Storage Is a Critical Enabler in the EU's Path to Decarbonization

According to Eurelectric, energy storage is set to play a crucial role in supporting the delivery of a carbon neutral energy supply. This effort includes the decarbonization of transportation, buildings, and industry through electrification, and more broadly, net-zero greenhouse gas (GHG) emissions from the European economy by 2050. In a recent report, Eurelectric estimated that batteries would make up nearly 200 GW of energy storage in 2045 if the European Union (EU) economy is decarbonized at 95%. However, scaling up energy storage and flexibility technologies will be essential to ensuring energy security as large-scale variable renewable energy generation, essentially solar and wind power, becomes the norm.

Different Types of Storage Are Needed to Achieve Decarbonization Goals

The EU’s storage landscape is currently dominated by pumped hydro storage; however, investment in battery storage and other complementary storage technologies will be key to unlocking scale economies in the long term energy transition. A concerted and collaborative effort between researchers, project developers, and policymakers is required to effectively realize the role of storage technologies in the decarbonization pathway.

Supportive policies and government-backed incentives have actively supported the buildup of renewable generation across key European countries such as the UK and Germany. These countries have a high penetration of renewable generation and high electricity prices, building a strong case for storage to scale and compete in the region’s flexibility markets. Frequency regulation and ancillary services to grid operators are anticipated to be key remuneration applications for large-scale energy storage providers.

According to Guidehouse Insights’ report, Market Data: Utility-Scale Energy Storage Market Update, utility-scale energy storage is considered a key component of new power system planning efforts in countries around the world. This trend represents a major shift from 2018 when the technology was still largely deemed too expensive or complex for integration into energy markets. Additionally, as cost economics of lithium ion batteries continue to work in favor of project developers, these batteries should account for almost 68% of new utility-scale energy storage capacity deployed globally by 2029.

European energy providers strive to offer resilient power and peak electricity supply to their consumers. The Clean energy for all Europeans package developed by the European Commission acknowledges the role of energy storage in the decarbonization pathway and GHG reduction targets. The business case for batteries in the UK has already shifted from frequency regulation to more wholesale revenues, i.e., from the balancing mechanism to day-ahead and intraday trading. Some of the key market enablers include well-integrated, functioning market and regulatory frameworks, research and innovation investment in new battery technologies, streamlined permitting processes, and clarity on taxes and levies. Advancing these drivers can help unlock energy storage opportunities in the European market.