Energy Outlook 2023: Energy Storage

Improving sustainability and increasing manufacturing of battery systems

The relevant legal and regulatory framework applicable to Battery Energy Storage Systems (generally categorised as a form of generation) is now relatively settled in many jurisdictions and routes to market are becoming more standardised (e.g. as seen through optimisation services contracting in the UK). In the EU, as part of the European Green Deal, new legislation concerning the competitiveness, safety and sustainability of batteries reached provisional political agreement in December 2022, providing rules on sustainability in production, recycling and repurposing of batteries. This revised Battery Directive is planned to be phased in from 2024 but the sector will need to start reacting in 2023 to avoid being left behind.

The US government has announced $2.8 billion in grants for electric vehicle batteries resulting in a race between the EU and the USA in attracting battery manufacturers. For example, Swedish company Northvolt was planning to build a Gigafactory in Northern Germany but is now considering making investments in USA instead. The industry has criticised the EU process for being too slow and there are calls for EU grants to allow competition with the USA. Further, there have even been calls to act under WTO law and sue the USA for protectionism and discrimination of EU companies under the Biden administration’s “Inflation Reduction Act”.

Cheap Aluminium-Sulphur and other new technologies for batteries

Conventional lithium-ion batteries are toxic, contain a flammable electrolyte and are produced with valuable metals which are often harvested under environmentally harmful conditions. Unlike lithium-ion batteries, aluminium-sulphur batteries are not flammable, and the raw materials are cheaper and more readily available. According to researchers, aluminium-sulphur batteries could have one sixth of the cost of lithium-ion batteries and do not require special insulation and anticorrosion measures. Therefore, they may be ideal for use in single homes, small to medium businesses or electric vehicle charging stations. Other new types of batteries under development include Lithium-Tungsten, Zinc-Manganese, and Organosilicon batteries which similarly offer various potential benefits in terms of energy density, safety, and recharging speed.

Aluminium-sulphur batteries will likely be subject to the same obligations as other, well-established battery types in EU law and will most likely also be subject to the new European Battery Directive. The situation is similar in other jurisdictions including the UK.

Hydrogen energy storage

Hydrogen is predicted to play a pivotal role in the future as one of the most promising energy storage mediums. However, handling and storing requires high-pressure tanks or cryogenic temperatures making it expensive and complicated. Development of the novel processes and tanks necessary to economically store hydrogen is an area where innovative start-ups are coming up with solutions. The energy in hydrogen is not necessarily needed at the location of production, requiring sufficient transport capabilities and local distribution. The use of offshore wind in hydrogen production is a highly attractive method of circumventing the issues in the production of power when demand is low and grid storage capacity is insufficient. These synergies between emerging technologies demonstrates the importance of diverse investment and development across different technologies aiming to achieve net zero.

Some new developments include a new electrolysis module which uses air humidity to produce hydrogen by splitting the humidity into hydrogen and oxygen has been successfully tested. This could allow the production of green hydrogen even where water is scarce. Further, researchers are developing methods to store hydrogen in a battery using formic acid and its salts as a storage medium which could allow renewable energies to be stored locally at the place of production.

The infrastructure for hydrogen requires massive investment and time to be built. Nevertheless, we are seeing this investment coming in, for example the US is deploying $10b in funding for hydrogen technologies with an additional $1.5b for R&D in clean hydrogen manufacturing and recycling. In Europe, examples include Denmark which has introduced a new target of producing 6GW of hydrogen annually by 2030.  In contrast, it has been suggested that some EU states are being hindered by lacking EU-legislation and causing uncertainties in the industry which leads to hesitation with investments which are necessary for the ramp-up. Therefore, the EU legislative package on renewable and natural gases and in hydrogen is eagerly awaited and currently being worked on by the Committee on Industry, Research and Energy.

Electrification push

The European Parliament and the Council have recently agreed on reducing CO2 emissions for cars and vans by 100% by 2035, de-facto banning new internal combustion engines (ICEs) cars from that date.

In addition, the proposal on the deployment of alternative fuels infrastructure is expected to be completed in 2023. It sets a minimum coverage of vehicles’ charging points across all EU roads.

Moreover, in early 2023, the European Commission is expected to present a revision of CO2 emissions standards for trucks, eying stricter standards and promoting zero-emission heavy-duty vehicles.

Therefore, the auto industry is expected to endorse further the trend towards EVs, as adaptation to these proposals will kick in in view of future compliance and shift in EV production will consolidate. The success of the electrification shift will also depend on the availability of batteries and the deployment of charging stations.