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    Energy Storage: an imperative for the green transition

    Energy storage is key to supporting increased renewable energy production, energy efficiency and energy security. Thus, the energy‑storage industry is moving rapidly from the periphery to the core of the energy sector.

    According to the International Energy Agency, the expected increase in renewables under the Net Zero Scenario (NZS), requires a six-fold increase in installed storage capacity, to roughly 1.5 TW by 2030.

    The importance of energy Storage 

    Energy storage is a fundamental pillar of the energy transition, and its deployment benefits can be summarized as follows:

    1. Renewable power integration in the energy system
    2. Grid stability & reliability
    3. Power resilience & security
    4. Energy prices stabilization
    5. Local economies support

    Types of energy storage systems 

    Electricity cannot be stored as such and therefore it needs to be transformed into other types of energy, such as mechanical or chemical. In addition to batteries, there are many storage technologies for different needs. The main types are:

    Electro Chemical

    One of the most prevalent energy storage methods are batteries, where lithium‑ion batteries in particular have gained prominence lately.

    Chemical

    In this case, energy is absorbed and released when chemical compounds react. 

     

    Future prospects 

    NZS requires to triple energy from renewable sources along with a sixfold increase of global energy storage capacity to 1.5TW by 2030, of which batteries are expected to account for 90%. Investment in batteries could reach $800bn by 2030, up 400% vs 2023 levels, doubling the share of batteries in total clean energy investment in 7 years.

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    Main driver of energy storage increase in terms of capacity is expected to be the support of renewable energy growth.

    Challenges in Energy Storage 

    Cost

    The primary challenge in energy storage is its cost, specifically the high levelized cost of storage (LCOS).  BNEF predicts a 50% reduction in the costs of lithium-ion batteries per kW/h by 2030.

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    Technical challenges

    For batteries, drawbacks include sensitivity to extreme temperatures and design intricacies. Reducing weight, increasing storage capacity and safety improvement are also focus areas.

    Just transition

    Ensuring ethical sourcing practices, fair labor standards, and investments in community development to mitigate mining adverse impacts on vulnerable populations.

    Circularity

    Materials management from green energy systems as well as finding alternatives that may be less toxic after its disposal is a challenging issue that requires additional research.

    Availability of inputs

    The demand for these critical minerals is set to rise significantly, requiring secure and resilient supply chains.  

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    Policy

    Regulatory systems must recognize the full value of the services that storage offers

    Conclusions

    Energy storage linked to transition is an evolving field to watch out for the upcoming years specially for stakeholders across the energy value chain. Energy storage is an imperative for a cleaner, more equitable, and energy-secure future. 

    Short to medium term growth in this sector will be driven by lithium-ion batteries supporting the increase in renewable energies. In the future, flow and solid-state batteries are expected to poise interesting applications. Thermal and chemical technologies may also play a key sustainable role specially in hard to abate industrial businesses.

    Important Legal Information
     This document has been prepared by Banco Santander, S.A. ("Santander") for information purposes only and is not intended to be, and should not be construed as, investment advice, a prospectus or other similar information material. This material contains information compiled from a variety of sources, including business, statistical, marketing, economic and other sources. The information contained in this material may also have been compiled from third parties, and this information may not have been verified by Santander and Santander accepts no responsibility for such information. Any opinion expressed in this document may differ from or contradict opinions expressed by other members of Santander. The information contained in this material is of a general nature and is provided for illustrative purposes only. It does not relate to any specific jurisdiction and is in no way applicable to specific situations or individuals. The information contained in this document is not an exhaustive and formal analysis of the issues discussed and does not establish an interpretative or value judgement as to their scope, application or feasibility. Although the information contained in this document has been obtained from sources that Santander believes to be reliable, its accuracy or completeness is not guaranteed. Santander assumes no responsibility for the use made of the information contained herein.