Battery energy storage systems are rechargeable battery systems that store energy from renewable energy sources such as solar arrays or the electric grid and provide that energy to end-users. Battery energy storage systems mainly include lithium-ion batteries because of their high energy density. Asia Pacific is the major hub for global lithium-ion battery manufacturing, and China is the world’s largest lithium-ion battery manufacturer. The outbreak of COVID-19 has impacted the battery energy storage market as major lithium-ion manufactures are facing issues with a shortage of components and raw materials from lower tier suppliers in the country. One of the key market opportunities is the fall in prices of lithium-ion batteries in recent years. The cost of lithium-ion batteries could fall up to USD 160 per kWh by 2025, which will create new growth opportunities for the energy storage market in the long term. The other key growth opportunity during the COVID-19 outbreak for the market is planned projects and investment in grid-scale battery energy storage projects in North America, Europe, and Asia Pacific regions from 2020 to 2023.
MarketsandMarkets projects that the global battery energy storage market size is projected to grow from USD 5.7 billion in 2020 to USD 7.3 billion by 2021 during the forecast period. The growing need for continuous power from critical infrastructure sectors such as hospitals, data centers, military zones, and government cantonment zones has helped drive the demand for continuous power and energy storage systems.
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The battery energy storage market is driven by the need to integrate renewable energy sources and rural electrification. However, the increasing government focus on healthcare and economic slowdown due to the COVID-19 outbreak will undoubtedly act as a major restraint for the market growth. The energy storage sector is expected to get revival from government stimulus packages and extension of tax credits. These initiatives will further create opportunities for battery energy storage operators to implement projects continuously.
Lithium-ion batteries dominate the current market for utility-scale battery storage in the world. Due to the COVID-19 pandemic, according to the NREL, technological innovations in lithium-ion chemistries and improved manufacturing capacity have resulted in a steep price decline of over 70%, and prices are projected to decline further which will create new growth opportunities for the energy storage market in the long term. The other key growth opportunity during the COVID-19 outbreak for the market is planned projects and investment in grid-scale battery energy storage projects in North America, Europe, and Asia Pacific regions from 2020 to 2023.
The utilities segment, by application, is dominating the battery energy storage market, and the trend is anticipated to continue during the forecast period as well. According to the US EIA and NREL, utility-owned battery energy storage systems play a crucial role in the operations of current and future energy generation mix of a country. In addition to the system flexibility they provide, battery energy storage systems also offer reliable interconnections in neighboring power systems. The utility-owned segment is mainly being driven by increasing financial incentives and regulatory supports from the governments globally.
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In terms of geographic coverage, the battery energy storage market is segmented into four regions due to the COVID-19 outbreak, namely North America, Europe, Asia Pacific, and Rest of the World (RoW). The Rest of the World includes regions such as South America, Middle East, and Africa. Asia Pacific is projected to dominate the market during the forecast period due to the increasing demand for battery energy storage systems for grid balancing and rural electrification activities in China, India, and Japan. However, the COVID-19 outbreak brought China’s battery energy component production to a standstill. North America is the second largest market. The US is also facing supply chain issues as it mainly sources battery parts from China.
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