Grid-Scale Battery Storage: Green Energy’s Next Big Thing

Intermittency is the renewables curse. If the sun isn’t shining or the wind isn’t blowing, green generation grinds to a halt. Frustratingly, sometimes there’s too much of both. If the grid can’t bear all the clean energy flowing in at peak periods, it gets curtailed – disconnected and dumped.

Grid-scale battery storage could be the answer. Keep enough green electrons in stock for rainy days and renewable energy starts looking like a reliable replacement for fossil fuels. Or so the thinking goes.

Until recently, the battery energy storage system (BESS) market has been plagued by long development timelines and uncertain use cases.

Recently, something’s changed. BESS growth forecasts are skyrocketing and advances in battery chemistry are releasing shackles of scalability and cost.

Will grid-scale storage fill the next stable of tech unicorns?

Table of Contents Table of Contents

1. Key Takeaways
2. Charging up for Growth
3. Hockey Stick Additionality
4. Hunting Green Unicorns
5. The Innovation Story Unfolds
6. Hydrogen
7. Three Grid-Scale Battery Startups to Watch
8. The Bottom Line
9. FAQs
10. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. Charging up for Growth
3. Hockey Stick Additionality
Show Full Guide
4. Hunting Green Unicorns
5. The Innovation Story Unfolds
6. Hydrogen
7. Three Grid-Scale Battery Startups to Watch
8. The Bottom Line
9. FAQs
10. References

Charging up for Growth

Up until 2020, grid-scale storage was a promising category in a fragmented marketplace.

Governments have shown interest but investors have been wary, put off by technical complexity and the years of R&D required to make new BESS solutions viable.

A form of BESS called pumped storage hydropower (PSH) has been around for more than a century, but it relies on water stored in a reservoir on a hill. When needed, the water flows downward and powers a turbine. It works, but it’s constrained.

As Chloe Coates, Research and Analysis Lead at Zero Carbon Capital, notes in this 2023 blog, PSH is ‘geographically limited.’

“Most of the suitable sites have already been developed, and it has long regulatory and construction timeframes.”

Enter large-format lithium-ion (Li-ion) batteries. What started as a trickle of installations in 2012 has leaped to wide deployment as grid-level storage assets.

Li-ion’s relative cost-effectiveness, modularity, and short build times are some of the reasons why BESS is on a hockey stick trajectory. Innovation, energy policy, and geopolitics are doing the rest.

Gorka Arrieta Eguia, product owner at Spanish clean energy startup RatedPower, told Techopedia that advances in lithium batteries “have improved their efficiency and decreased their degradation, thus increasing their useful life. There are already companies like China’s CATL advertising batteries with hardly any degradation in the first years of usage.

“Advances in sodium and solid-state battery technology, which are safer and have less environmental impact, are also very promising.”

Meanwhile, he adds, industry bodies and governments around the world are promoting the use of batteries through legislation, markets, and support to make them more profitable.

“All this makes them increasingly more profitable and more feasible.”

Hockey Stick Additionality

What’s driving the growth?

The 2022 US Inflation Reduction Act aims to fuel the transition to renewables by adding over 20 GW of battery capacity by 2030, catalyzing renewable energy investments, and boosting solar and onshore wind capacity along the way.

The EU’s Green Deal Industrial Plan calls battery storage a ‘strategic net-zero technology,’ while the UK’s ‘Battery Strategy‘ earmarks GBP 32 million for funding energy storage projects.

In China – the center of global battery production – companies with a reputation for intense competitiveness and innovation get an extra jolt from domestic policies that mandate on-site battery storage for large wind and solar installations.

Meanwhile, the broader shift to renewables has gained new urgency thanks to Ukraine and the political desire to decouple the West’s energy consumption from Russia. A slowdown in electric vehicle sales also has battery manufacturers looking for new markets.

As a result, VC money has flowed in.

Hunting Green Unicorns

According to Net Zero Insights (NZI), a market intelligence firm, private investment in the battery storage sector has surged nearly tenfold since 2015 – more $106 billion all told, with lithium-ion battery companies claiming 70% of the total.

According to Mercom Capital, the five largest VC funding deals for energy storage in the first half of this year were:

VC interest looks to have dipped recently, though NZI says this probably reflects a new phase of industry maturity. Battery firms are trading on the legitimacy they’ve earned in the EV market and opting for public market and debt financing, represented by deals like the $4.7 billion Automotive Cells Company (ACC) raised in February of this year.

Bigger opportunities are attracting bigger financial players.

The Innovation Story Unfolds

There are a number of possible formats and technologies. Policymakers are betting big that together they can advance the renewables transition.

In April, International Energy Association (IEA) Executive Director Fatih Birol said batteries will play “an invaluable role in scaling up renewables while delivering secure and sustainable energy for businesses and households” – a tall order.

Lithium-ion technology has proven itself and is still in the lead, but it’s less scalable than some of the alternatives (if you need more Li-ion capacity, you need to install more Li-ion batteries).

With demand surging and lithium supply chains feeling the squeeze, other technologies are now in the spotlight. These include:

Hydrogen

Hydrogen’s potential for powering the grid has drawn a lot of attention.

Renewable energy can be used to spur electrolysis and create ‘green hydrogen’ from water. The H is then pumped into a fuel cell to generate power or burned to create hot air and turn a turbine.

Hydrogen can be stored in unlimited quantities and burned using the tech already installed in gas-fuelled power plants (with some adaptation).

The downside is a round-trip efficiency (RTE) of around 30%. In practice that means only about a third of the power consumed by liberating the H from 2O finds its way back to the grid.

Analysts say RTE is a key factor determining which of these technologies is best placed to augment or replace Li-ion.

The batteries and supporting technologies that optimize or reduce RTE are likely to get more attention, as will those that fit the needs of data centers, the number one source of power consumption growth.

Three Grid-Scale Battery Startups to Watch

1. RatedPower

The Spanish renewable energy startup creates software that helps engineers model and optimize the design of grid-scale battery storage systems for renewable generation plants.

In 2022 it was purchased by Enverus, the world’s largest energy software company.

2. Terralayr

The Swiss startup aims to aggregate Europe’s grid-scale storage assets virtually with software, creating what the company calls “the world’s first energy cloud.”

In October 2024, it raised CHF 64 million from a consortium of VCs, including Earlybird, Norrsken,  Creandum, Earlybird, Picus, and Norrsken.

3. Thaleron

UK-based Thaleron has developed a mechanical energy storage system using established technologies, which give utilities and industrial users ‘more affordable options’ for battery storage.

The company raised $ 12.7 million from six investors in a seed round last year.

The Bottom Line

To achieve net-zero, the IEA estimates that global installed battery storage capacity will need to grow from its current ~200 gigawatts to a full terawatt by 2030 to five terawatts by 2050.

The opportunity for grid-scale storage looks to be massive, though RatedPower’s Arrieta Eguia notes the obstacles that need to be overcome.

“Batteries will face price cannibalization, supply and price squeezes on raw materials, plus the uncertainty that governs the world.”

We’ll soon see which technologies, countries, and companies are best placed to navigate them.

FAQs