Different countries have various schemes, like feed-in tariffs or grants, which can significantly impact the financial viability of battery storage projects. Market trends indicate a continuing decrease in the cost of battery storage, making it an increasingly viable option for both grid and off-grid applications.
The fact that a battery storage project market developed without subsidy support meant that its business case is predicated on a mix of revenue streams. The optimal mix is ever-changing with constant shifts in strategy required. Any player in this space must be backed by a capable trading and optimisation team.
The cost of battery storage systems has been declining significantly over the past decade. By the beginning of 2023 the price of lithium-ion batteries, which are widely used in energy storage, had fallen by about 89% since 2010.
This can result in significant cost savings, especially in regions with high differential in peak and off-peak electricity prices. Additionally, batteries can provide value in ancillary services like frequency regulation and demand response, offering further financial incentives.
According to some projections, by 2030, the cost of lithium-ion batteries could decrease by an additional 30–40%, driven by technological advancements and increased production. This trend is expected to open up new markets and applications for battery storage, further driving economic viability.
As well as providing trading (arbitrage) opportunities for operators, the development of large-scale BESS projects is essential for the energy transition, helping balance fluctuations in renewable energy and improving grid reliability. As such, any slowdown in battery storage growth could spell bad news for the energy transition.