The Impact of the Top 3 Strategic Imperatives on the Grid-scale BESS Industry

Transformative Megatrends

Why

• The global race to net zero requires the electrification of energy demand and its supply with renewable energy (RE) generation, especially solar PV and wind. To realize higher shares of RE, BESS are the logical choice given their maturity, increasingly competitive costs, and proven track record.

Frost Perspective

• BESS' ability to charge and discharge in milliseconds, following the commands of control systems run by AI and ML, is disrupting how power is generated, optimized, and traded. The industry is migrating to more automated systems supported by ML algorithms. Moreover, as fossil fuel-based generation diminishes, electric systems are evolving to accommodate new services for better grid balance, creating further revenue opportunities for batteries.

Disruptive Technologies

Why

• Cloud computing, big data, analytics, AI, blockchain, and IoT are key technologies enabling the power sector's digital transformation.

Frost Perspective

• Applied to the energy storage industry, these technologies are helping to maximize BESS' value by optimizing operations, increasing security, extending lifespan, and ensuring higher transparency in the value chain and the industry’s circularity.

Geopolitical Chaos

Why

• To reap the benefits of the clean energy economy and decrease reliance on Asia, North American and European countries have implemented measures to foster their local clean tech industries. A combination of fiscal incentives and targeted higher import tariffs originated disputes with commercial counterparts, especially China.

Frost Perspective

• Most lithium-ion (Li-ion) batteries are sourced from Chinese firms. As Europe and North America progress with their localization strategies, stiffer barriers with Chinese batteries and components are expected. The disruptions in the flow of batteries from China may bring new constraints to the supply chain, project delays, and further price reductions in Chinese batteries, which could benefit other emerging BESS markets.

Regional Segmentation

• Sub-Saharan Africa: Includes all 55 members of the African Union (apart from Egypt, Libya, Tunisia, Algeria, and Morocco)
• ANZ & Pacific: Includes Australia, New Zealand, and the Pacific islands
• ASEAN: Includes Indonesia, Vietnam, Laos, Brunei, Thailand, Myanmar, the Philippines, Cambodia, Singapore, and Malaysia
• China: China
• East Asia: Includes Japan, South Korea, and Taiwan
• Europe: Includes the European Union (EU 27), the United Kingdom, Norway, Switzerland, and the other smaller European nations
• India & South Asia: Includes India, Pakistan, Bangladesh, Sri Lanka, Nepal, and the Maldives
• Latin America: Includes all of South America and Mexico, Central America, and the Caribbean
• Middle East & North Africa: Includes all the Gulf countries, as well as Israel, Jordan, Syria, Iran, Iraq, Lebanon, and Turkey; North Africa includes Egypt, Libya, Tunisia, Algeria, and Morocco
• North America: Includes Canada and the United States
• Russia & CIS: Includes Russia and all the former members of the Soviet Union (apart from the Baltic States), as well as Mongolia and Afghanistan

Key Findings

1. The global grid-scale BESS industry has entered a period of accelerated growth, driven by the energy transition, the emphasis on energy security and resilience, and supportive regulatory frameworks. In 2023, grid-scale BESS annual installations almost tripled, reaching 35.82 GW/87.69 GWh, while 2024 is expected to end with 41.84 GW/104.67 GWh of new additions, equivalent to $37.69 billion in investment.
2. Grid-scale BESS are becoming increasingly ubiquitous. There is the need and the will to grow energy storage deployment and investment throughout most regions. Frost & Sullivan’s BESS Growth Generator shows that 18 countries surpassed 500 MWh of total capacity by the end of 2023, and project pipelines continue stacking up. Nonetheless, in the short-medium term, the bulk of new grid-scale BESS additions will continue to be concentrated in China and the United States. In 2023, the 2 countries accounted for more than 80% of the global market.
3. While critical minerals and battery supply constraints were driving battery prices up and threatening to slow BESS take-off 2 years ago, the current situation is the opposite. New manufacturing capacity, especially in China, and supportive policies to re-localize and expand the value chain have led to a drop in prices.
4. Frost & Sullivan's long-term forecast for 2035 predicts a continued decline in costs, which, coupled with an average of 660 GW of annual wind and solar additions and evolving supportive policies and market rules, will result in the FTM BESS annual capacity expanding more than 5 times, reaching 175.81 GW/665.81 GWh.
5. BESS industry development is bringing higher sophistication and specialization across the value chain and diversification of business models and opportunities around systems. AI and analytics will significantly contribute to gains in battery performance, manufacturing efficiency, trading and dispatch optimization, and circularity.

Growth Drivers