The world’s top battery manufacturer, CATL, expects sales of battery storage systems to account for half of its total sales in the coming years, signaling strong optimism about the battery storage sector as countries investing in alternative energy seek to make it more reliable.

Storage is the only way to use electricity later than the moment it was generated, which is how electricity is normally used. With regions such as Europe and parts of Asia betting big on wind and solar electricity, battery storage has become a necessity. China, CATL’s home country, is also among the big investors in battery storage as it seeks to curb the waste of surplus wind and solar generation during periods of low demand.

“Once we have more renewable energy, we need energy storage,” the Chinese battery maker’s director for energy storage systems in Europe, Kevin Tang, told Reuters on the sidelines of a recent industry event. As a result of this need, Tang sees battery storage doubling as part of total sales by 2030, from 25% currently to 50%.

Battery storage has indeed become vital for grids in countries that have come to rely heavily on electricity generation from weather-dependent installations. Unlike baseload generation capacity, which synchronizes the supply of electricity with demand at any given moment, wind and solar installations work when there is, respectively, wind and sun. Since this does not correspond to second-by-second electricity demand, the only way to match supply to demand without wasting massive amounts of output is by storing excess electricity in batteries. Related: Kuwait Offers First Crude Cargoes to Asia since Iran War Started

Germany is a case in point. Last year, the country had to curtail 3.1% of the total output of its solar installations, where “curtail” means “waste” because there was too little demand for electricity when solar panels generated at peak. Together with wasted wind output, Germany’s total curtailment last year hit 9.6 TWh.

Yet battery storage growth is easier said than done due to things like costs, profitability and, not least, land use. Despite a sharp decline in production costs for batteries over the past decade or so, battery storage is not exactly cheap, hence the rather slow adoption of storage installations to be coupled with wind and solar generation facilities. This has made it necessary for regulators to step in—in Europe—and make sure that wind and solar are coupled with batteries to reduce the need for curtailment.

It is because of these regulations that the future of battery storage is as bright as CATL expects it to be, especially in Europe. The Chinese battery maker already has two factories in Europe—in Germany and Hungary—and is building a third one in Spain. It is also because of these regulations that some companies have jumped at the business opportunity battery storage has opened up.

Vitol, Trafigura, and other trading companies are investing in various battery storage projects across Western Europe as they try to grab a piece of an electricity market that features wild price swings on a daily basis, thanks to the proliferation of wind and solar. Battery storage, then, has probably become one of the safest investments one can make in energy in Europe right now, with returns basically guaranteed.

In this context, CATL’s optimistic expectations for its battery storage business are quite justified. One additional problem right now is the prices of raw materials, which have been trending higher amid the total industrial disruption in the Middle East and the higher energy costs this disruption has led to. However, per Kevin Tang, this will stop being a problem when CATL’s supply chain matures over the longer term.

By Charles Kennedy for Oilprice.com

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