Battery Energy Storage Systems Market Analysis

Large-scale battery storage systems are the “hidden champion” of the energy transition and a critical pillar of green power generation: they provide the flexibility essential to the new power system. Our recent market assessment shows where battery storage will be particularly needed in the coming years.

The common goal of the players in the energy transition is clear: the complicated term ‘decarbonization of power generation’ describes the shared intention to advance climate-friendly energy production. However, some implications of the energy transition are neglected in the debate. As traditionally generated energy, such as gas or coal, declines, the system loses the ability to consistently produce electricity on demand (so-called dispatchable baseload generation). It also becomes more dependent on natural factors such as wind or solar radiation (so-called intermittent power generation). Adding on to this, more industries are becoming electrified, which in turn causes higher electricity demand peaks. All this shows the gaining importance of additional flexibility capacities to minimize the risk of power supply disruptions. It can compensate for fluctuations in energy generation and ensure a reliable power supply, thus providing the flexibility that is crucial for the new power system.

What makes BESS the ‘BES[S]T’ technology?

Currently, battery storage systems (often abbreviated BESS for Battery Energy Storage Systems) are the best technical solution to this challenge. Batteries offer a number of advantages over comparable technologies, such as a fast activation time, high efficiency during charging and discharging, and –compared to other storage technologies – a low price. In short, they are fast, efficient, and cheap.

Policy targets, such as the REpowerEU 2022 program, contain clear targets for the expansion of electricity generation capacity per renewable energy source. In contrast, however, there are hardly any transparent policy targets for flexibility technologies, especially for batteries. However, such targets and the resulting investment would certainly encourage faster expansion. A market analysis conducted by Pelion Green Future creates transparency by evaluating the ten largest European electricity markets based on their electricity expansion targets until 2030.

Balancing market size and attractiveness

The assessment contrasts two factors: How attractive is the market for battery storage? And what demand do we expect for electricity in 2030? Market attractiveness describes the intersection of flexibility in demand and supply. Demand is measured by the expected share of volatile renewables – wind and solar – in the electricity mix. Supply consists of three technologies that enable flexibility: dispatchable baseload generation, peak capacity, and bidirectional flexibility capacity.

For a comparison at country level and a transparent ranking, factors were assigned and evaluated in each case for the electricity mix targets in 2030 and for the expected changes in storage expansion. All resulting factors are combined into a final score.

The result of the market assessment is not only a transparent ranking of the top ten markets for battery storage, but it also shows five clusters of future market movements: Champions, High Potentials, a Nuclear Nation, an Attractive Niche, and Limited Potentials.

Champions: the UK and Germany lead the rankings

Germany and the United Kingdom, which lead the battery storage market in terms of current operating capacity, perform particularly well. According to this analysis, Germany is the largest and most attractive market, ranking first. The Federal Republic plans to increase the share of electricity generated from wind and solar energy by 40 percentage points by 2030. The planned coal phase-out and the limitation of the expansion of capacity from gas-peaking plants, which currently provide a stable power supply, add to the good scores in market attractiveness. The United Kingdom comes in second, with an ambitious plan to achieve 70-80 percent intermittent renewable electricity by 2030. The UK also plans to phase out coal but will continue to rely on gas in the coming years. As a result, gas will still account for 10-20 percent of the electricity mix in 2030.

An attractive niche: The Netherlands

As the graphic shows, the Netherlands presents an interesting contrast: In terms of market size, the country ranks only ninth, but in terms of market attractiveness, it ranks third. The target of 95 percent wind and solar power by 2030 represents a remarkable 70 percentage point increase in the share of renewables in the power mix. The only limitation to the growth of the battery market in the Netherlands is the current high interconnection capacities, which exceed EU requirements.

The great potentials: Spain and Italy

In addition to the current market leaders, Spain and Italy are emerging as important markets for battery storage systems. Spain ranks fourth in terms of both market size and attractiveness. The country’s baseload gas supply will decline significantly, by as much as 25 percentage points, and zero percent gas peaking power is expected by 2030. However, Spain has the highest share of pumped hydro capacity of all the countries studied. Italy ranks fifth in terms of market size and attractiveness. Among all the countries studied Italy uses the most gas in baseload supply. The share is expected to drop from about 60 percent to 40 percent by 2030. The only reason Italy loses points on the attractiveness scale is the above-average percentage of capacity exchanges with neighboring countries.

The nuclear nation: France stands out

The discrepancy between market size and attractiveness makes France stand out as an outlier. While the country is the second largest market in the analysis, it ranks only eighth in attractiveness. Most of France’s electricity comes from nuclear power. Targets for intermittent renewables by 2030 are rather low, at 27 percent of the electricity mix. In combination, this results in little need for flexibility capacities in the form of storage systems.

Limited potential: Poland and the Nordic countries (Sweden, Finland, and Norway).

While the study shows market opportunities for the expansion of storage systems, it also shows where there is currently little demand. Poland, for example, ranks sixth in terms of attractiveness and eighth in terms of market size. The main reason is Poland’s late coal phase-out in 2049 – a full 19 years later than most of the other countries surveyed. The Nordic countries – Sweden, Finland, and Norway – also offer limited opportunities for expansion, with only a small increase in the share of electricity from wind and solar power expected by 2030. This is mainly due to the widespread use of renewables, especially hydropower, which account for a large share of the energy mix.

By Martin Körner and Katharina Prantl