Grid-Connected Lithium-ion Batteries to Soar to $1B Biz by 2018

A123Systems1The investment and innovation pouring into lithium-ion battery technology for electric cars could be a major boon for a greener power grid. According to a new report out today from Pike Research, the global market for lithium-ion batteries in utility-scale applications (storing energy from intermittent renewable sources like solar and wind) is set to grow to $1.1 billion by 2018 — at a rate faster than at least 10 other energy storage options for the grid, including pumped hydro, compressed air and flow batteries.

“Utilities will be the downstream beneficiaries of innovation and investment in lithium-ion batteries for the transportation sector,” explains Pike Research senior analyst David Link in today’s release. Lithium-ion is “quickly becoming the battery of choice for electric vehicle manufacturers,” he says, and this trend will deliver improvements in storage capacity and economics that will spur the utility sector to follow suit. By 2018, Pike expects lithium-ion batteries to make up more than a quarter of the $4.1 billion stationary energy storage business.

While investment in lithium-ion batteries for electric cars could help drive down costs for grid storage applications, utilities adopting the technology for grid storage could also give something in return. Batteries degenerate to about 80 percent storage capacity after 8-10 years in an electric car, but still hold value for grid storage and other applications at that point. So if auto and battery makers can find a healthy market for recycled lithium-ion batteries on the grid, it could help make electric vehicles more affordable. That’s part of why Nissan (part of the Renault-Nissan Alliance, which is targeting global domination of the electric vehicle market) is now getting into the battery recycling business.

A number of battery makers, including A123Systems (s AONE), Ener1 (s HEV) and Altairnano (s ALTI), are hoping to ride the lithium-ion grid storage boom. But as the power grid gets more digital intelligence and renewable energy in coming years, there’s plenty of room for other energy storage technologies. As Katie has explained in our FAQ about energy storage for the smart grid, “Next-generation smart grid without energy storage is like a computer without a hard drive: severely limited.” According to Pike Research, other “important storage technologies” will include advanced batteries like sodium sulfur, as well as kinetic storage tech including pumped hydro and compressed air.