2021 will undoubtedly be a hugely successful and challenging year for the energy storage industry.Global energy storage deployment has seen tremendous growth, but it also faces significant challenges from supply chain disruptions and the need for incentives and regulations to adapt to technological and market developments.
This paper will further analyze and study the business operation and future development of downstream manufacturers in the energy storage industry. This was explained by corporate executives from Burns&McDonnell Corporation, a full-service project designer and builder and one of the leading engineering, procurement and construction (EPC) contractors in the U.S. energy storage market.
Burns&McDonnell is involved in the construction of the Moss Landing battery Storage project in California, the largest battery storage project in the world to date, which is up and running.
Also responding was Mike Arndt, president and general manager of Recurrent Energy, a Solar developer owned by Canadian Solar that has recently expanded its business in battery storage.
Several executives of Burns&McDonnell analyzed and discussed the business operation and market development of the company.
What does the energy storage business mean for your company in 2021, and how does it compare to previous years?
Doug Riedel, SENIOR VICE President of Renewable Energy: In 2021, we're seeing a lot of growth internally at Burns&McDonnell, in the energy storage industry, and in the scale of the energy storage projects that we're implementing EPC services on. This year we have significantly increased the number of staff dedicated to building renewable energy projects and will continue to do so for the foreseeable future.
Next year, we expect more than 50% of our revenue to come from renewable energy projects and continue to grow year over year, with nearly half of our revenue coming from battery storage systems.
How do you think the business model of energy storage will evolve?
Adam Bernard, HEAD of Business Development for Renewable Energy: We're starting to see a separation between energy storage integrators and EPC/ general contractors. Energy storage integrators are modularizing container storage systems, putting together control systems and compiling portfolios of equipment leased by construction companies.
They and EPC contractors can work together to complete everything from pre-study and licensing to engineering, construction and start-up/commissioning.
We expect to see some consolidation in the energy storage market as customers integrate control systems, as we see in fossil fuel power plants. In particular, once construction of 100MW or larger battery storage systems begins, mature control systems with network security measures will need to be adopted.
If the Build Back Better bill passes, the investment tax credit (ITC) for independently deployed storage systems would accelerate deployment and expand the market for owners of deployed storage systems.
We are starting to see growth from utilities looking to add storage deployments to their renewable energy portfolios. They began to understand energy storage system performance and how to model it into their integrated Resource Plan (IRP).
What are some of the technology or industry trends you've observed? Which are the most exciting trends and which will fade away in the future?
Jason Barman, Manager, Energy Storage Technology and Strategic Partnerships: One of the most exciting developments is the increased deployment of solar + energy storage projects. As energy developers strive to meet ESG targets by increasing renewable energy sources such as solar and wind, the need for dispatchable generation is critical to providing customers with reliable clean energy. The deployment of battery storage systems with solar power facilities is something we planned and consulted with our customers early on.
We still see most battery storage systems with sustained discharge times of 1, 3 and 4 hours, but it remains to be seen when storage systems will shift to longer sustained discharge times as energy storage technology is incentivedthrough policy incentives and increased investment. We also see ESS Inc (iron flow battery provider), Form Energy (iron-air battery startup) and EOS Energy Enterprises (water-based zinc-cathode battery startup) all working on developing and deploying long-term Energy storage systems.
Tisha Scroggin-Wicker, Process Technology Director: Customer demand for flow batteries and other long-term energy storage technologies is growing, even if their costs are not yet becoming more competitive in the commercial market. As utilities shut down more coal-fired plants, adopt more renewable energy sources, and look for ways to manage the resulting imbalance between energy production and demand, we believe interest in longer-term, more sustainable energy storage solutions will increase.
Transportation electrification projects will further increase demand for battery storage systems. As more and more electric vehicles become widely used, long-term energy storage systems could power ev charging stations.
In other areas, companies like Microsoft and Google hope long-term storage will play a major role in their shift from net-zero (carbon offsets that offset emissions) data centers to zero-carbon programs that rely on 100% carbon-free energy.
Nonetheless, multiple barriers, most notably high production costs and few incentives, limit the entry of long-term storage technologies into emerging markets.
What are the major challenges facing the energy storage industry this year and in the future, and how do you think they can be addressed?
Chris Ruckman, BUSINESS Director, Energy Storage: Supply chain problems are likely to continue until 2023. We are also beginning to see challenges in sourcing raw materials for lithium carbonate and other batteries.
It would also be interesting to know what percentage of battery products oems provide for the battery storage market versus the EV market. This is an evolving issue as battery storage projects become larger and compete with the electric vehicle industry in battery product distribution.
With 80% of the world's battery production coming from Asia, port transport and supply chain bottlenecks will continue to be challenges, while container, port and truck transport costs will increase significantly.
Matt Domeier, DIRECTOR, Energy Storage EPC: Labor shortages have been particularly challenging over the past two years and are likely to continue into 2022. We witnessed firsthand a labor shortage at an energy storage project in California that made it difficult to adequately staff the project and scale up the deployment as needed, forcing us to be creative in how we executed EPC projects.With integrated EPCs and greater transparency for all stakeholders from concept to completion, we are able to better manage the schedule and sequence of design and execution packages.
Planning and execution of energy storage projects is critical. Without the creativity and integration of the various technologies used in energy storage projects, I don't think we could have built the Moss Landing battery storage project three months ahead of schedule (the 400MW/1600MW Moss Landing battery storage project is the largest battery storage project in the world to date). Our main work ranges from loading and unloading batteries to building Battery Cabinets and installing supporting facilities.
The battery storage industry is still a relatively new and evolving market that requires a different skill set than older conventional power generation facilities. Our engineers who focus on developing and integrating energy storage projects require unique insights into current and future technologies, as well as the ability to think beyond traditional engineering practices.
What will 2022 bring for your company and the wider energy storage industry?
Bailey Semeniuk, DIRECTOR of Energy Storage Engineering and Development: Supply constraints will continue to be an issue.
If the "Build Back Better" bill includes direct payments and credits for independently deployed storage systems, we expect to see more utilities enter the solar and storage markets.
We are excited to see more projects and opportunities in 2022, especially as more utilities enter the market. As we continue to deploy some of the largest energy storage projects in the world, we look forward to leveraging this experience and skills to drive project safety, efficiency and on-time delivery.
Chris Ruckman, Energy Storage Business Director: We will probably start to see more pilot projects and continue to look at the development of Form Energy's long-duration storage systems that last more than 100 hours of discharge.
And utilities at the forefront of the energy transition will continue to explore hydrogen development and applications -- whether as a blend, for energy storage or for fuel cell vehicles. We consult and collaborate with our customers on integrating renewable and clean energy into their product portfolios to help them meet their decarbonization targets and provide reliable services to their customers.
Which regional markets or market opportunities are most promising for your current energy storage business and why?
Adam Bernardi, HEAD of BUSINESS Development for Renewable Energy: Obviously, there are a lot of opportunities in California, Texas and the northeast, but we're also starting to see an increase in energy storage deployment plans in states like the Midwest and Illinois with the Clean Energy Jobs Act.
We are increasingly seeing the expansion of solar power facilities and energy storage systems from traditional electricity customers into other industries such as oil, gas, chemicals, manufacturing and data centers. Outsourcing, offshoring, supply chain and insourcing are the main trends we see among integrators in the solar and energy storage industries.
Recurrent Energy is currently developing and building the Slate solar + Energy storage project in California, which will deploy 300MW of solar generation facilities and 561MWh of battery storage systems
Mike Arndt, President and managing director of Recurrent Energy, gave an analysis of the company's business operations and market development.
What does the energy storage business mean for your company in 2021, and how does it compare to previous years?
Mike Arndt: This year, energy storage systems became a big part of our business.
It has been working on solar and Energy storage projects for years, but in 2021, the Energy storage market underwent a phase change. With sales, construction and commercial operations of multiple Energy storage projects, Recurrent Energy's Energy storage business is as important as our long-standing solar business.
How has the business model of energy storage systems evolved?
Mike Arndt: We've seen business models from start-up to financing and operating energy storage projects adapt to these risks and set expectations for risk management. We see independently deployed energy storage as our asset class, rather than simply following the development of solar power facilities, so the energy storage market has its own risks, challenges and opportunities.
What are some of the technology or industry trends you've observed: which are the most exciting developments, and which are likely to fade in the future?
Mike Arndt: We're encouraged by the adoption and development of long-term storage. While some of these long-term storage technologies need to be validated on a large scale, we first need to identify market demand. It is encouraging that utilities and regulators are looking at how energy storage systems can replace peak-gas plants, but also combined-cycle gas-fired plants.
What are the major challenges facing the energy storage industry this year and in the future, and how do you think they can be addressed?
Mike Arndt: The energy storage industry will continue to respond to the challenge of significant growth in demand for lithium-ion batteries and has become the second largest industry after electric vehicle manufacturers. We would like to see strong federal policies to incentivize demand for energy storage systems and domestic manufacturing to help create greater certainty and safety for energy storage projects.
What will 2022 bring for your company and the wider energy storage industry?
Mike Arndt: We will see continued growth in energy storage deployments in 2022. "Recurrent Energy is coming online with the first independently deployed Energy storage project, one of the largest battery storage projects we've ever deployed, and owning and operating a Battery Storage System in California for the first time. We will also see a continued diversity of market participants and significant investment in the energy storage sector.
Which regional markets or market opportunities are most promising for your current energy storage business and why?
Mike Arndt: Will continue to be the market leader in energy storage in the U.S. and globally. Founded in California, Recurrent Energy remains one of our most important markets due to the growth in scale and gradual adoption of new Energy technologies.
The Texas market is also important and is rapidly deploying energy storage systems and adopting new market rules. We expect the energy market dynamics in Texas to change a lot and there will be a lot of value in energy storage deployments in the future.
COP26 Puts Climate Change on the International Policy Agenda: How best to accelerate the energy transition to meet climate goals?
Mike Arndt: The United States is poised to become a leader in adopting and manufacturing new energy technologies. Significant and long-term federal policymaking will help accelerate the energy transition while creating a larger U.S. job market and driving resilient growth in the U.S. energy economy.
