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.
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 advancements in technology are driving the growth of the market for battery energy storage systems (BESS). Battery storage plays a crucial role in supporting the generation of renewable energy, facilitating alternative sources to consistently contribute to global energy requirements despite the inherently unpredictable nature of these sources. As battery prices decrease, the versatility offered by BESS (Battery Energy Storage System) will become crucial in various areas such as peak load management, optimizing self-consumption, and providing backup power during power disruptions. These applications are progressively gaining profitability.
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.
Additionally, there are the tasks related to system integration, encompassing the comprehensive planning and creation of energy management systems and additional software to enhance the adaptability and utility of BESS. We anticipate these integrators to capture an additional 25 to 30 percent of the profit allocation accessible.
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.
In conclusion, a percentage ranging from 10 to 20 is linked to sales entities, project development organizations, as well as other endeavors focused on acquiring customers and commissioning (Exhibit 4).
Considering the multitude of customer segments, varying business models, and imminent changes in technology, this question holds significant importance. Here are four strategies that could potentially lead to success in the market:
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).
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?
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.
As the next stage of objectives outlined in the Paris Agreement draws near, governmental bodies and various organizations are actively seeking to enhance the uptake of renewable energy sources. Certain regions, heavily reliant on energy consumption, offer additional incentives to encourage the exploration of alternatives to conventional energy methods. In Europe, the motivation arises from an energy crisis, while in the United States, it originates from the Inflation Reduction Act, a legislation passed in 2022 that designates $370 billion for clean-energy investments.
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.
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.
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.
If the project consists of multiple inverters, then only one inverter and its corresponding batteries are required for step 6. As a result, the remaining components of the project can continue functioning with a partial outage while the full outage, lasting two weeks, is solely necessary for the completion of step 7.
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The last section of the C&I subsegment encompasses challenging settings, including mining, construction, oil and gas exploration, as well as outdoor festivals. The driving force behind its expansion will be customers shifting from diesel or gas generators towards eco-friendly options like BESS and hybrid generators in order to mitigate emissions. One of the primary catalysts for the increasing adoption in this sector is the implementation of forthcoming regulations, such as the European Commission's sustainability-driven Big Buyers initiative and Oslo's objective to achieve net zero on construction sites by 2025. A significant number of companies transitioning to more environmentally friendly practices will initially opt for hybrid genset solutions as an intermediate step before fully transitioning to Battery Energy Storage Systems (BESS).
The third division comprises public infrastructure, commercial establishments, and industrial facilities. Within this category, energy storage systems will primarily be deployed to assist with load management during peak periods, facilitate the integration of on-site renewable energy sources, optimize self-consumption, serve as a backup power source, and support grid-related services. It is our belief that BESS holds the capacity to decrease energy expenses in these regions by a staggering 80 percent. The case for implementing BESS is particularly compelling in countries like Germany, North America, and the United Kingdom, where demand charges are frequently imposed.
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.
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.
HybridOS is FlexGen's proprietary energy management platform that optimizes the performance, efficiency, and reliability of battery storage systems through real-time monitoring, analytics, and control capabilities.