As the penetration of renewable energy (RES) in the grid continues to increase, so does the demand for stationary energy storage (ES) batteries. Governments and states have introduced incentives and policies and set clear targets to drive the expansion of battery storage. According to IDTechEx's forecast, the global lithium-ion battery energy storage system (BESS) market will be worth $109 billion by 2035, and the cumulative installed lithium-ion BESS capacity worldwide will exceed 4.4 terawatt-hours (TWh).
Lithium-ion batteries (LIBs) currently dominate the BESS technology landscape, with more than 90% of the world's electrochemical energy storage systems employing this technology. Over the past decade, lithium-ion batteries have seen significant growth due to their superior performance and rapid cost decline, driven by a surge in demand for lithium-ion batteries in the electric vehicle (EV) market. In 2023, for example, the total demand for lithium-ion batteries for electric vehicles, energy storage systems (ESS), and consumer electronics is about 960 gigawatt-hours (GWh), up from 400 GWh in 2021. While the EV segment still dominates the total demand for lithium-ion batteries, the demand for lithium-ion batteries for energy storage systems continues to increase, with the demand in this segment expected to reach 10% by 2023.
Looking ahead, other BESS technologies have the potential to gradually seize market share from lithium-ion BESS. Material supply constraints for lithium-ion batteries may make other BESS technologies based on richer materials more cost-competitive. These technologies may include sodium-ion batteries, redox flow batteries (RFB), metal-air batteries, and thermal batteries, among others. In addition, some of these technologies are capable of being more cost-effective than lithium-ion batteries at a cost per kilowatt-hour over a longer storage period. Nonetheless, IDTechEx expects lithium-ion batteries to continue to dominate the stationary BESS market in the medium term. These alternative BESS technologies may also have other potential advantages, such as more recyclable materials and the avoidance of flammable electrolytes, resulting in improved safety.
Figure: Lithium-ion market demand (Source: IDTechEx)
The safety of lithium-ion BESS continues to be an important topic in the market. The root cause of a BESS failure can be related to improper installation, design flaws, manufacturing issues, or BESS performance beyond its design specifications. LFP (lithium iron phosphate) batteries are generally considered safer than NMC (nickel-cobalt-manganese) batteries, although this is not always absolute. LFP batteries generally have higher thermal stability and therefore have a lower risk of thermal runaway, but can be more dangerous once they enter the thermal runaway phase. To reduce the risk of thermal runaway or prevent the spread of fire, different materials and subsystems can be introduced. However, the safety of BESS is still an area of constant innovation. This report provides a detailed analysis of the root causes of BESS failures, thermal runaway and its effects, the role of battery chemistry and morphology, safety design, thermal management techniques (such as forced air cooling and liquid cooling), battery fire testing, and related regulations.
In addition to the potential to improve system safety, LFP batteries can also reduce the cost and extend the service life of lithium-ion BUSS. As a result, LFP is now the dominant chemical component in the lithium-ion BESS market. However, the energy density of BESS using LFP cells at the system level is lower than that of BESS using NMC cells. To offset this gap, many Chinese companies have introduced BESS technology in larger battery formats, giving rise to "containerized" BESS with capacities of 5 megawatt-hours (MWh) or more. Such larger cells typically have a higher energy density and make better use of the space within the BESS container, increasing the volumetric energy density at the system level. For a given project capacity, this means that fewer BESS are required, allowing the system to be installed on a smaller footprint, reducing installation time and project costs. While energy density is not as important in grid-scale BESS as it is in EVs, as LFPs transform and become increasingly dominant, providing LFPs with higher energy density BESS will be one of the key differentiators for BESS integrators.
