The battery storage market is expected to expand significantly over the next decade as the U.S. rolls out more renewable energy projects across the country. As more green energy sources come online, the need for battery storage will be great. Lithium-ion batteries allow energy producers to store power rather than waste energy, as many do now, due to a lack of adequate infrastructure.
For example, solar panels only produce power during the day, demonstrating the need for battery storage to be incorporated into solar farms and grid systems to ensure the steady, reliable flow of energy throughout the day and night. But to develop enough battery storage to manage all this power, the government must establish clear regulations and oversight for the industry.
The Current Outlook
The U.S. battery storage capacity is expected to increase from 7.8 GW of utility-scale storage in operation in 2022 to around 30 GW by 2025. This could rise to a staggering 95 GW by 2035, in response to the rapidly increasing demand. This growth in U.S. battery storage capacity will support the expansion of the renewable energy sector, helping to ensure the stable delivery of power to households across the country 24 hours a day.
By 2021, the global investment in battery energy storage stood at $10 billion. Grid-scale deployment accounted for over 70% of the total sector spending. And spending on battery energy storage was expected to reach $20 billion last year. In the U.S., the 2022 Inflation Reduction Act (IRA) will provide an investment tax credit for stand-alone storage, which is expected to increase the competitiveness of new grid-scale storage operations.
Dependence on Foreign Powers
However, sourcing the necessary batteries is not so simple. The energy sector must contend with the electric vehicle (EV) industry for its battery power. And the U.S. continues to be heavily reliant on foreign powers, such as China, to source many of its battery components. China currently produces around three-quarters of the world’s lithium-ion batteries, providing 60% or more of the world’s lithium supply.
The global dominance of the Chinese battery industry means that several countries are competing to establish supply chains with China to ensure their battery supply is in line with the green transition, essentially having to rely on China for its energy security.
But there is great potential for the U.S. to develop its domestic battery manufacturing power thanks to the country’s lithium reserves that remain largely untapped. The U.S. is sitting on top of approximately 750,000 tons of this ‘white gold’. Yet it produces just 1% of the world’s lithium supply at present. This supply comes from the U.S.’s only active mine, in Nevada. However, as part of government plans for an accelerated green transition, the Biden Administration plans to rapidly develop the country’s lithium mining to support the development of a domestic battery production industry and reduce reliance on foreign powers.
Whether the batteries come from the U.S. or elsewhere, there is no doubt that battery storage will play an essential role in the decarbonization of the U.S. economy. Grid-scale storage will be used to provide short-term balancing and operating reserves, ancillary services for grid stability and deferment of investment in new transmission and distribution lines, to long-term energy storage and restoring grid operations following a blackout, according to the International Energy Agency (IEA).
Achieving Net-Zero Despite Challenges
But according to a September 2022 report from the IEA, the U.S. was not on track with its energy storage to achieve the Net Zero Scenario. At present, meeting the rising demand for flexibility while also decarbonizing U.S. electricity is a core challenge for the power sector. The U.S. must invest heavily in the expansion of its grid-scale battery storage if it hopes to achieve net-zero carbon emissions by 2050. To reach this goal, the country’s grid-scale battery storage capacity must increase 44-fold from 2021 to 2030, to 680 GW, growing by an average of 80 GW a year between now and the end of the decade.
But further challenges stand between the U.S. and its battery storage expansion, including the disruption of metals and minerals supply chains due to the Covid-19 pandemic and the Russian invasion of Ukraine. Several key materials for battery manufacturing, such as cathode (nickel and cobalt) and anode (graphite), have been negatively affected by the Russian-Ukraine conflict, thereby limiting global battery production. Russia is the biggest producer of battery-grade Class 1 nickel, providing around 20% of the world’s total. It is also the second-biggest producer of cobalt and the fourth of graphite.
While several challenges need to be overcome to successfully roll out grid-scale battery storage in the U.S., the rapid expansion of the country’s battery storage capacity will be vital to achieving the government’s climate pledges. The development of a domestic lithium and battery production industry could help boost U.S. energy security and reduce its reliance on foreign powers for its battery supply. And the 2022 IRA climate policy is expected to help the U.S. attract greater investment in the sector to help achieve the government’s decarbonization goals.
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