Energy storage plays an essential role in the transition towards a carbon-neutral economy. Energy storage supports balancing power grids and saving surplus energy. It improves energy efficiency by integrating more renewable energy sources into electricity systems. Expansion and innovations in storage will also help enhance US energy security and produce a well-functioning internal market with lower prices for consumers. Although energy storage is not new, the demand for it has increased significantly as environmental impacts in this sector have become more apparent.
Storage technologies can provide backup power during outages, meet peak demand when power prices are high, or even help the grid adapt to unexpected fluctuations in power generation. The use of energy storage allows for flexibility when handling any changes that may be caused by the increase in renewable energy production. Energy storage provides utilities and consumers with a range of new alternatives for managing energy and increasing the reliability and stability of the grid. These storage technologies will help with the integration of renewable resources as the demand for cleaner alternatives continues to rise. Energy storage consists of a broad range of technologies, including electrochemical batteries, compressed air, pumped storage hydropower, and thermal storage. Pumped-storage hydropower (PSH) is the most common form of energy storage in the United States, where it accounts for 95% of utility-scale energy storage.
According to Forbes, energy storage deployments in the U.S. shattered records in 2020, even with the unprecedented challenges posed by COVID-19 and the economy. The U.S. Energy Storage Association expects continued innovation and growth in the storage industry in 2021 and beyond. Kelly Speaks-Backman, CEO of Energy Storage Association mentioned that we are just beginning to see the industry grow at a rapid pace, with expectations of at least 3.6 GW of battery storage to be installed in 2021 (compared to an estimated 1.275 GW installed in 2020). This accelerated growth is a direct result of the decline in battery costs, the shifts within the regulatory system, and the overall understanding of the benefits of energy storage. As new technologies for energy storage are emerging, opportunities for financing will become more apparent and readily available. Although some financiers are still wary about the strength of future cash flows for these assets, it is expected that equipment costs will continue to decrease making new storage technologies more accessible and profitable. Assets with storage added capabilities are becoming more common as coal-fired plants across the US are retired.
Energy storage can provide environmental benefits such as helping integrate more renewable energy into the electricity grid. Electricity storage can increase efficiency, reducing the need to rely on less efficient generating units. Additionally, the added capacity provided by electricity storage will reduce the need to build additional power plants or transmission/distribution infrastructure. Potential negative impacts of electricity storage depend on the type of storage technology. For example, batteries use raw materials such as lithium and lead, and they can present environmental hazards if they are not disposed of or recycled properly. Ultimately, storage is an enabling technology. It allows consumers to save money, improve reliability and resilience, integrate generation sources, and help reduce environmental impacts. TRUELight works with a diverse mix of clients and our experts are in the commodity markets every day and will keep you on top of the trends and energy market fundamentals.