Who Stole My Energy – Powering the rainy day

In previous articles, we mentioned that with the rapid proliferation of AI servers, global electricity demand is sharply rising. Technology companies are actively seeking solutions to the power challenges faced by data centers, exploring innovations from nuclear energy to emerging energy technologies. However, merely increasing energy production is insufficient to meet future demand fluctuations, making energy storage technology a crucial aspect.

Summary

• Energy storage technology is essential for addressing the rising global electricity demand and facilitating the transition to renewable energy sources, thus supporting low-carbon development.

• The energy storage industry plays a vital role in balancing energy supply and demand, ensuring reliability and stability in power systems.

• The global energy storage market is projected to grow significantly, valued at USD 58 billion in 2024 and expected to reach USD 219 billion by 2034, with a robust CAGR of 14.20%.

• Major players like Tesla and BYD are driving innovations in energy storage technology, contributing to its increasing market share and investment potential.

• The ongoing interest from private investors in energy storage indicates a positive outlook for futures development in the sector.

Did you know?

·       Watt (W) is the basic unit of power, measuring the rate of energy transfer. For example, a typical LED light bulb uses about 10 watts, which means it consumes 10 watts of energy continuously each second.

·       Kilowatt (kW) is equal to 1,000 watts. A typical household with about 4 people uses around 1 to 2 kilowatts of power continuously.

·       Megawatt (MW) is equal to 1 million watts. A small wind turbine generating about 1 to 3 megawatts can power approximately 300 to 900 homes continuously.

·       Gigawatt (GW) is equal to 1 billion watts. A large power plant may generate over 1 GW, which can supply electricity to approximately 750,000 homes continuously.

Energy Storage and Sustainable Energy Sources

Amid the global emphasis on sustainable development, transitioning from traditional energy to renewable sources is crucial for countries striving for low-carbon growth. Energy storage technology plays a vital role in this transition, not only in enhancing the efficiency of renewable energy but also in supporting broader low-carbon initiatives across various sectors. This transition is driven by the urgent need to reduce greenhouse gas emissions, combat climate change, and ensure a reliable, resilient energy supply.

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The energy storage industry plays a vital role in supporting sustainable energy by effectively balancing power supply and demand. Renewable energy sources, such as solar and wind, are often influenced by natural conditions, leading to fluctuations in their availability and making the supply unstable and intermittent. For example, solar energy generation can be affected by weather conditions like cloud cover or rain, while wind energy production depends on wind speed and patterns. These factors contribute to the intermittency of renewable energy, underscoring the importance of energy storage solutions in ensuring a stable and reliable power supply.

Energy storage systems store surplus energy during periods of high production and release it during peak demand or when renewable energy production is insufficient, thereby ensuring grid stability and reliability while promoting the effective utilization of sustainable energy. During natural events like typhoons or hurricanes, which can disrupt renewable energy generation, stored energy can help maintain a stable energy supply. In other words, the energy storage industry is closely linked to sustainable energy sources.

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As the world gradually relies on renewable energy sources like wind and solar to combat climate change, energy storage has a new position to avoid energy wastage. In 2022, California curtailed over 2,450 GWh of solar and wind output, accounting for 10% of its monthly power consumption. This issue extends beyond California, with a total of 8,950 GWh of renewable energy wasted nationwide that year. Similarly, in 2023, Ireland and Northern Ireland experienced substantial curtailments, with 10.7% of wind energy and 9.1% of solar energy going unused. In Northern Ireland, the situation was even more striking, with 18.6% of available wind energy curtailed. Such wastage underscores the critical need for energy storage technologies that can capture surplus energy during periods of high supply and release it during periods of higher demand, ensuring more efficient use of renewable resources.

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Energy Storage Market

The global energy storage market presents a significant growth opportunity. Valued at USD 58 billion in 2024, it is expected to reach around USD 219 billion by 2034, expanding at a compound annual growth rate of 14.20% over the next decade. In 2023, the market nearly tripled, marking the largest annual gain on record, with 45 GW (97 GWh) of new capacity added. In 2024, the market is set to exceed 100 GWh of new capacity, driven primarily by growth in China, which remains the largest market globally. The U.S. is also emerging as a significant player, supported by state targets and favorable economic conditions. In Europe, residential battery demand is on the rise, especially in countries like Germany and Italy. Forecasts suggest a robust annual growth rate of 21%, with capacity potentially reaching 137 GW by 2030.

Tesla's New Pillar

Tesla is a global leader in the EV market; however, in recent years, its EV business has faced challenges with slowing growth due to the post-impact of Covid19. Despite this, Tesla's energy storage business is gradually becoming a new growth pillar for the company. With the increasing global demand for renewable energy and energy storage, Tesla's energy storage systems, such as Powerwall and Powerpack, have garnered widespread market attention due to their high efficiency and advanced technology. With the acceleration of energy transition, Tesla's energy storage business is poised to become a significant growth point in the future.

Tesla's energy storage business's revenue contribution has increased from 4.8% in 2022 to 9.44% in Q3 of 2024, with a gross profit margin of 25%, surpassing the automotive business's 17.1%. The year-over-year growth of the energy storage business has reached 52%, far exceeding the automotive business's growth of 2%. During the Q3 earnings call on October 24th, Elon Musk stated that the energy storage department is experiencing "growing like wildfire". Current, the market is optimistic about Tesla's energy storage business, with Morgan Stanley bullish on Tesla’s energy storage segment.

BYD's Core Strengths

BYD is a leading global provider of new energy solutions, demonstrating strong competitiveness, particularly in the electric vehicle and energy storage sectors. BYD's energy storage business has rapidly expanded in recent years, becoming a new growth engine for the company. Its energy storage products, ranging from household systems to large-scale solutions, have gained broad market recognition. According to a report by EUPD Research, BYD held a 30% market share in the European battery energy storage market in the first half of 2024.

In 2023, BYD delivered 28.4 GWh of energy storage systems globally, accounting for 31% of global BESS market, highlighting its significant role in the global market. In early 2024, BYD secured an order from Grenergy to supply 1.1 GWh for the Atacama Oasis project in Chile, the world's largest energy storage project. This order was later expanded to 3 GWh in September, further demonstrating BYD's capacity to support large-scale global initiatives and reinforcing its leadership in the energy storage industry.

Energy Storage and Current Private Market

The energy storage market holds a promising outlook with immense potential, drawing significant attention and active participation from the financial industry, particularly in the primary market. Despite the continuous rise in capital costs, the energy storage sector continues to attract substantial investment. Private equity firms and venture capital funds are now targeting energy storage, with investments in battery storage, energy management, and related sectors already surpassing the total for 2023 by August 20, 2024. According to S&P Global Market Intelligence, as of August 20, the total value of global energy storage transactions reached $17.86 billion, exceeding the $16.17 billion recorded for all of 2023.

Conclusion

The significant growth in global electricity demand, driven by increasing consumption across various industries and households, underscores the essential role of energy storage in ensuring grid stability and reliability. As evidenced by impressive market growth and increasing investments, the energy storage industry is becoming a cornerstone of sustainable energy development, attracting substantial interest from investors. With key players like Tesla and BYD leading the way, innovations in energy storage technology are poised to support the transition to a low-carbon economy.

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