The battery energy storage system market is projected to grow from USD 2.9 billion in 2020 to USD 12.1 billion by 2025; it is expected to grow at a CAGR of 32.8% from 2020 to 2025. Increasing demand for continuous power and energy storage systems in critical infrastructures, adoption of grid energy storage solutions, grid modernization efforts, and increasing usage of lithium-ion battery based energy storage systems due to its excellent features are among the factors driving the market for battery energy storage systems. The report covers the battery energy storage system industry segmented into element, battery type, ownership, connection type, energy capacity, application, and geography.
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COVID-19 impact on the battery energy storage system market
The battery energy storage system market has historically been subjected to significant growth due to the rise in demand for battery energy storage systems in the utility sector. However, the outbreak of the COVID-19 pandemic has resulted in a decline in the growth rate.
As a result of COVID-19, the expected growth of several application segments of the battery energy storage system market is expected to decline as it is restricting the supply of batteries and other components and the adoption due to severe disruptions in businesses and the global economy. The current situation has impacted the supply chain of the energy industry, particularly renewable energy technologies and battery energy storage systems. The key components of battery energy storage systems are mainly manufactured in Asia Pacific. The COVID-19 situation has exposed the overdependency on the region for key raw materials, especially China. The business of the energy storage system manufacturers in the US, Germany, and Australia has been adversely affected by the shutdown of operations in China and other Asia Pacific countries. It has also resulted in limited production leading to a serious decline in business inputs. The recovery depends on government assistance as well as the level of corporate debt and how the companies and markets cope with the low demand. The current demand for utility-owned energy storage systems is largely affected by the COVID-19 pandemic. Most of the projects in China, the US, Germany, and South Korea are operational and are used for integrating renewable energy power generation and grid balancing operations. However, some of the companies are facing short-term operational issues due to the limited availability of workforce. In addition, the per capita income of individuals has also been affected due to the pandemic, which has consequently declined the demand for residential battery energy storage systems. However, in countries such as India, where power cut is a major issue, battery energy storage systems have been used as a backup energy source during power shortage. However, there is no major surge in demand.
It is expected that the demand would increase in the coming years, and the market would recover by 2022. The deployment of battery energy storage in upcoming projects in the utility sector will support the recovery of the market. After the recovery phase, the market is expected to grow at a moderate rate until 2025.
Opportunity: Requirement of continuous power supply in datacenters
Datacenters use an uninterrupted power supply (UPS) to provide power to loads in emergencies when the main power supply fails. Battery energy storage systems play an important role in eliminating electricity fluctuations in datacenters. The combination of battery energy storage systems and UPS ensures continuous power supply to designated critical loads when utility disturbances or outages are detected. This leads to a rise in demand for UPS from large datacenters. This, in turn, is anticipated to fuel the demand for energy storage systems based on lithium-ion and lead-acid batteries. The BMS software monitors the charge/discharge functions of batteries by ensuring that UPS batteries are optimally charged. The monitoring data gathered and displayed by BMS is useful for datacenter operators.
Challenge: Ongoing disruptions in supply chain of energy generation industry and delay in ESS projects caused by COVID-19
The outbreak and the spread of the COVID-19 have impacted the energy industry supply chain, particularly renewable energy technologies and battery energy storage systems. The key components used in battery energy storage systems are mainly manufactured in APAC. The pandemic has exposed the overdependence of the world on the region, especially on China, for key raw materials. Manufacturers of energy storage systems in the US, Germany, and Australia are severely impacted by the shutdown of operations in China and other countries of APAC. The key battery energy storage system manufacturers and operators such as LG Chem (South Korea) are making efforts to shift their supply chain base outside China to reduce their dependence on the country. Moreover, countries and companies worldwide might shift to new and other energy storage technologies such as PHS, CAES, and flow battery solutions to avoid any further delays in project completions and be prepared for such situations in future.
APAC accounts for the largest market size during the forecast period
APAC held the largest battery energy storage system market share in 2019, followed by North America and Europe. The market in APAC mainly comprises developing economies, such as China and India, which have tremendous potential for installation of energy storage projects due to increasing renewable energy integration. APAC is expected to witness plans for electrification in remote areas, which are majorly off-grid in several countries. The use of residential energy storage technology will enable to increase access to electricity for these remote and island communities in the region. The battery energy storage system market in APAC is highly competitive with the presence of established players. These players are continually upgrading their product portfolio with the launch of technologically advanced energy storage products.
Some of the major battery energy storage system manufacturers based in Asia Pacific are Samsung SDI (South Korea), LG Chem (South Korea), Hitachi (Japan), Panasonic (Japan), and NEC Corporation (Japan).
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