While political developments seem to ignore the increasing climate crisis, there is evidence of climate-friendly technology penetrating all industrial markets. And this paves the way for increasing battery storage but also thermal storage markets. Here are three key points why the hocky stick for thermal storage is getting closer.  They are: The enormous development of renewables, battery storages and the shrinking price of flexible electricity.

#1 Renewable Energy growth needs flexibility technologies

Here is why this is important for Thermal Energy Storage (TES):‍

• The more renewable energy, the more flexibility solutions like energy storage are needed.
• With a saturated green power market, new markets are needed for investors in renewable projects. While residential heat (heat pumps) is being addressed, industrial heat is the area with the most potential.
• System costs such as grid construction, congestion, redispatch costs are reduced with behind-the-meter storage.

Renewable energy has consolidated its position in the energy market, attracting many times more investment than fossil and nuclear power plants. The US state of Texas, for example, has 34% solar and wind in its power grid (ElectricityPlans), and Reuters concluded earlier this year: Since 2019, Texas power firms have boosted solar generation capacity by 800%, wind capacity by 50% and battery storage capacity by an eye-popping 5,500%, according to energy data portal Cleanview, using EIA and state-level data.”

The rise of renewables in Texas may surprise some. Globally, the U.S. has just over one-fifth of the renewable energy market. The Asia-Pacific region, led by India, China, and Australia, has seen the largest deployment of renewables. With China exceeding its own targets, the share of renewables is growing rapidly..

The extraordinary growth of wind and solar PV is set to continue. For 2028, a global market value of $US 760bn is predicted by Marketline, and an increase of 46.5%. By 2030, all of Europe's major industrialized nations, including France, are expected to have more than 65% renewable electricity. (LCP Delta). And within the renewable market we see that a great dynamic in those numbers is possible: While it took 68 years to reach 1 TW of installed capacity (1954-2022), only two years were needed to add the next TW, from 2022 to 2024 (pv magazine).

A closer look at the type of renewables

Renewable power does not automatically mean that flexibility solutions are needed; geothermal, hydro and biofuel power generation is steady, not variable. However, data shows that the cheapest forms of electricity, and therefore the most growth, are in the variable renewables, wind and solar. However, the steady sources are losing market share, improving the market for flexibility solutions.

With this increase of renewable power plants, especially with solar PV, a dangerous question arises in a country with a lot of deployment. Low and negative electricity prices reduce the margin of renewables, making the investment case less attractive. When the sun is shining, there is not much money to be made. This creates a huge demand for energy storage, as it opens up new opportunities to sell electricity at a profit.

#2 Battery Energy Storages development

Here is why this is important for TES:

• Batteries are needed for short-term power supply - Market growth is a recognition of the need for energy storage.
• Batteries are heavily used for frequency regulation and other ancillary grid services, showing a need for more grid stabilization solutions, which TES can also partially cover.
• Grid-scale batteries usually stick to electricity as the energy form. For other forms, different types of storage come into focus when realizing the shortcomings and price of batteries.

The last two years showed the start of the massive growth in the energy storage market, namely in batteries as depicted here from BloombergNEF. From 2020 to 2023 the additions each more than doubled, and new record additions are forecasted until 2030. In the IEA report “Batteries and Secure Energy Transitions” the central message is that battery energy storage systems (BESS) need to be increased to the sixfold capacity. And this is highly economic causing a run on battery projects.

An example from Germany: 650 requests for grid-scale BESS have been submitted to the TSOs by the end of 2024. In total, they cover more than 225 GW of requested capacity, at least double the amount that BloomberNEF predicts will be deployed by 2030. And while realistically not all of this will be deployed soon, the request shows that interest in the BESS market is peaking now.

In its 2023 report, McKinsey projected market volume growth for BESS from $44-55bn in 2023 to $120-150bn in 2023, driven primarily by utility-scale deployments (from 72% of deployments in 2023 to 86% of deployments in 2030).

The business model for batteries is not only to store cheap electricity and sell it at a higher price, but also to provide ancillary grid services to regulate frequency and stabilize the grid, a big value-add that operators pay for. While it is difficult to find market volumes for these grid services, one consulting firm expects growth from $8.7 billion to $18.3 billion. Read more details here.

Flexibility, i.e. aFFR, can also be provided by TES, which adds value by combining storage charging at peak times with grid stabilization services. However, the biggest advantage of TES over BESS is the CAPEX. Power block is only a fifth or less of the price of battery storage, allowing large amounts of energy to be transported. Since this shift can be more than the typical 4 hours of batteries, there is even more flexibility for consumers, especially given the projection of day-ahead electricity markets.

‍#3 Electricity Prices

Price is an important issue, as TES typically competes with gas prices for heat, not with gas-fired electricity, which is much more expensive due to its inefficiency. Lower prices make the business case more and more viable. And with renewables, prices are generally lower, as shown here for the US and German markets.

Even in the U.S. market, where gas does not have high transportation and processing costs, we are seeing that grid-scale solar and onshore wind are outperforming fossil fuels, driving down electricity prices. 

This general trend is underscored by market trends. The spot market shows that prices are falling for renewables. Sometimes even to negative prices. In Europe, a record number of hours with negative prices was recorded in 2024.

This represents a huge opportunity to reduce OPEX to zero. Since thermal energy storage can extort these prices and charge three or even four times as much as a process needs, they shift negative prices from 700 hours in Finland to about a quarter of a year. Exploiting the off-peak becomes a business model that not only batteries can use. This is what we roughly analyzed in our flexibility whitepaper.

All these points show: Regardless of many political views, renewable energy has entered the market and is the only major energy source that will be taken care of in the future. With it, the market will electrify industries. And if you read our comparison white paper, you will know which solution is best suited to decarbonize industries.

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