ENERGY STORAGE

5 keys to success in the fiercely competitive storage market

Energy storage market leaders are grappling with reputational issues that could give new market entrants an opportunity to distinguish themselves from competitors and muscle their way to the forefront of the storage debate 

BEN COOK

December 1, 2023

  • Patent statistics show storage sector is one of the most innovative, and competitive, industries
  • But even storage market leaders are grappling with reputational issues that give new market entrants an opportunity to thrive
  • Companies that distinguish themselves from their competitors and muscle their way to the forefront of the storage debate will flourish
  • Tamarindo’s Energy Storage Report highlights five keys to success

The energy storage sector is one of the most competitive industries in the world at present. This is partly because the power industry is commonly seen as a hotbed of innovation. Indeed, research conducted by the data analytics company GlobalData shows that there have been 439,000 patents filed and granted in the power industry over the last three years. However, given the highly competitive nature of the energy sector, the vast majority of these innovations, and the companies that file the patents, will never gain any significant traction.

GlobalData conducted an analysis of innovation in the storage sector, which was based on “innovation intensity models built on 83,000 patents”, and identified 30-plus companies that could be described as being at the forefront of innovation in the industry – these companies included technology vendors, established power companies, and up and coming start-ups engaged in the development and application of battery energy storage systems.

The companies identified in the analysis were assessed against a number of criteria including ‘application diversity’ and ‘geographic reach’. By way of explanation, ‘application diversity’ measures the number of different applications identified for each relevant patent and broadly splits companies into either ‘niche’ or ‘diversified’ innovators. Meanwhile, ‘Geographic reach’ refers to the number of different countries each relevant patent is registered in and reflects the breadth of geographic application intended, ranging from ‘global’ to ‘local’.

Shell, Mitsubishi and Panasonic among most prolific storage patent-filers

It may come as no surprise that some of the biggest filers of energy storage-related patents are huge conglomerates, such as Shell, Mitsubishi and Panasonic. However, this is not to say that there is no room for emerging energy storage companies to make inroads and grow market share. For example, though Shell may be leading the charge when it comes to patent volumes related to battery energy storage systems, the company is struggling to convince the public of its environmentally friendly credentials – for example, earlier this year the company was accused of misleading investors through “greenwashing”.

Patent volumes related to battery energy storage systems (Source GlobalData Patent Analytics)

 

Meanwhile, as Tamarindo’s Energy Storage Report has highlighted previously, there is a lack of consensus on what is the optimal storage technology and this uncertainty is acting as a barrier to the growth of the sector. It’s also worth noting that, as the Swiss Federal Institute of Technology has highlighted, while lithium-ion battery storage is likely to “outcompete” alternative storage technologies up to 2030, this market dominance also poses risks for wider society. One of these is “technological lock-in”, that is the idea that the more a society adopts a certain technology, the more unlikely users are to switch.

Storage companies that dominate now may not do so in the future

Yes, lithium-ion batteries are the most widely adopted type of energy storage, but is it necessarily the best form of energy storage? This is an ongoing debate in the industry, and there has been much discussion about the fire risks associated with lithium-ion batteries. There is no guarantee that the industry players that currently dominate the storage sector will continue to be the dominant forces in future. Take Tesla as an example – a company that has benefitted more than most from what the Swiss Federal Institute of Technology would describe as “innovation spill-overs from the electric-mobility sector”. Such spill-overs have played a part in enabling Tesla to become one of the world’s ‘Big Five’ integrators, but it’s not all plain sailing for the company – a fire incident at the 50MW/100MWh Tesla Bouldercombe Battery Project near Rockhampton, Queensland, Australia in September indicates that the company and the wider industry may have to grapple with some potential reputational issues as the storage industry further develops.

Indeed, the fire risk issue will prove to be a significant barrier to the wider deployment of energy storage. Last month, an executive at gravity and kinetic energy-based energy storage manufacturer Energy Vault said that lithium-ion battery fires will “go up exponentially” given that large amounts of lithium-ion battery storage being deployed around the world. It’s a concern that is resulting in local planning authorities rejecting proposals for energy storage projects. For example, last week it emerged that Harmony Energy’s plans to build a battery plant on greenbelt land in West Yorkshire had been rejected by Leeds City Council after “hundreds of locals” objected to the plans on fire safety grounds. Elsewhere, in April this year, local residents in Maryland’s Prince George’s County in the US launched a campaign against a proposed lithium-ion battery storage system near their homes amid fears of possible fires and explosions.

Entrepreneurs ‘know their craft and little else’

There is a school of thought in the finance and investment world that a business boils down to two aspects, marketing and bookkeeping, and that if a business excels at both “it doesn’t matter what you are selling or offering because someone will buy it”. The flipside of this is that there is a view that most entrepreneurs – of which there are many in the energy storage sector – “know their craft and little else”. In other words, while you may have invented the most efficient and effective energy storage system in the world, if it will count for little if you lack the skills to convince the general public of its merits or safety record, for example, or convince potential customers to buy it and potential investors to back it financially.

It’s for this reason that energy storage companies need to tool up for the battle for the public, and potential customers’, hearts and minds. That’s not forgetting that investors also need to be persuaded to provide the capital that will enable storage technology developers to commercialise their products. Here are five issues that energy storage companies, and the wider industry, need to clarify in order to ensure the sector fulfils its undoubted potential.

1. Strengthen the reputation of storage and the companies that operate within it

 Concerns about fire risks associated with lithium-ion batteries means the public is becoming increasingly concerned about the safety of energy storage projects. Lithium-ion battery storage manufacturers and project developers need to reassure the public about what steps they have taken to minimise fire risk. In addition, more clarity is needed about the extent to which energy storage fires actually do occur. Are energy storage fires actually very rare? And when an incident does occur does it receive disproportionate media coverage that increases fire risk fears to an unrealistic level? Energy storage companies need to be at the forefront of this debate so the issue of fire risk is addressed in a measured way. Meanwhile, energy storage companies need to always be aware of the need to prove they are sound and robust businesses that are run by ‘fit and proper’ persons. Investors will want to know that storage technology companies have a project pipeline that consists of financially sound clients that will enable the business to fulfil its order book. In addition, investors, customers and the general public need to know what the motivations are of the executives that run energy storage companies. Are you an executive that believes in the goal of transitioning to a net zero economy? Or have you merely spotted a very promising investment opportunity? A growing concern that is fuelling opposition to energy storage projects is that some energy storage companies’ primary objective is to grow profits via energy arbitrage rather than having a desire to reduce damage to the environment per se.

2. Individual companies need to be very clear about what distinguishes them from their competitors

 What makes your company superior to its rivals? For example, the uninitiated may believe that all energy storage projects pose a fire risk, when in fact this is primarily a concern for lithium-ion battery storage projects. If your storage technology does not pose a fire risk, be clear about it. Similarly, storage companies need to be clear about their primary purpose – if it’s to accelerate the transition to a greener economy, make this clear, this will stand your organisation in good stead when making planning applications, for example, and trying to win over local communities. If you are seen as purely seeking profit, residents near a proposed site are likely to up their efforts to campaign against the plans.

3. Companies need to build credibility and trust

Your customers, investors, the general public, as well as lawmakers at a local and national level need to know that your company can be trusted to guarantee people’s safety, and is partnering with robust and financially-sound companies. They also need to know that your primary mission is to protect the environment, rather than make a “quick buck”. Your investors, in particular, also need to know that your business plan is financially sound with credible, and ideally multiple, revenue streams.

4. Your company needs to be at the forefront of energy storage debate

 There is no consensus on what type of energy storage will ‘win out’. Will it be lithium-ion batteries, thermal energy storage, compressed-air/gas, lead batteries, redox flow systems, or perhaps sodium-ion batteries? The only thing that is clear is that the future evolution of the storage sector is very uncertain. But this represents a huge opportunity for forward-thinking companies that place themselves at the forefront of the energy storage debate and establish themselves as thought leaders. Markets are waiting to be convinced about what the future of energy storage looks like, this is a chance for purveyors of specific technologies to mould perceptions.

5. Build industry partnerships

 In this era of supply chain constraints in the energy storage sector, building industry partnerships is paramount. An effective and efficient supply chain can be the difference between the success and failure of a business. But suppliers have many businesses to choose from when it comes to selecting a potential partner. They are more likely to choose those companies that have a clear proposition, a reputation for safety, a clearly stated energy transition-related mission, healthy finances, an excellent industry reputation, public support, and an industry-leading position in the market. Companies that possess all these qualities will be able to secure the most effective industry partners that give their business the best chance of flourishing.