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Grid energy storage surged in 2021, as we predicted

Your humble correspondent presaged 5 market trends, and they all came to pass.
By Julian Spector

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I love the holidays because they offer a chance to mingle with old friends and family members who don’t think about the clean energy transition every day. I get to ask questions like, Does the term energy storage’ mean anything to you?”

I posed that inquiry recently at a wine bar patio, with string lights hanging from the roof that kept the chilly D.C. drizzle off our heads. My friends looked at me quizzically, and then sipped some pétillant naturel. I had to improvise.

Well, we all know that solar power is generated when the sun’s out. But we’re drinking wine by the light of these lamps right now, when it’s dark. That’s going to become a problem when we’re trying to run much more of our grid on renewable electricity.”

Then we were off to the races.

In years past, I had to frame energy storage as a promising technology that wonks hoped would be a crucial piece of the clean grid puzzle. This time, I could describe it as a rapidly growing energy industry that just closed out its biggest year ever and spawned a small army of billion-dollar companies.

I figure this storage sector deserves some attention as we shift into the new year. After all, Eric Wesoff already tackled the year in solar news, and I recently recounted some surprising success stories in heavy industry and transportation. And y’all clearly gravitated to storage news in our top 10 most-read stories of 2021.

To make this even more exciting, I’ll revisit a list of five predictions I made for the storage sector one year ago.

Spoiler alert: All my predictions came true. I tell you this not to brag, but to compliment you on the sophistication of your chosen source for clean energy news and analysis.

1. Biggest year ever” 

2021 was indeed the top year for U.S. grid storage installations by far.

After achieving one gigawatt of annual installations for the first time [in 2020], U.S. energy storage companies just installed one gigawatt of projects in one quarter,” announced Jason Burwen, interim CEO of the U.S. Energy Storage Association industry group, in a December statement.

That was based on third-quarter data, and the fourth quarter is likely to be even bigger when all is counted. The volume of batteries hopping onto the grid is simply unrecognizable compared to even two years ago.

That means more batteries charging up in moments when the grid has more power than is necessary and discharging during the hours when electricity is scarce and more valuable.

Economic fundamentals push for loading up on cheap solar generation and delivering it after the sun sets — buy low, sell high. It doesn’t always play out that way; sometimes batteries charge up from a dirtier electricity mix.

But the states building the most big battery plants right now — California, Texas, Arizona — are all places with lots of sun and booming solar industries. And in many projects, the batteries are hard-wired to solar plants for tax-credit purposes, which guarantees they’re using clean electricity.

The grid will need orders of magnitude more storage to keep up with the push toward a clean electricity system in the coming decades. Now that the industry has set a new benchmark, it’ll need to keep pushing the pace.

2. Congress offers a mild boost, leaves hard questions unsettled”

I very nearly flubbed this prediction. But Congress came through for my clairvoyance by failing to come through for the ambitious clean energy policies in the Build Back Better Act.

The infrastructure bill that did become law in 2021 funds storage demonstration projects that Congress approved in late 2020. And it sets up other multibillion-dollar funding buckets that storage projects can access for goals like resilience, grid flexibility and developing domestic supply chains. Those amount to a mild boost.

But the single biggest ask made by the storage industry — its very own federal tax credit — got kicked out of reach when Senator Joe Manchin (D-West Virginia) went on Fox in December to say he doesn’t feel like voting for his party’s signature policy initiative. Manchin’s opposition stalls not just the storage tax credit but half a trillion dollars of climate-related spending, a far more transformational package than what Congress passed in 2021.

Build Back Better may not be dead yet, though. The top clean energy lobbyist in Washington tells me that negotiations will continue this year. The Sisyphean cycle of hope and last-minute setback continues.

3. More, and bigger, finance deals for storage companies”

We had strong indicators going into 2021, but I had no idea just how correct this prediction would become.

Companies that I covered raising $10 million or $15 million rounds a couple years ago transformed into publicly traded entities with billion-dollar market caps. (VC firm Energy Impact Partners maintains a handy index of publicly traded climatetech companies ranked by market cap; much of the list is storage-oriented.)

Many of the recent arrivals to public markets went through the backdoor route of merging with a special-purpose acquisition company (SPAC), avoiding the more rigorous scrutiny that comes with a standard IPO. But Fluence, which puts together large-scale battery plants, did hit the Nasdaq through the traditional route.

SPACs have provided capital to companies with big stories to tell and little tangible deployment to speak of. They’ve also delivered for entities such as Proterra that have shipped product for years and have a real pipeline to fulfill.

Either way, these companies are now looking at hundreds of millions of dollars in the bank. That should be enough to ramp production, or to create a real product for those SPACs that don’t have one yet. I’m reminded of the words of New Zealander solar analyst Lorde:

But we’re the greatest
They’ll hang us in the Louvre
Down the back, but who cares — still the Louvre

4. Flow batteries lose ground to other emerging technologies”

This one’s about the horse race to be able to store power for many hours — long-duration storage that could smooth out the fluctuations in renewable power.

Flow batteries have long captivated a certain set of academics and entrepreneurs. The decades-old technology stores energy by pumping around liquid electrolytes. It’s supposed to cost less for longer storage timescales than lithium-ion batteries while avoiding unsavory qualities like fire risk and reliance on metals linked to environmental or labor violations.

Flow batteries continue to draw investment from some respectable industrial conglomerates. But to the extent that they spur merger and acquisition activity, it tends to happen under financial duress. Meanwhile, the other up-and-coming storage technologies competing with flow batteries are actually going into projects at meaningful scale.

Take Energy Dome, an Italian startup that stores energy by compressing and decompressing carbon dioxide gas. This company only launched in 2019, but it already has a commercial demonstration project far enough along that a major utility signed up for a full-scale one. Construction on the full 100-megawatt-hour facility could start this year, and it would be bigger than any flow battery I know of in the West (though some bigger flow projects are reportedly underway in China). Not bad for two years of toiling with turbomachinery.

Another mechanical storage company, Hydrostor, compresses air into underground caverns with water to balance the pressure. That firm is applying for approval to build two truly massive projects in California. Highview Power is developing its liquid air” tech at scale in the U.K. and Vermont. Malta will build its thermal storage in New Brunswick, Canada for 100 megawatts/1,000 megawatt-hours.

Iron-air battery maker Form Energy is still working toward 2023 delivery of a 1-megawatt/150-megawatt-hour demo project for a Midwestern utility. That one won’t inject much instantaneous power onto the grid, but it would be huge for proving out the ability to store power for longer durations than anything on the market today.

Presumably, the flow batteries still under development are hitting some sort of internal technical milestones, and that’s why companies continue to invest in them. Some companies are actually shipping products to paying customers, including publicly traded ESS, which manufactures iron flow batteries in Oregon.

Mass-scale long-duration storage projects remain largely theoretical, and it’s far too early to declare winners. But flow batteries have little success to show for years of effort, while relative newcomers race toward the construction of facilities that could actually make a dent in grid decarbonization.

5. California’s grid mess means good business for batteries”

So true.

To recap, California ran out of electricity for a bit in summer 2020. A record heat wave led to cranked air-conditioner use across the region, and California couldn’t import enough power to meet its needs after the sun went down. Limited rolling blackouts ensued.

The episode ultimately proved more embarrassing than destructive, but it did reveal that for all its years of grid-planning, one of the nation’s wealthiest states lacked enough capacity to provide for itself in a pinch. That kicked off a flurry of efforts by the utility regulator, such as extending the operating lives of gas-burning plants and asking planned power plants to materialize in an improbably short period of time.

Eventually, the state came up with something resembling a strategy, and its strategy is to unleash a biblical flood of batteries.

This past summer, California regulators ordered power companies to buy 11.5 gigawatts of zero-carbon capacity by 2026. Lithium-ion batteries are the favorite to answer the call, though there will be carve-outs to help technologies like geothermal and longer-duration storage compete. To get a sense of the market acceleration here, recall that a total of 1 gigawatt of storage capacity was added in the whole U.S. in all of 2020.

California effectively became one big battery-development sandbox as the state belatedly replaces those gas plants it was supposed to shut down, plus the zero-carbon nuclear baseload it’s getting rid of at Diablo Canyon.

If 2021 seemed like a big deal — and it was — just wait for these contracts to get rolling.

Julian Spector is a senior reporter at Canary Media. He reports on batteries, long-duration energy storage, low-carbon hydrogen and clean energy breakthroughs around the world.