Growth is set against the backdrop of the lowest-ever prices, especially in China, where turnkey energy storage system costs in February were 43% lower than a year ago, at a record low of $115/kWh for two-hour energy storage systems. Contact online >>
Growth is set against the backdrop of the lowest-ever prices, especially in China, where turnkey energy storage system costs in February were 43% lower than a year ago, at a record low of $115/kWh for two-hour energy storage systems.
BNEF reports that last year''s record global additions of 45 GW (97 GWh) will be followed by continued robust growth. In 2024, global energy storage is set to add more than 100 GWh of capacity. The uptick will be largely driven by the growth in China, which will once again be the largest energy storage market globally.
The next-largest market will be the US, where state targets, utility procurements and attractive merchant economics in places like Texas drive the market. In Europe, the Middle East and Africa, residential batteries will continue to be the largest source of storage demand, led by Germany and Italy, as well as markets like Austria, Switzerland, Belgium, Sweden, Spain and the UK.
Out to 2030, the global energy storage market is bolstered by an annual growth rate of 21% to 137 GW and 442 GWh by 2030, according to BNEF forecasts. In the same period, global solar and wind markets are expected to see compound annual growth rates of 9% and 7% respectively.
Much of the growth in energy storage investment is being driven by mandates and targeted subsidies, ranging from solar and wind co-location mandates in China, to the Inflation Reduction Act and state-level policies in the US. New support schemes are also emerging across Europe, Australia, Japan, South Korea and Latin America.
Falling energy storage costs, as seen in China, will be key to support more economic deployments globally. The main enabler of these falling costs has been lithium iron phosphate (LFP) batteries, which use no nickel and continue to take market share from lithium-ion batteries using nickel manganese cobalt (NMC).
The growth in LFP''s market share is made possible by a scale-up in manufacturing capacity led by Chinese battery makers. Battery makers outside China, many of which historically specialised in nickel-based lithium-ion batteries, are also looking to start manufacturing energy storage system products using LFP. Major examples include South Korea-based LG Energy Solution and Samsung SDI, Panasonic in Japan and Norway-based Freyr. BNEF expects NMC to hold a market share of only around 1% by 2030.
Rapid expansion of batteries will be crucial to meet COP28 climate and energy security goalsMeanwhile, growth in batteries outpaced almost all other clean energy technologies in 2023 as falling costs, innovation and supportive industrial policies helped drive up demand, according to a new report from the International Energy Agency (IEA).
The report finds that in less than 15 years, battery costs have fallen by more than 90%. Today, the energy sector (including transport) accounts for over 90% of overall battery demand. In 2023 alone, battery deployment in the power sector increased by more than 130% year-on-year, adding a total of 42 GW to electricity systems around the world. In the transport sector, batteries have enabled electric car sales to surge from three million in 2020 to almost 14 million last year, with further strong growth expected in the coming years.
Battery deployment will need to scale up significantly between now and the end of the decade to enable the world to get on track for its energy and climate goals, the IEA warns. In this scenario, overall energy storage capacity will increase sixfold by 2030 worldwide, with batteries accounting for 90% of the increase and pumped hydropower for most of the rest.
In line with the goals set at COP28, to triple global renewable energy capacity by 2030, 1,500 GW of energy storage will be required, including 1,200 GW from batteries. A shortfall in deploying enough batteries would risk stalling clean energy transitions in the power sector.
To scale up batteries globally, the report found that costs need to come down further without compromising quality and technology. Ensuring energy security also requires greater diversity in supply chains, including extracting and processing the critical minerals used in batteries, and manufacturing of the batteries themselves. Countries are already tackling these issues through ambitious industrial programmes to support local manufacturing capacity with targeted policies in the US, European Union (EU) and India among others.
Global battery manufacturing has more than tripled in the last three years. While China produces most batteries today, the report shows that 40% of announced plans for new battery manufacturing is in advanced economies such as the US and the EU.
Growing global momentum could accelerate the energy transition, as demonstrated by the UAE Consensus, released in December 2023, that calls on Parties to make a just and orderly transition away from fossil fuels while accelerating zero- and low-emission technologies such as carbon capture, utilization and storage (CCUS), particularly in "hard-to-abate" sectors. This article examines the role that CCUS could play in decarbonizing energy systems and takes a closer look at what it will be needed for it to scale to a globally impactful level.
CCUS is expected to play a role in decarbonization across all energy transition scenarios and will likely be especially important for hard-to-abate industries with limited other decarbonization levers. However, to meet current announced net-zero targets, global CCUS capacity needs to grow over 100 times in the longer term, reaching 4 to 6 gigatons CO2 by 2050 and decarbonizing around 15 to 20 percent of today''s energy-related emissions.1Under the Achieved Commitments + upside CCUS in power scenario. This will require a significant acceleration from the current uptake pipeline, and more than double the CCUS capacity from the Current Trajectory scenario.
The global CCUS landscape is also diversifying, with carbon being captured from a wider array of sources. Cement, blue hydrogen, iron and steel, and power together are projected to account for around 85 percent of total uptake by 2050, although large differences are expected between regions.
In power, there is some uncertainty on the role of CCUS in the decarbonization of the sector. CCUS could mitigate the risk of stranding assets, but in regions like Europe and North America, renewables build-out is preferred, limiting CCUS applications. However, if renewables build-out is limited in North America and countries such as China and India choose to avoid stranding young coal and gas plants by installing CCUS, it could play a significant role, potentially reaching 1 to 2 gigatons CO2 captured by 2050. An expansion in nuclear capacity and increased caps on renewables capacity could also lead to higher CCUS uptake in the power sector for certain regions.
In cement and lime production, CCUS is the only solution currently capable of decarbonizing process emissions at scale. Overall cement demand and clinker substitution rates drive the uptake of CCUS in this hard-to-abate sector to enable reduced emissions.
In hydrogen, CCUS is currently a cost-effective pathway to rapidly scale low-carbon hydrogen production, but post 2030, green hydrogen may become more cost competitive. A lower-than-expected penetration of hydrogen in some segments (such as road transport) and greater efficiency in end uses, as well as changes in the competitiveness of green compared to blue hydrogen, could result in a lower-than-expected demand for CCUS. However, blue hydrogen is expected to remain a significant demand driver of overall CCUS uptake.
Along with the growth and diversification of the CCUS market, investment into CCUS is also growing. Average annual investments in CCUS could peak close to $175 billion by around 2035, and could surpass today''s gas investments by as early as 2026 under the Achieved Commitments scenario.
Our analysis suggests that more than 70 percent of cumulative global CCUS investments will be concentrated in the ASEAN region, China, India, and North America, with the majority of these investments in hard-to-abate sectors (such as cement and iron and steel), as well as (potentially) in the power sector.
To meet announced net-zero targets, approximately $120 billion in annual average investments ($3.5 trillion cumulative, 0.1 percent of global GDP) will be required globally by 2050 under the Achieved Commitments scenario.1Cumulative investment by 2050 varies between $0.4 trillion and $2.6 trillion in other scenarios. As of 2023, only around one-quarter of the necessary funding for CCUS by 2030 has been earmarked. This significant shortfall underscores the need for a concerted effort to mobilize financial resources and investment in CCUS.
Higher-cost CCUS applications will require cost declines as well as regulatory and market-based revenue sources beyond current CO2 pricing to support their commercial viability. About 60 percent of future investments in CCUS will be focused on CO2 capture. The cost of capture is strongly dependent on purity of the gas stream and the plant size, and ranges from around $10 to $30 per ton for high-purity sources to more than $80 per ton for low-purity sources. Cost declines, for example from learning by doing or technology innovation, may be critical to realizing the Achieved Commitments scenario.
As for the diversification of revenue streams for CCUS, these face some uncertainty. Assumed CO2 prices or incentives, which are projected to vary depending on region and scenario, are likely to be insufficient to scale up some CCUS applications in many high-emitting countries, particularly for low-purity point sources, and thus additional revenue sources such as green premiums may be required to strengthen business cases. To bridge the investment gap and drive the widespread adoption of CCUS in the future, collaboration between governments, industries, and the financial sector could be essential for establishing a robust and enduring financial landscape.
CCUS is subject to considerable uncertainty and may depend on policy incentives, economics by sector and region, technology development, and interaction with alternative decarbonization technologies. Our analysis suggests it will be increasingly important to watch out for five signposts critical for CCUS development:
To request access to the data and analytics related to our CCUS outlook, or to speak to our team, please contact us.
Krysta Biniek is a senior expert in McKinsey’s Denver office; Luciano Di Fiori is a partner in the Houston office, where Neil Segel is a consultant and Brandon Stackhouse is an associate partner; and Rosie Liffey is a consultant in the Amsterdam office.
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