The global battery storage market continues to grow dramatically.
In the United States, developers installed 8.7 GWs of battery storage capacity in 2023, a 90% increase from the prior year. The global storage market grew by 110 GWhs of energy storage capacity in 2023, an increase of 149% from the previous year. Investment in the global storage sector grew 76% in 2023, to $36 billion.
The growth will continue, driven by several opportunities:
In Orrick Energy Storage Update 2024, we present the latest trends and issues accompanying this sector growth and maturity,including:
Rohit has extensive experience in the solar, wind, energy storage, and biofuel sectors, and has advised on numerous award-winning transactions. He is recognized by Chambers USAand Chambers Global in the Projects: Renewables & Alternative Energy category.Rohit''s clients describe him as"excellent," "knowledgeable,""timely in his work," "commercially-oriented," "very plugged into the market" with a "great demeanor."
In recent years, Rohit''s practice has focused particularly on project development and project M&A transactions. He has successfully negotiated many GWs of "physical" and "virtual" PPAs and tolling agreements, as well as a variety of construction, supply and other development arrangements. Rohit has also represented clients on the purchase and sale of renewables projects in various U.S. jurisdictions, as well as joint venture and other project asset arrangements. He has particularly focused on the development, financing and sale of domestic and international energy storage projects, including stand-alone, hybrid, front-of-meter and behind-the-meter projects.
Rohit co-leads Orrick''s South Asian Inclusion Network and served as a Fellow for the Leadership Council on Legal Diversity.
He started his legal career at an international law firm in New York, where he focused on project development and project finance transactions across the globe. Prior to law and business schools, Rohit was an investment banking analyst at Credit Suisse in San Francisco where he provided M&A and financial advisory services to technology companies in Silicon Valley.
Les represents many of the industry''s leading companies on project development, financing and M&A transactions for solar, wind, energy storage, biomass, gas and similar projects. Les has led the Orrick team''s thought leadership in the growing battery and hydrogen energy storage market, has published numerous articles on the topic, and has served as lead counsel on many of the largest storage and renewables+storage transactions completed to date.
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This report comes to you at the turning of the tide for energy storage: after two years of rising prices and supply chain disruptions, the energy storage industry is starting to see price declines and much-anticipated supply growth, thanks in large part to tax credits available via the Inflation Reduction Act of 2022 (IRA) and a drop in the price of lithium-ion battery packs.
Policymakers in the United States and Europe continue to put forth measures meant to supercharge the sector toward a promising future. Even with near-term headwinds, cumulative global energy storage installations are projected to be well in excess of 1 terawatt hour (TWh) by 2030.
In this report, Morgan Lewis lawyers outline some important developments in recent years and trends that will help shape the 2024 energy storage market.
The US utility-scale storage sector saw tremendous growth over 2022 and 2023. The volume of energy storage installations in the United States in 2022 totaled 11,976 megawatt hours (MWh)—a figure surpassed in the first three quarters of 2023 when installations hit 13,518 MWh by cumulative volume. In the third quarter of 2023, and despite significant delays in the market, the US storage market added a record-setting 2,354 MW and 7,322 MWh.
The enactment of the IRA, which contained significant new incentives for storage including availability of the investment tax credit and new manufacturing credits, helped stimulate growth of the energy storage market, as did a decrease in price of lithium-ion battery packs, which fell 14% from their high in 2022 to a record low of $139/ kilowatt hour (kWH) in 2023. Lithium-ion battery pricing is expected to continue to decline through 2030 to $80/kWh. Growth in the utility-scale storage sector is also expected to continue, with the US storage market estimated to install roughly 63 GW between 2023 and 2027.
At the same time, sustained pressure in the supply chain for storage components has not yet fully abated—particularly transformers, substation equipment, and other electrical engineering equipment—which has led in some cases to equipment stockpiling, higher prices, and ultimately an increase in delays for battery projects. Large-scale battery projects now take around 12 to 18 months to complete; an increase of approximately six months.
Other near-term market pressures include increased demand for batteries and competition for batteries and raw materials with the electric vehicle market. Yet even with these headwinds, the pace of installations is expected to increase and the long-term energy storage market is once again poised for growth.
The energy storage industry was one of the major beneficiaries of the IRA’s new rules on both the deployment and manufacturing sides. The IRA enacted the long-sought investment tax credit (ITC) under Section 48 of the Internal Revenue Code (Code) for standalone energy storage facilities as well as a new “advanced manufacturing” production tax credit (PTC) under Section 45X of the Code applicable to the US-based production of a variety of clean tech equipment and critical minerals, including energy storage equipment and underlying materials and minerals.
Over the last year and a half, the US Internal Revenue Service (IRS) and Department of the Treasury (Treasury) have released proposed guidance on IRA provisions tied to deployment, manufacturing, and monetization that will be closely watched by the energy storage industry.
An increase in demand for energy storage project financing has coincided with the energy storage market’s rapid growth. Lenders will analyze both the amount and probability of receiving cash flows generated by energy storage just as they would for any other project-financed asset class. However, there are certain additional considerations in structuring a project finance transaction for an energy storage project.
Read more about energy storage project financing >>
US regulators and policymakers at the state and federal level have in recent years taken steps to encourage growth of energy storage and set rules around its participation in the energy market, particularly as intermittent renewable energy resources become a larger part of the energy mix. Significant developments that will propel further action on renewable energy resources and energy storage include the 2021 Infrastructure Investment and Jobs Act, the IRA, and a number of state-level policies to provide incentives for the use of energy storage.
In the United States, energy storage participation in wholesale energy markets is guided by a pair of landmark reforms from the Federal Energy Regulatory Commission (FERC). Issued in 2018, Order No. 841 requires grid operators to implement storage-specific reforms in wholesale capacity, energy, and ancillary service markets, while Order No. 2222 of 2020 requires grid operators to facilitate the participation of distributed energy resource aggregations in wholesale markets, which can include storage resources.
FERC has also taken steps to shore up reliability rules for inverter-based resources, which it considers to include all generation resources that connect to the electric power system using devices that change direct current (DC) power produced by a resource to alternative current (AC) power, including battery storage resources. FERC has already approved proposals by Southwest Power Pool, Inc. and ISO New England Inc. to use storage resources as transmission assets.
Read more about storage participation in the wholesale markets >>
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