A few weeks ago I was attending the most important solar fair in Europe, Intersolar, in Munich. In addition to solar energy, this fair is a reference in e-mobility and energy storage. And the feeling I was left with is that batteries and their applications for energy storage are the new market boom. And many of the things I saw reminded me of the dot-com boom 20 years ago when, among other things, datacenters emerged as a large-scale business model. And that flashback, in addition to making me aware of the unrelenting pace of time, gave me the opportunity to analyze this analogy a little more in depth.
- It is an infrastructure business that serves as an “enabler” for other businesses. In the case of data centers, he was the enabler of e-commerce, cloud applications, etc. In the case of energycenters, we will have to wait and see how to monetize the break with the first commandment of the network operators: “generation and demand must be identical”.
- Both are businesses based on efficient hardware management using advanced thermal management and control software. Both scale well and savings are achieved by centralizing the infrastructure.
- Both base their profitability on the cost reduction curve. In the case of datacenters it is heavily influenced by Moore’s law. In the case of the energycenters, as they are electrochemical technology, we cannot expect such spectacular curves, but according to BNEF in its latest report, the cost reduction will lead us in a few years to reach the mythical figure of 100 $/kWh.
- The value chain in both is very similar
Currently, energy storage attracts players of many different types. From large industrial conglomerates such as LG, Panasonic, Siemens, GE or ABB, through IPPs such as RES or AES to specialists in the new sector such as Tesla, BYD or Leclanché. If we look at the datacenters, we can see that 20 years ago there were also many players but now the sector is evolving towards 2 large groups of companies:
– Infrastructure providers: specialists such as Equinix or Cyxtera or telcos such as China Telecom who maintain the centres with the associated HW.
– Service providers: Amazon, IBM, Google… hire the above mentioned capacity and offer “cloud” services.
In the case of energycenters, infrastructure providers are likely to be large companies such as utilities with the capacity to make large investments with medium term returns. But it is in the part of service providers where the most exciting battle seems to me to be where perhaps we will see great Internet companies like Google with new companies like Tesla and certainly classics like Siemens or IBM. In fact, I was struck by the fact that one of the most spectacular stands at Intersolar was from Mercedes energy, which did not actually show any specific products but clearly focused on energy storage solutions. Whoever develops services that fully leverage the capabilities of technology (as Amazon did with its cloud services) will revolutionize the market. And all of this has a lot to do with Smart Grids, a field that focuses the efforts of many giants of both energy and IT.
It seems clear that energy storage is going to change the management of renewables, as well as the grid management currently being carried out by operators, but I believe that it is not going to be through distributed private installations but as virtual’ storage services offered by companies that in turn will rely on optimised centralised infrastructures. Initially it will be aimed at large power generators/consumers, but it will evolve towards a scalable service that is within the reach of both large customers and individuals.
But all this will only happen if energy storage is profitable. Currently, the main source of income is frequency regulation, which is usually paid for by the network operator. As storage costs are reduced, new business applications will emerge. At the moment everyone wants to be well prepared for what is supposed to come in the near future: energy storage as a tool to revolutionise electricity management.