‐to‐hour variability of wind and solar PV electricity generation on the grid, especially as their share of generation increases rapidly in the Net Zero Scenario. Meeting rising flexibility needs while decarbonising electricity generation is a central challenge for the power sector, so all sources of flexibility need to be tapped, including grid reinforcements, demand‐side response, grid-scale batteries and pumped-storage hydropower.  

Grid-scale battery storage in particular needs to grow significantly. In the Net Zero Scenario, installed grid-scale battery storage capacity expands 35-fold between 2022 and 2030 to nearly 970 GW. Around 170 GW of capacity is added in 2030 alone, up from 11 GW in 2022. To get on track with the Net Zero Scenario, annual additions must pick up significantly, to an average of close to 120 GW per year over the 2023-2030 period. 

Based on cost and energy density considerations, lithium iron phosphate batteries, a subset of lithium-ion batteries, are still the preferred choice for grid-scale storage. More energy-dense chemistries for lithium-ion batteries, such as nickel cobalt aluminium (NCA) and nickel manganese cobalt (NMC), are popular for home energy storage and other applications where space is limited. 

Besides lithium-ion batteries, flow batteries could emerge as a breakthrough technology for stationary storage as they do not show performance degradation for 25-30 years and are capable of being sized according to energy storage needs with limited investment. In July 2022 the world’s largest vanadium redox flow battery was commissioned in China, with a capacity of 100 MW and a storage volume of 400 MWh. 

While the past decade has witnessed substantial reductions in the price of lithium-ion batteries, it is now becoming evident that further cost reductions rely not just on technological innovation, but also on the rate of increase of battery mineral prices. The leading source of lithium demand is the lithium-ion battery industry. Lithium is the backbone of lithium-ion batteries of all kinds, including lithium iron phosphate, NCA and NMC batteries. Supply of lithium therefore remains one of the most crucial elements in shaping the future decarbonisation of light passenger transport and energy storage.  

Moreover, the impacts of Russia’s invasion of Ukraine are also apparent in the battery metals market. Both cathode (nickel and cobalt) and anode (graphite) materials are affected. Russia is the largest producer of battery-grade Class 1 nickel, accounting for 20% of the world’s mined supply. It is also the second and fourth largest producer of cobalt and graphite respectively.  

Ranging from mined spodumene to high-purity lithium carbonate and hydroxide, the price of every component of the lithium value chain has been surging since the start of 2021. 2022 saw the first increase in the price of lithium-ion batteries since 2010, with prices rising by 7% compared to 2021. Some relief was observed only in the first quarter of 2023. 

• In July 2021 China announced plans to install over 30 GW of energy storage by 2025 (excluding pumped-storage hydropower), a more than three-fold increase on its installed capacity as of 2022. 
• The United States’ Inflation Reduction Act, passed in August 2022, includes an investment tax credit for stand-alone storage, which is expected to boost the competitiveness of new grid-scale storage projects. 
• In September 2022, India released its draft National Electricity Plan, setting out ambitious targets for the development of battery energy storage, with an estimated capacity of between 51 to 84 GW installed by 2031-32. 
• In December 2022, the Australian Renewable Energy Agency (ARENA) announced funding support for a total of 2 GW/4.2 GWh of grid-scale storage capacity, equipped with grid-forming inverters to provide essential system services that are currently supplied by thermal power plants. 
• In March 2023, the European Commission published a series of recommendations on energy storage, outlining policy actions that would help ensure greater deployment of electricity storage in the European Union. 
  

Global investment in battery energy storage exceeded USD 20 billion in 2022, predominantly in grid-scale deployment, which represented more than 65% of total spending in 2022. After solid growth in 2022, battery energy storage investment is expected to hit another record high and exceed USD 35 billion in 2023, based on the existing pipeline of projects and new capacity targets set by governments.  

The most significant investment in new pumped-storage hydropower capacity is currently being undertaken in China: Since 2015, the vast majority of final investment decisions for new capacity have been take there, with additions far exceeding those in other regions.