Battery energy storage systems (BESS) are a configuration of interconnected batteries designed to store a surplus of electrical energy and release it for upcoming demand. Offering practical solutions for addressing power intermittency challenges as the world transitions to greener sources of power generation such as solar photovoltaics (PV) and wind, BESS will be ‘critical in meeting future energy demand’, says Rystad Energy. The market analyst forecasts that ‘annual capacity additions will snowball in the coming years’, surpassing 400 GWh by 2030 and representing a 10-fold increase in current yearly additions.

Global BESS capacity additions expanded 60% in 2022 over the previous year, with total new installations exceeding 43 GWh, according to Rystad. A further 74 GWh is expected to be added this year – a 72% increase – primarily driven by cost reduction in BESS systems in addition to incentives in North America, government funding programmes in Europe, coupled with robust renewable capacity expansion in mainland China.

Rystad projects annual installations will surpass 400 GWh by 2030. Noting that GWh refers to the energy units, while GW is the unit of power, this correlates to capacity additions of about 110 GW by 2030 on a power basis, almost equivalent to the peak residential power consumption for France and Germany combined.

Government policies are playing an important role in incentivising investments and capacity expansion, according to Rystad. It says that last year’s US Inflation Reduction Act has catalysed renewable and clean tech expansion, boosting expected solar and onshore wind capacity by 40% and expected to add more than 20 GW battery capacity compared to before the Act. As result, the US battery capacity is forecast to exceed 130 GW by 2030.

Meanwhile, the European Green Deal Industrial Plan aims to accelerate the transition to a sustainable and low-carbon industrial sector in Europe, and supports BESS development in addition to local fundings for BESS developers – for example, a £32mn energy storage funding programme in the UK.

Elsewhere, China is committed to peaking its emissions by 2030 and ‘sees battery developments as a stepping stone to achieving that goal’, says Rystad. The country’s clean energy development will accelerate in the coming years, increasing the share of renewables in its power mix.

Rystad emphasises that ‘China’s coal capacity expansion primarily targets addressing energy security concerns providing the domestic power sector with sufficient flexibility to mitigate future energy crises. Average coal capacity factors in China have been declining steadily since 2010. Meanwhile, the country has matured its solar and battery production capacity and is expected to continue investing in local supply chain expansion to deliver on both domestic demand and the role China plays in the global export market across the low-carbon energy value chain.’

Annual BESS market installation is forecast to hit 110 GW by 2030, 58% of which will be developed in Asia. North America will account for about 20 GW and Europe will have 18 GW installed, with the remaining 8 GW from the rest of the world. ‘This is a shift from current trends, as the projected installation at the end of 2023 is expected to be dominated by North America, which will account for 45% of total BESS capacity,’ says Rystad.

Utility scale battery storage is required to address power security concerns in national and regional electricity grids. However, Rystad suggests that microgrids – self-contained, local power grids – ‘will become more prevalent and distributed power generation is set to dominate as primary energy sources such as solar and wind are not limited to specific countries or regions’.

It expects that: ‘Cost capacity additions will be at the utility level, but residential developments are also critical. Consumer power prices will drive standalone BESS growth in the short term, with residential battery installations set to grow alongside rooftop solar PV adoption. Countries with efficient and affordable solar energy production will emerge as pioneers in coupled-residential battery systems.’

Noting that the ‘residential market is lagging the utility segment globally’, Rystad believes that will change. ‘We expect residential adoption to grow in parallel and increase 10-fold, surpassing 41 GWh battery demand by 2030. Europeans are pioneers in utilising BESS in their homes, as tax credits and high-power prices during peak periods have motivated consumers.’