As the world aims to reduce its dependence on fossil fuels and is becoming increasingly reliant on renewable energy sources, the battery energy storage system (BESS) has emerged as a super-high growth market. The global market for battery storage grew twofold y/y to exceed 90 GWh in 2023, according to data of the International Energy Agency, and the volume of battery storage in use rose to over 190 GWh. Underpinned by hefty supportive policies, BESS has proven to be resilient to supply chain disruptions and challenges stemming from the exponential growth of clean energy industries and continues to surpass growth expectations.
BESS is of core importance for renewable energy generation because of the intermittent nature of renewable sources, whose output is highly contingent on weather conditions, daily, and seasonal variations. In addition, renewable projects are often located in remote areas, and transmitting the produced energy to demand sites presents a huge logistical challenge.
At the grid level, BESS helps manage the temporal misalignment between power generation and consumption, level out peaks in demand via peak shaving, and avoid node congestion. BESS can store surplus energy produced by renewable sources during periods of high generation and release it at peak demand, during low production, or whenever there is available grid capacity. Thus, BESS ensures reliable power supply and eases the integration of renewable generation facilities into the market.
All of this makes BESS a rather attractive investment target with over USD 5bn worth of investments in 2022, according to analysis by McKinsey & Company, almost a threefold increase from the previous year. According to a Frost & Sullivan report from January 2024, the BESS market was estimated at USD 21.3bn in 2023 and is expected to grow to USD 72bn by 2030, scaling from a global annual capacity of 22.4 GW/51.3 GWh to reach 104.2 GW/301.0 GWh. McKinsey is even more optimistic in its predictions, according to which the global BESS market will reach USD 120bn-150bn by 2030.
According to a December 2023 publication on the InvestChile website, the country had 23 approved energy storage projects with a total of 3,000 MW of capacity. Chile is exploring a variety of solutions to keep abreast of the changing energy demand landscape ranging from BESS to innovative projects using CO2.
Engie has also recently announced plans to convert its decommissioned Tocopilla coal plant into a 116 MW standalone BESS facility. The investment is estimated at around USD 180mn and construction works will start in June 2024. The Tocopilla BESS will be capable of storing 660 MWh of energy generated by solar and wind facilities in the Antofagasta region and will have a discharge duration of 5.7 hours.
According to the company, the facility will have annual generation capacity of 211 GWh, equivalent to supplying 90,000 homes with power, thus avoiding 51,231 tonnes of CO2 emissions a year.
In March 2024, Atlas Renewable Energy announced it has signed a power purchase agreement (PPA) with Chilean mining giant Codelco for the supply of 375 GWh of energy per year, to be generated by a new renewable energy project with an integrated battery energy storage system. The project is Atlas Renewable Energy''s first foray into battery storage technology, which the company sees as essential for increasing the share of renewable energy sources in the power system.
In November 2023, Spain-based Grenergy announced it would build a USD 2.6bn BESS in Chile''s northern region of Atacama. Construction works are expected to be completed in 2026. With a capacity of 4.1GWh in storage and about 1GW of solar, once operational Oasis de Atacama will provide green energy to over 145,000 homes, avoiding 147,000 tonnes of annual CO2 emissions.
According to estimates of the national electric system of Chile (SEN) cited by Americas Market Intelligence, the country will have 13.2 GWh/ 2 GW (6–8-hour duration) of operating energy storage by 2026. The northern regions of Antofagasta and Atacama account for nearly 5GW of the BESS pipeline.
All recent developments point to the fact that the Chilean market is ripe for BESS investment, underpinned by a strong renewable sector and a solid regulatory backing. But the investment opportunities are not limited to Chile alone – as the world is increasingly relying on renewable generation and building transmission lines is a lengthy and expensive project, storage assets will provide grid stability and counterbalance the inherent intermittency of renewable energy across the region.
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Currently, 36 of the 129 large-scale projects Latin America projects with an energy storage component under development are in Chile, including 32 out of 71 of the region''s early works projects. The storage technologies either in use or being considered include:
• Lithium-ion battery• Compressed air• Cryogenic/liquid air• Pumped hydropower• Molten salt systems
While many projects are under development, lithium - ion battery storage is still limited. According to data from Acera, the Chilean Renewable Energy Association, there are only 64MW of battery storage capacity currently active, representing 0.2% of national capacity. AES Andes, a subsidiary of U.S. company AES Corp. operates all 64MW at their Angamos and Los Andes substations. In addition, AES Andes announced plans to invest $400 million to double its storage capacity by 2023.
Despite the current low level of installed energy capacity and high cost per MW, the opportunities for battery storage are promising. The Chilean Ministry of Energy projects that batter costs to decrease by 20 percent. Three greater than 100 MW renewable energy projects are under development and will have a lithium-on battery storage component. As of November 2021, the Coordinador Eléctrico Nacional (CEN), Chile''s electric grid coordinator, reports that 50 renewable energy projects totaling 2,696 MW are currently classified as in the process of entering operations or being put into service. Of these projects, 61% are solar, 33.4% are wind, 4% are thermal, and 1.7% hydroelectric.
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Spain-based developer and IPP Grenergy has detailed its investment plans for 2023-2026, totalling US$2.6 billion including what it claimed is the ‘largest BESS in the world’ in Chile.
According to its Strategic Plan 2023-2026, the IPP will commit US$2.6 billion to these expansions, with US$1.5 billion allocated to solar PV and US$800 million to energy storage. Of its three major operational markets – the US, Europe and Latin America – Grenergy highlighted Chile as a fulcrum for leveraging up its solar and storage businesses.
To support the planned growth, the company said that it expects to continue to expand its asset rotation model through 2026, by which it funds projects at certain points and sells them to more well-positioned investors at a later stage. The company said that it expects to sell between 350MW-450MW of solar PV capacity and 1GWh of storage capacity to the market annually, generating around US$600 million by 2026.
Earlier this year, it signed power purchase agreements (PPA) for solar projects inChileandSpainwith respective capacities of 241MW and 259MW.
Both of these are pivotal markets for Grenergy, and Chile featured most prominently in its Strategic Plan announcement. In addition to its solar PV assets in the country, which add to over 900MW across operational and pipeline projects, the company said that "Chile will be key to the company''s growth in the storage sector".
It said that construction had begun on the Oasis de Atacama battery storage project, which will be the "largest in the world" with 4.1GWh capacity and a further 1GW of solar PV generation. The project will represent a total US$1.4 billion. It will be built in five phases and will ‘come on stream’ over the next 36 months.
"Today, Chile is a superpower in terms of the development of energy storage due to the exceptional conditions of the Atacama Desert in terms of hours of solar radiation and the particularity of the energy mix of this vast area, where the penetration of solar energy reaches 50%," said David Ruiz de Andrés, CEO of Grenergy.
The grid-scale energy storage market in Chile is taking off with significant opportunities in the capacity market and renewable load shifting, with some 735GWh of renewable energy curtailed in the first five months of 2023 alone.
See the full version of this article on PV Tech.
Chile is now on track to become the second-largest battery market in the Americas, following the United States. As of this year, the Latin American nation has switched on 12 storage projects, with a total capacity of 1.3 GW. It currently has 85 energy storage projects, totaling 6.4 GW, in various stages of development.
Image: Acciona Energia
The United States has historically held the position of being the largest energy storage market in the Americas, with anticipated deployment of more than 10 GW in 2023. However, countries such Canada, Mexico, and Chile are actively promoting policies to stimulate energy storage development, positioning Chile to become the second-largest energy storage market in the Americas, as projected by UK consultancy Interact Analysis.
While the first electrochemical energy storage projects in Chile made their debut in 2009 and only amounted to around 300 MW by 2022, Chile''s parliament passed legislation in October 2022 to incentivize energy storage and electric mobility development. Furthermore, the government has set an ambitious target of achieving 70% of total energy consumption from renewable sources by 2030.
Consequently, Chile has witnessed a surge in renewable energy generation installations in recent years, creating a pressing demand for energy storage. This summer, $2 billion was allocated for large-scale storage auctions.
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