1xAs the world races to bridge the widening gap between global warming and climate action, great faith is being placed in mitigation strategies such as renewable energy and electrification. Scenarios for keeping global temperature increases to within 1.5oC of pre-industrial times demand wind and solar sources do much of the heavy lifting by 2050, accounting in some models for 35% and 25% respectively of all electricity generation.[1]
Yet wind and solar power come with one significant caveat – unless fed into the grid for immediate use, storing the energy created from all those turbines and panels is a complex affair. Without adequate storage mediums, homes and industries could still find themselves deprived of energy at times when clouds obscure the sun or blades hang dormant in windless skies.
The obvious answer to this conundrum is utility-scale Battery Energy Storage Systems (or BESS), capable of containing electricity from renewable sources until needed for deployment, and this is an area where Abdul Latif Jameel Energy’s FRV is one of the rising pioneers.
With 2023 proving another year of record temperatures[2] and climate-related disasters[3] costing thousands of lives, it is little surprise that BESS facilities are experiencing a dramatic upsurge.
By 2030, mass energy storage systems around the world are forecast to reach a cumulative 411 GW – some 15 times the capacity that was operational as recently as 2021.[4] Ambitious investments are giving the entire market a much-needed jolt. In 2022 alone, more than US$ 5 billion was plowed into BESS facilities, triple the amount from just 12 months earlier. And this is merely the beginning; according to experts at McKinsey, by the end of the decade the BESS market could double from its present size to reach anywhere between US$ 120 billion and US$ 150 billion globally.[5]
The USA and China seem destined to remain pacesetters in the sector, likely hosting more than half of all such storage systems by 2030. However, the rest of the world is not standing idly by, and one region is particular is rapidly catching up with these industrial behemoths – Europe.
Before we begin examining the European continent’s embrace of utility-scale battery storage, it is worthwhile spending a brief moment on the technology underpinning the sector and its potential for turbo-charging the fightback against climate change.
A battery of solutions to energy storage dilemma
Utility-scale storage batteries connect to both power generation devices (predominantly wind turbines and solar panels) and transmission networks. Storage capacities range from several megawatt hours to hundreds of megawatt hours per installation. Some 95% of systems currently operate using lithium-ion batteries.[6] A single 40 MWh battery can save around 400 hours of grid congestion and approximately US$ 2 million in fuel costs.[7]
Grid-scale batteries have the potential to make massive cuts in the carbon footprint of the energy sector – a sector which accounts for more than 40% of all global CO2 emissions.[8]
Lithium-ion batteries have several distinct advantages over competing technologies, they:
- can be recharged thousands of times with only minimal performance decline,
- can be manufactured to any capacity,
- marry relatively low prices with an enviable safety record.
Modern lithium-ion technology is smart, too, designed to release optimum patterns of energy to the grid using bespoke algorithm-driven software.
The technology is ingenious and captivating, with systems charging then discharging power by transferring lithium-ions between electrodes. Lithiated metal oxides are commonly used as the cathode for storage, and carbon as the anode for extraction. Global business advisory McKinsey anticipates the entire lithium-ion battery chain growing 30% annually until 2030, attaining a market size of 4.7 TWh.[9]
Lithium-ion is far from the only technology promising to square the circle of dependable energy supplies from irregular renewable sources.
Sodium-ion batteries hold less energy than lithium-ion equivalents and have shorter lifespans but are one-fifth cheaper and could step in to fill the void if lithium supplies decline[10]. At least six new manufacturers began producing sodium-ion batteries in 2023.
Flow batteries produce energy via a pair of chemical components dissolved in liquid and divided by a membrane, using electrolytes to extract electrons. While less efficient compared to solid electroactive materials the technology does have utility-scale potential, already powering homes in the Chinese port city of Dalian with a 400 MWh, 100 MW flow battery.
Other innovations are waiting in the wings. Compressed air systems (releasing air from a pressurized container to spin a turbine), mechanical gravity batteries (allowing weighted blocks to descend from a tower, creating torque, during times of energy deficit) and even sand batteries (trapping heat in silos using sand as a high-temperature storage medium) are at different stages of development, ready to supplement the dominance of lithium-ion systems and showcase the versatility of energy storage concepts.
Whether the future of energy storage is governed by rare earth minerals, sand or gravity, one things is certain: Without a widespread battery infrastructure, society will never fully free itself from the shackles of fossil fuels. Batteries are the bridge that can ease our journey to a net-zero future and avert the most extreme consequences of climate change.
Legislators and lawmakers in Europe seem particularly aware of the importance of utility-scale energy storage, fueling market growth that can be summed up in one word – electrifying.
Power surge: Europe leads the way in battery storage
Europe is positively abuzz with new grid-scale BESS projects.
Across the continent in 2022, some 1.9 GW of new storage capacity came online from 170 separate projects, led by major expansions in the UK, France, Germany and Ireland. Final figures for 2023 are still being calculated, but forecasts for the year see new installations rocketing to 3.7 GW, for almost 100% annual growth.[11]
Much of 2023’s expansion came courtesy of the UK (+1,512 MW), Italy (+853 MW), France (+337 MW), Germany (+215 MW), Ireland (+205 MW), Lithuania (+200 MW) and Sweden (+112 MW).
A trajectory is now established, with even more rapid progress to come. If current plans come to fruition, at least 95 GW of new utility-scale BESS facilities are due for construction between now and mid-century across Europe. Such ambitions dwarf the 5 GW cumulatively installed as of early 2023, and together account for more than €70 billion of investment.[12]
Going forward, Germany, the UK, Greece, Ireland and Italy are expected to lead this charge. Such forecasts may prove just the tip of the iceberg, with 14 out of 24 EU countries yet to unveil their own targets for deployment of renewable energy storage facilities.
Performance will increase in tandem with capacity; batteries boasting 4+ hours of storage will comprise more than 60% of total installations by 2050, compared with just 22% in 2025.
The industry is maturing particularly quickly in the UK. Commodity analysts S&P Global argues that this is because the country established itself as an ‘early mover’ in the field. Back in 2016, the UK’s National Grid offered four-year, rapid-response contracts to eight projects encompassing 201 MW of energy – at that point, double Europe’s entire installed capacity.[13]
Momentum in the UK shows no sign of slowing down. Q4 2023 saw almost 420 MW of new battery storage projects come online across the country – the largest ever increase, and 13% more than the previous quarter. A total of eight major commercial-scale facilities commenced operations during this period. The surge brought operational BESS storage capacity in the UK to 4.6 GWh.[14]
So, what factors lie behind the soaring popularity of battery storage projects across Europe, and what lessons can we learn for spreading that enthusiasm around the rest of the industrialized world?
Policymakers firmly plugged in to BESS potential
Europe is in the midst of an energy crisis, with supplies of Russian gas declining by more than 80% in 2022 and wholesale prices of oil and gas rising 15-fold since 2021.[15] Increasingly, Europe is looking to renewable energy to plug the gap and ratchet down prices for consumers, and batteries are the natural solution for storing that electricity.
Just as advocates point to people’s wallets to make the case for batteries, they can also point to the skies.
Despite its relatively benign climate, Europe is not immune from experiencing the tangible impacts of global warming. Germany, Austria, Hungary, the Czechia and Slovenia are just some of the countries hit by flash flooding last year, the latter experiencing a month’s worth of rain in just 24 hours and suffering an estimated €500 million of damage.[16] Scorching temperatures across the continent triggered wildfires across Portugal, Spain and Greece. Meteorological incidents in Europe in 2022 caused some 16,365 deaths and affected a further 156,000 people.[17]
Yet, the main reason for the surging utility-scale battery market in Europe is a receptive policy environment encouraging the proliferation of such schemes.
The EU’s REPowerEU Plan aims to hasten the energy transition by setting the region’s renewable energy target to 45% by 2030[18]. It outlines clean energy infrastructure investments worth €800 million, including energy storage projects and cross-border compatibility via the Connecting Europe Facility (CEF) for Energy initiative.[19]
Announced in March last year, the European Commission’s (EC’s) Net Zero Industry Act – a pillar of the EU’s Green Deal Industrial Plan – aims to generate fresh capital for grid-scale energy storage projects by promoting the domestic manufacture of batteries.[20]
Published around the same time, the EC’s proposed reforms for Electricity Market Design (EMD) prioritize electricity storage systems in efforts to establish energy independence[21].
One strategy involves establishing national flexibility objectives for ‘demand response’ and storage, as well as greater energy sharing between states and wholesale markets.[22]
The broader Green Deal Industrial Plan also encompasses a Critical Raw Materials Act to strengthen the refining, processing and recycling of materials central to the green transition – including lithium, a key battery material, and other rare earth elements.[23]
Legislative coordination is already leaving a lasting legacy. Italy received the go-ahead late last year for plans to earmark €17.7 billion for constructing more than 9 GW of energy storage. In the Netherlands, meanwhile, German power company RWE AG is building a utility-scale battery facility to integrate its OranjeWind offshore farm into the grid. For its domestic market, RWE AG is also behind mega-battery schemes in Lingen, Werne and two other sites in North Rhine-Westphalia.[24]
The potency of legislative support for BESS schemes is already evidenced elsewhere in the world. As proof, one could study Australia’s AU$ 20 billion ‘Rewiring the Nation’ grid upgrade initiative, which had an exponential impact on the scope of utility-scale battery projects under construction[25]; or the USA’s Inflation Reduction Act of 2022, which is expected to double battery storage capacity in the USA in 2024.[26]
Despite the rapid rise of BESS plants in Europe, and the increasingly buoyant policy environment, several hurdles still need to be overcome before the technology can realize its full potential.
Will ongoing challenges hinder battery plant development?
Even as grid-scale battery projects multiply across the continent, developers still complain of excessive red tape and unnecessary costs. Notwithstanding its recent advances, the EU still falls some way short of regulatory harmonization. Even now, new BESS developments must be approved by individual states, often with conflicting priorities and incongruous legal definitions, leading to inconsistent business models across the bloc.[27]
Key challenges remain around grid interoperability, the delivery of ancillary services, and the roll-out of long-term contracts deemed necessary by investors to inspire speculations on a technology still in its relative infancy.
The market in Europe remains fragmented, with insufficient consolidations so far to achieve stability in the sector.[28] Price volatility across the battery value chain also remains an issue. As of December 2022, the price of lithium carbonate (comprising cost, insurance and freight) was estimated at US$ 75,000/mt, up 122% year-on-year.[29]
Despite incoming mitigation measures such as the EU’s Critical Raw Materials Act (see above), concerns persist over the resilience of supply chains – particularly reserves of those rare earth minerals so vital for batteries. Electric vehicle (EV) manufacturers are competing with other industries for access to scarce resources such as lithium, causing backlogs in the energy storage market. Volkswagen’s battery procurements over the next three years, for example, will far exceed the project pipelines of the 10 largest energy storage providers combined.[30]
There is also a public perception issue to overcome. Mining rare earth minerals consumes natural resources, causes biodiversity loss and routinely contaminates the landscape. In emerging markets, often the origin of such minerals, indigenous rights and forced labor can ferment further reputational damage. Turning the vision of a battery-powered Europe into a reality will entail a battle of hearts and minds, as well as balance sheets.
If the mission is to succeed, it must be bolstered by an energized private sector willing to direct its capital towards long-term, game-changing BESS solutions.
Private sector can help power-up battery storage
As the flagship renewable energy business of Abdul Latif Jameel, Fotowatio Renewable Ventures (FRV) already has a strong pedigree of innovation.
Active across five continents, FRV develops and manages solar power, wind and hybrid energy projects, alongside a portfolio of battery storage systems.
FRV is spearheading private sector efforts to promote BESS plants throughout Europe, with a particular focus on the UK, where it has established a BESS Center of Excellence headed by David Menendez.
In 2023, FRV reached financial close on two of its major UK battery storage projects – Contego, West Sussex and Clay Tye, Essex – the latter being one of the largest BESS projects ever undertaken in the UK and the joint largest operational BESS in Europe at the time of its inauguration.
Clay Tye came online at the end of March 2024, has an output of 99 MW and capacity of 198 MWh. It employs 52 Tesla Megapack lithium-ion batteries, alongside Tesla’s Autobidder AI software for energy capacity exchange and efficient project management.
Contego, harnesses an output of 34 MW and capacity of 68 MWh from an array of 28 batteries.
FRV has also begun construction of two further UK BESS schemes, this time in the Midlands. Each project covers a total of 1.01 hectares, and together they will generate some 100 MW of energy. The two lithium-ion battery storage systems will allow the import and export of energy connected to the distribution network.
These schemes build on the success of FRV’s Holes Bay battery project in Dorset, UK, active since 2020. The 15 MWh site was the first to go live in the National Grid’s new wider-access Application Programming Interface (API) for the Balancing Mechanism.
FRV now has more than 5 GW of BESS projects at various stages of operation or development in the UK. This is complemented by similar projects in Australia, where the company is developing BESS facilities at Gnarware, in Victoria, and a hybrid solar and BESS plant at Dalby, Queensland. It also has a majority stake in a BESS project in Greece, while in February 2024, FRV partnered with AMP Tank Finland Oy for a utility-scale battery energy storage system (BESS) project in Finland.
Vice Chairman, International
Abdul Latif Jameel
Fady Jameel, Vice Chairman, International, Abdul Latif Jameel, says: “Grid-scale battery energy storage systems are a vital link between renewable energy sources and dependable supplies of eco-electricity for our communities. Groundbreaking BESS technology helps ensure homes and businesses have access to power 24/7, providing peak-time flexibility to electricity networks globally and accelerating our necessary transition away from damaging fossil fuels.”
[1] https://www.irena.org/-/media/Files/IRENA/Agency/Webinars/07012020_INSIGHTS_webinar_Wind-and-Solar.pdf
[2] https://www.metoffice.gov.uk/about-us/press-office/news/weather-and-climate/2024/2023-the-warmest-year-on-record-globally
[3] https://www.theguardian.com/environment/2023/dec/27/2023-costliest-climate-disasters-poor-lose-out-global-postcode-lottery
[4] https://www.pveurope.eu/solar-storage/bloombergnef-global-energy-storage-market-15-fold-growth-2030
[5] https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/enabling-renewable-energy-with-battery-energy-storage-systems
[6] https://www.windpowerengineering.com/how-three-battery-types-work-in-grid-scale-energy-storage-systems/
[7] https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/Sep/IRENA_Utility-scale-batteries_2019.pdf
[8] https://documents.worldbank.org/en/publication/documents-reports/documentdetail/873091468155720710/Understanding-CO2-emissions-from-the-global-energy-sector
[9] https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/battery-2030-resilient-sustainable-and-circular
[10] https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/enabling-renewable-energy-with-battery-energy-storage-systems
[11] https://www.energy-storage.news/europe-deployed-1-9gw-of-battery-storage-in-2022-3-7gw-expected-in-2023-lcp-delta/
[12] https://auroraer.com/media/european-battery-markets-on-track-to-attract-over-70bn-e-investment-by-2050/
[13] https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/123022-opportunity-for-battery-storage-as-big-as-it-has-ever-been-in-europe
[14] https://www.solarpowerportal.co.uk/q4-2023-sees-largest-quarterly-increase-in-battery-energy-storage/
[15] https://www.imf.org/en/Publications/fandd/issues/2022/12/beating-the-european-energy-crisis-Zettelmeyer
[16] https://www.euronews.com/green/2023/08/08/torrential-rain-flash-floods-and-raging-wildfires-europes-extreme-summer
[17] https://news.un.org/en/story/2023/06/1137867
[18] https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/repowereu-affordable-secure-and-sustainable-energy-europe_en
[19] https://www.iea.org/policies/15691-repowereu-plan-joint-european-action-on-renewable-energy-and-energy-efficiency
[20] https://www.energy-storage.news/european-commissions-net-zero-industry-act-includes-energy-storage-as-eligible-technology/
[21] https://energy.ec.europa.eu/topics/markets-and-consumers/market-legislation/electricity-market-design_en
[22] https://www.energy-storage.news/european-commissions-raised-ambition-for-energy-storage-in-electricity-market-design-welcomed-with-caveats/
[23] https://www.reuters.com/markets/commodities/eus-hunt-critical-minerals-2023-12-18/
[24] https://www.bloomberg.com/news/articles/2024-02-15/battery-storage-for-europe-s-grids-may-finally-be-getting-ready-for-net-zero
[25] https://www.energy-storage.news/australia-had-over-2gwh-of-large-scale-battery-storage-under-construction-at-end-of-2022/
[26] https://www.eia.gov/todayinenergy/detail.php?id=61202
[27] https://www.bloomberg.com/news/articles/2024-02-15/battery-storage-for-europe-s-grids-may-finally-be-getting-ready-for-net-zero
[28] https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/enabling-renewable-energy-with-battery-energy-storage-systems
[29] https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/123022-opportunity-for-battery-storage-as-big-as-it-has-ever-been-in-europe
[30] https://www.spglobal.com/commodityinsights/en/market-insights/latest-news/electric-power/123022-opportunity-for-battery-storage-as-big-as-it-has-ever-been-in-europe
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