European innovators could unlock €250bn a year energy storage market

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Christian Müller, CEO of InnoEnergy Germany, argues that opportunities are plenty for those that commit to developing Europe’s battery energy ecosystem now.

Back in June, Europe’s political leaders negotiated an increase to the binding renewable energy target for the EU: 32% by 2030.1 This level of ambition is what sets Europe apart as the leader of our global clean energy transition. However, while great progress has been made towards switching to low carbon electricity, we need innovative energy storage solutions to smoothly integrate more renewables onto the grid. China has dominated the rise in global production; now is the time for Europe to put its own ingenuity and determination to good use. And take the lead on storage.

Over the past 30 years we have progressively moved away from a centralised system as we have looked to solve the energy system challenge at the lowest level – think managing generation and consumption within households and businesses then looking to solve it at district, or country level.

Consumers are increasingly taking control of their energy needs, from solar panels on roofs to cogeneration on industrial sites, and electric vehicles to heating you can control on your phone.

In tandem, we are also increasingly seeing sector coupling – the natural integration of complimentary sectors – in this case, buildings, transport, industry, heat and cooling into the power sector.

The culmination of these changes mean that we stand at the very edge of a system-wide transformation. Change is coming from every angle. As we seek to decarbonise and decentralise, electricity, transport and heat are becoming increasingly integrated, and as they do, new challenges arise.

The state of energy storage in Europe

One particularly pressing challenge is how we can continue to match supply and demand as the system changes. It’s no secret that our electricity grid is under increasing pressure from the electrification of transport and heat, the addition of intermittent renewables, and from population growth. The answer is storage.

Storage, in its myriad forms, is key for integrating heat, transport and electricity by providing a more flexible and efficient grid that can meet increasing demand from electrification and flatten peaks. A more flexible and efficient energy storage system would avoid the need for large amounts of generation capacity that is only required to run for a short period of time – an inefficient and uneconomic approach.

Forecasts say that the market agrees. Research by the International Renewable Energy Agency predicts battery storage installations could experience 17-fold growth by 2030 due to the rapidly falling price of batteries. However, in Europe, we are simply not doing enough to take our share of this exponentially growing market.

Current battery production in Europe accounts for just 4% of global demand.2 The European Commission attributes the slow development of energy storage in Europe to market, regulatory and administrative barriers, limited access to grids, and excessive fees and charges.

To level the playing field against Asian competitors, the Commission has proposed a market design initiative in the Clean Energy for All Europeans package to facilitate investment and support the cost-efficient use of storage.

What lies ahead is a huge opportunity for businesses, entrepreneurs and innovators to bring innovative storage solutions to market to bridge the gap. In fact, research by InnoEnergy suggests that a sustainable battery cell manufacturing supply chain in Europe could be worth as much as €250bn a year by 2025. We are about to witness a steep rise in market volume globally, and Europe needs to ready itself to take its share.

EVs as exemplars

This growth is, in part, stimulated by the rapid rise in popularity of electric vehicles. According to recent forecasts, as much as a third of all cars worldwide will be electric by 2040, and by 2030 the cost of electric cars will be cost competitive with petrol and diesel models.

With the battery accounting for almost 50% of the retail price of an electric car, this presents an opportunity or a risk, depending on your appetite. Do manufacturers collaborate with external suppliers as best they can but be beholden to them, or create their own supply chain to the tune of millions in research and development?

In Germany, several car manufacturers are increasingly looking to do the latter, creating the expertise in-house and securing their own local supply chain.3 Audi’s development of its e-tron electric SUV launched late September 2018 is an excellent example of integrating the supply chain to retain maximum value and regain full control over assembly. In 2012, Audi opened its High Voltage Competence Centre near Ingolstadt bringing together its battery supply chain under one roof.

The result was the development of a complete system including packaging, cooling and fusing that integrated perfectly into its e-tron concept vehicle allowing for optimal mass positioning. Being able to bring this part of the process in-house allowed Audi to simultaneously produce an optimised solution for the e-tron while focusing on how to speed up charging and slow down the ageing of batteries.

Today, the manufacturing of the battery takes place in Audi’s Brussels-based factory, allowing the production of e-tron and its battery to happen side-by-side. By manufacturing the battery in-house, Audi has full control over the assembly line and can operate to just-in-time principles.

Another part of making a sustainable supply chain in Europe hinges on the need to consider battery manufacturing in a more holistic way – from mining through to recycling. By considering a battery’s lifecycle, we can begin to identify opportunities to reduce the need for freshly mined materials; for those that we do need to mine, we must ensure that it is sourced to the highest ethical standard and that we reduce its use as much as possible.
Audi is thinking about this too. The Centre’s research has also investigated how to recycle the e-tron’s high capacity EV once it has reached its end of life. The Centre is currently demonstrating a stationary storage solution coupled to a solar PV installation which can generate up to 20kW on sunny days.4 This kind of approach epitomises the type of integrated approach we need to revolutionise our energy storage system.

Positive shift

It is encouraging to see this positive shift towards establishing a competitive energy storage supply chain in Europe and, in truth, we need more of it. In the past, incumbents and investors alike have been reluctant to commit the resources needed for the sector to flourish. However, over the past year there have been several announcements that indicate that this sentiment is changing.

Integration is coming, and European players, large and small, need to act fast if they are to benefit from the wave of energy storage requirements that are to come. Of course, there are inherent challenges to the integration of energy sotrage, but if the supply chain comes together around this common goal, all manner of success awaits.

3 InnoEnergy, 2018, Clean Air Challenge

The European Battery Alliance (EBA)

The European Battery Alliance (EBA) was launched in October 2017 by European Commission Vice President Maroš Šefcˇovicˇ. Its immediate objective is to create a competitive manufacturing value chain in Europe with sustainable battery cells at its core
The EBA wants to allow all Europeans to benefit from safer traffic, less polluting vehicles and more advanced technological solutions, while creating a competitive sustainable battery cell manufacturing value chain in Europe – a market with an estimated annual value of up to €250bn by 2025.

InnoEnergy is working with more than 120 stakeholders of the industrial and research battery ecosystem from across Europe and beyond – covering the entire battery value chain from design, to production, manufacture and installation. And it is proud to be instrumental in achieving this European ambition.

InnoEnergy is ready to be a driving force behind the actions identified, in close co-operation with the European Commission services. Concrete investment projects have already been identified in the ecosystem, which EIT InnoEnergy will strongly support, as co-investor or facilitator.

Christian Müller
InnoEnergy Germany
Tweet @InnoEnergyEU

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