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Energy storage to be next critical catalyst for a global shift towards renewables

A critical factor impacting the viability of renewables is energy storage. Current energy storage capacity represents just 17% of total installed solar and wind capacity. Energy storage cost has almost halved in the past five years but generally remain too pricey for scale-up applications. In a "red-alert on climate change" scenario, annual renewable energy capacity additions would treble to 500-600GW globally. 15+ UBS analysts, across 6 sector teams globally, examined the status and scenarios for energy storage, with cost cuts and technological advancement indicating energy storage potential is at a tipping point.

How cheap can it be? 2025E energy storage cost under a third of what it is now

In the next decade, we expect energy storage costs to fall 66-80% from here due to: 1) battery makers' more aggressive plans for R&D investment and capacity expansion; 2) experiences gained from EV batteries; 3) material cost cuts in renewables lowering power system costs. Our analysis suggests electrochemical energy storage, such as batteries, has the greatest cost reduction potential, and full grid parity (storage + renewable costs lower than other power sources' costs) could be achieved in 2025-27.

How large is the addressable market? Up to US$426bn by 2030E – 6x vs. now

We estimate the installed global solar and wind capacity at end-2018 was 1,105GW while storage capacity was only 188GW. To make the renewables' operation more efficient, we think the gap between the two capacities needs to narrow driven by: 1) accelerating cost reduction; 2) rising scale of renewables (is 100% renewable achievable?); and 3) ongoing power demand growth. We forecast energy storage's global addressable market will be 452-1,424GW by 2030E versus 230GW in 2020E. This implies a US$134-426bn market value, and energy storage to account for up to 13% of global power capacity in 2030E versus only 3% in 2020E.

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