Thursday, August 18, 2011

Fight Brewing Over Off-Grid Energy Storage
Struggling to get their feet in the door of transportation and grid-tied markets, emerging electrical storage developers have begun eying off-grid opportunities as a way to attain scale and lower costs. But the off-grid market represents a rapidly closing window of opportunity for emerging storage – only developers who take immediate and intelligent action will capture a meaningful share of the market, according to a new report by Lux Research.

The report, titled “Off-grid: A Modest Meal for Starving Storage Developers,” forecasts opportunities for emerging battery, flywheel, ultracapacitor, and fuel cell technologies in off-grid markets, such as telecommunication networks, datacenters, and mobile and semi-permanent military bases. The off-grid storage market will grow from $9.9 billion in 2011 to $13.5 billion in 2016, a 6% compound annual growth rate. Emerging technologies will be the fastest growing segment of the market, growing from $1.5 billion in 2011 in 2011 to about $4 billion in 2016, a 22% CAGR.

“Considering the current financial and regulatory state of grid-connected storage, the off-grid market presents a relatively bright opportunity for emerging storage technologies,” said the report’s lead author, Steve Minnihan. “But given the sheer number of developers competing for a share of the market, decisive action is needed to succeed.”

The report bases its analysis on a lifetime cost calculation for each technology, market, and application it covers. Among its key conclusions:
  • Li-ion sees small, steady growth in diversified markets. Li-ion batteries will grow from $795 million in revenue in 2011 to $2.2 billion in 2016, a 23% compound annual growth rate (CAGR). Thanks to its improved cycle life and energy density over lead-acid batteries, lithium-ion will see narrow penetration into the high-end datacenter market, netting 6.8% of unlimited power supply (UPS) capacity and 5.8% of telecom backup capacity in 2016. If Li-ion developers can trim costs 33% to $400/kWh and demonstrate improved lifetimes, then the technology could usurp further market share in the telecom backup market in the latter half of the decade.
  • Flywheels and ultracapacitors will supplement, not lead, the UPS market. Together, flywheels and ultracapacitors will capture 10% of the datacenter UPS market by 2016. Flywheels will grow from $49 million in 2011 to $104 million in 2016 (a 16% CAGR), while ultracapacitors will expand from a base of $88 million to $248 million in 2016 (a 23% CAGR). High reliability, superior cycle life, unsurpassed power density, and minimal maintenance costs all help make these technologies strong candidates, but their limited energy capacity raises barriers against broad adoption.
  • Fuel cell potential is strong, with room for growth beyond 2016. Fuel cells will grow from $536 million in 2011 to $1.3 billion in 2016, a 22% CAGR, through adoption in the off-grid telecom power and datacenter market. This expansion won’t be enough, however, to support the expansive list of fuel cell developers, leading to fierce competition and consolidation.
“Off-grid: A Modest Meal for Starving Storage Developers,” is part of the Lux Smart Grid and Grid Storage Intelligence service. Clients subscribing to this service receive ongoing research on market and technology trends, continuous technology scouting reports and proprietary data points in the weekly Lux Research Smart Grid Journal, and on-demand inquiry with Lux Research analysts.

Lux Research
June 21, 2011

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