From a technological standpoint, the primary factors that customers prioritize when it comes to batteries are cycle life and cost-effectiveness. Presently, lithium-ion batteries are prevailing because they fulfill customer requirements. In the past, the dominant choice for battery chemistry was a nickel manganese cobalt cathode. However, lithium iron phosphate (LFP) has emerged as a more cost-effective alternative, surpassing it in popularity. (Customers of lithium iron phosphate are willing to acknowledge that LFP may have certain limitations compared to nickel batteries, particularly in terms of energy density.) Nevertheless, the scarcity of lithium has led to the exploration of various intriguing and promising battery technologies, with a particular focus on cell-based options like sodium-ion (Na-ion), sodium-sulfur (Na-S), metal-air, and flow batteries.
C&I is divided into four subsegments, with the initial one being electric vehicle charging infrastructure (EVCI). According to the McKinsey Center for Future Mobility, electric vehicles (EVs) are projected to experience a significant increase in market share, rising from approximately 23 percent of global vehicle sales in 2025 to 45 percent by 2030. This rapid growth will necessitate the widespread expansion of standard charging stations and superchargers, thereby exerting strain on existing grid infrastructure and requiring expensive and time-consuming upgrades. In order to prevent this situation, charging station companies and owners might choose to install a Battery Energy Storage System (BESS) on their premises. Collaborations have already been established between BESS providers and electric vehicle manufacturers to construct additional Electric Vehicle Charging Infrastructure (EVCI), even in secluded areas.
The project's operating system, known as the energy management system (EMS), assumes responsibility for controlling (charging and discharging), optimizing (revenue and health), and ensuring safety (electrical and fire). The EMS operates in conjunction with the inverters, battery management system (BMS), breakers, and fire system to coordinate their functions. However, what occurs in the event that it does not yield satisfactory results?
Promote the development of robustness within supply chains. Numerous essential components of BESS (from battery cells to semiconductors in inverters and control systems) depend on intricate supply chains that are vulnerable to disruptions arising from various factors such as scarcities of raw materials and modifications in regulations. When establishing a supply chain strategy, it is important to take into account various factors such as strategic partnerships, multi-sourcing, and local sourcing. Additionally, planning for potential technological changes should not be overlooked. In addition to addressing BESS components, those operating in the industry also face challenges when it comes to engineering, procurement, and construction (EPC) capability and capacity, especially for front-of-the-meter applications. To achieve smooth execution of BESS projects, it is imperative to establish strategic collaborations with prominent EPC companies that have the capacity for large-scale BESS installations.
In an emerging market such as this, it is crucial to grasp the potential profits and profit margins linked to various products and services. The BESS value chain initiates with manufacturers responsible for producing storage components like battery cells, packs, inverters, housing, and other necessary elements within the system balance. Based on our calculations, the providers involved in this particular sector of the chain are expected to receive approximately 50% of the profit pool generated by the BESS market.
The BMS encompasses the HMI, which denotes the operational state of the BMS (such as charging, discharging, or idle), desired levels of real and reactive power, limits for state of charge (SOC), alarm information, and input from control parameters.
To gain a comprehensive understanding of the potential advantages that come with BESS, it is ideal to divide the market based on user applications and sizes. Within BESS, there are three distinct segments: front-of-the-meter and BTM residential installations, typically ranging below 30 kWh (as shown in Exhibit 1).
The main clientele for FTM installations consists of utilities, grid operators, and renewable developers who seek to address the sporadic nature of renewables, offer grid stability services, or avoid expensive investments in their grid. Typically, the BESS providers in this sector are either vertically integrated battery manufacturers or prominent system integrators. They will set themselves apart based on factors such as price and scope, dependability, their history of successfully managing projects, and their aptitude for creating energy management systems and software solutions for grid optimization and trading.
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Exploring the realm of software is of utmost importance, particularly within the context of storage systems. It is anticipated that the value of these systems will shift from mere hardware to encompass the software that governs and enhances the overall functionality, presenting an opportunity to attract a wider customer base and achieve greater profitability. It is important for BESS players to cultivate these abilities at an early stage.
In order to monitor battery readings, the SCADA system generally establishes direct communication with the BMS. Additionally, there may be a need or advantage for the SCADA system to communicate with DC-DC converters, inverters, and auxiliary meters in order to effectively manage the BMS.
According to our analysis, the current situation has presented a notable prospect. Our findings indicate that over $5 billion was allocated to BESS investments in 2022, marking an almost threefold rise compared to the previous year. It is anticipated that the worldwide BESS market will achieve a valuation ranging from $120 billion to $150 billion by 2030, surpassing its current size by more than twofold. However, this market remains fragmented, posing challenges for numerous providers who are uncertain about their competitive positioning and strategies. It is crucial to seize this moment and determine the prime areas of growth in the swiftly advancing BESS market, while also making the necessary preparations for them.
The battery management system (BMS) is frequently mistaken for the EMS. The BMS is a straightforward system that serves two purposes: 1) enabling or disabling battery operation and 2) ensuring the safety of the batteries. When initiating a BESS, the EMS will instruct the BMS to activate the batteries (establish the DC bus). The BMS will execute this command only if it detects a safe condition. During operation, if the BMS detects parameters that are exceeding their acceptable range, it will prompt the EMS to decrease power output (in cases where parameters breach fault thresholds, the BMS will activate the opening of rack contactors).
The market for BESS (Battery Energy Storage Systems) is currently experiencing a rapid phase of growth and development. Companies that fail to take action at this pivotal moment risk losing out on significant opportunities. Success in this market will be determined by four essential factors that companies must demonstrate. As the energy transition gains momentum, these victors will generate value in an emerging market.
To obtain a summary of the functioning of BMS and EMS, please refer to our publication on BESS and grid assistance. In this section, we will delve into the integration of BESS with SCADA.
Large-scale deployments of BESS are already underway, with the notable involvement of FlexGen company in a project aiming to establish a BESS capacity of six GWh in due course. A different United States-based company, involved in various industries including energy, has already exceeded that milestone by achieving 6.5 gigawatt-hours (GWh) in deployments of battery energy storage systems (BESS) in the year 2022. A significant portion of the current influx of funding towards BESS is being allocated to services aimed at enhancing the flexibility of energy providers, such as firm frequency response. Over time, the main source of BESS (Battery Energy Storage System) expansion will arise from the development of solar parks and wind farms, requiring batteries to manage their storage requirements for shorter durations.
Recognize a neglected requirement within the value chain. In an emerging industry like this, it is beneficial for companies to consider additional products and services they could expand into, either through internal growth or mergers and acquisitions. As an example, is there any hindrance preventing a system integrator from conducting in-house battery packaging? Or collaborating with a battery manufacturer to jointly develop a new cell chemistry? Moreover, is there any limitation preventing a battery manufacturer from incorporating system integration or service capabilities to attract a particular BESS sector, like utilities?
BESS EMS, when contrasted with solar SCADA, presents considerably greater complexity. Several owners have come to realize this through personal experiences that were challenging. The EMS assumes a significant level of accountability in relation to its cost, particularly for projects exceeding 100 MWh in size. In such cases, there are two cost metrics that are taken into consideration.
The financial strategies for utility-scale Battery Energy Storage Systems (BESS) are greatly influenced by the unique characteristics of the regions in which providers establish themselves. Typically, players in this sector opt for a revenue stacking approach, which involves aggregating incomes from multiple sources. They may engage in supplementary offerings, arbitrage, and capacity auctions. For instance, numerous BESS installations in the United Kingdom presently focus on ancillary services like frequency regulation. In Italy, there are talented players who have achieved success by emerging victorious in one of the country's capacity auctions that prioritize renewable energy. On the other hand, in Germany, the focus is more on evading expensive grid enhancements in order to seize opportunities. The successful players in the FTM utility sector have recognized the importance of tailoring their approach to individual countries and their regulations, rather than relying on a singular, all-encompassing strategy.
FlexGen ensures the reliability of its energy storage systems through advanced design, rigorous testing, and the implementation of HybridOS software, which provides real-time monitoring, predictive maintenance, and intelligent control. Additionally, FlexGen's lifecycle services offer ongoing support and maintenance to maximize system performance and longevity.