Renewable Energy

Business Is Booming for the Energy Storage Sector

Ten years ago, both solar and wind energy began to gain popularity. Today, record amounts of solar and wind energy are being deployed.

Several things have changed between then and now. Wind and solar are currently favored over every other form of electrical power generation.

But more importantly, the intermittent nature of both solar and wind now has an elegant solution…

Energy storage.

This solves the problem of needing power when solar and wind are unable to operate, like at night or on a day with little wind. It also helps level out both supply and demand curves.

Let me show you a real-world example of how solar power can change over time.

Below is both the solar power production and the electricity usage at our farm in Pennsylvania this past Sunday from 9 a.m. to 1 p.m.

As you can see, solar production and electric usage are constantly changing. Sunday was partly cloudy, so our solar array didn’t make anywhere near its 19-kilowatt peak.

Solar Power Production and Usage Chart

Our usage also varied widely. Anywhere on the graph where usage spikes above production, we were using expensive, utility-provided power.

We try to avoid that. So we’re planning to add energy storage to our solar system in 2021.

With energy storage as a part of our system, we won’t be using much utility power at all. Instead, it will be treated as a backup source if our solar system has a problem.

Energy storage provides quiet, maintenance-free power. It is used in place of a noisy generator and can provide backup electricity for hours or even days.

Utilities also have energy storage systems, but they are much more expensive to run. Imagine the above chart calibrated in gigawatts (GW) and covering a utility’s entire customer base.

It will have the same peaks and valleys in load. Utilities use their energy storage systems to give them super-fast load leveling known as “demand response.”

Prior to cheap energy storage, the only way for utilities to meet demand peaks on their grids was to fire up natural gas peaker plants. These are power plants that run only when there is high demand.

Because they are very expensive to run, the power they produce can cost a fortune. That’s why large, commercial and industrial customers pay a lot for peak power.

Peaker plants have a slow startup time. A plant can take 30 minutes to start, even under the best conditions. In contrast, battery-based energy storage can be dispatched in several milliseconds. That gives utilities a way to fix the output peaks and valleys of large solar and wind farms.

That’s why most new solar arrays now have companion energy storage systems. It’s a great solution for utilities.

Business Is Booming!

Energy storage is expected to grow at least sixfold between now and 2025.

This comes as no surprise to me. If the third quarter of this year was any indication, that estimate could even be low!

A record-breaking amount of energy storage, 476 megawatts, was brought online during this quarter. This was a 240% increase over the previous record.

Even more amazing, the previous record was set in the second quarter of 2020. The residential and utility energy storage markets have grown steadily for six and seven quarters in a row, respectively.

And energy storage grew at these rates despite COVID-19-related business slowdowns. After all, we’ve been suffering through a severe economic downturn.

But during 2021, the economy will be ramping back up. And I believe we are going to see an unprecedented buildout of energy storage over the next five years.

Energy storage is forecast to grow from today’s 1.2 GW to 7.5 GW by 2025. And at current buildout rates, we’ll easily beat that.

To take advantage of this future growth, interested investors might consider a solar or clean energy exchange-traded fund (ETF).

However, a more direct way to play the storage space is to focus on current storage technology. That’s lithium-ion batteries.

A full 99% of today’s storage solutions use lithium-ion chemistry to make batteries. And the best way to play these is via the Global X Lithium & Battery Tech ETF (NYSE: LIT).

This ETF is focused on what it calls the “full lithium cycle.” It looks at companies that mine and refine lithium and those involved in battery production.

With amazing growth prospects ahead of it, the energy storage sector is going to outperform most other sectors for years to come.

No matter how you decide to play it, make sure you take advantage of this opportunity.

Good investing,

Dave

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