The optimism in the energy storage industry is based on soaring demand, rapid technological advances, expanding capacity and, for some, what will likely be a scary competitive environment.

First, the good news. Lithium ion battery packs over the last ten years have declined faster than the cost of solar, said John Carrington, CEO of Stem, which makes behind-the-meter storage systems for hotels and other commercial customers looking to shave peak power costs, during a hallway meeting at Finance West sponsored by the American Council of Renewable Energy this week.

Solar panels have declined by 50% or more in the last five years. Batteries have declined by 80% in three years, he said. Battery packs hit the under $300 per kilowatt hour mark last December, Carrington added. By 2020, battery pack prices could drop to $190 per kilowatt hour. (In 2007, lithium ion battery packs in the wholesale markets sold for around $1,000 per kilowatt hour.)

The volumes of batteries shipped at the same time is expected to grow by 6x 2025, he added, citing a Goldman Sachs report, fueled in part by the rapid adoption  of solar, wind and microgrids. Stem has approximately 75MWh under management. Stem doesn’t generally sell batteries: it installs them at commercial sites and charges a subscription fee based on a formula that takes into consideration the cost of power minus rebates and fees received from utilities for grid balancing. Everybody wins.

Goldman Sachs also predicts energy density will increase from 200 watt hours per kilogram to 500 Wh/kg by 2025 before the still experimental solid-state batteries take over for lithium ion.

Declining prices, improving technology and growing demand—what could go wrong?

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The energy-storage market will go “ballistic” in the final two months of this year, Tesla Motors CEO Elon Musk said Wednesday, when the company ramps up production of batteries he promises will be “head and shoulders above anything else I’ve even heard announced as future plans from other companies.”

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I spend a good deal of time at energy storage conferences, trying to figure out where the various technologies and business models are headed. I thought I had most of the nuances figured out – until I ran into Sam Jaffe at the Energy Storage America conference in Charlotte in April. After a brief discussion, I realized I had some more understanding to do, and was able to arrange a follow-up conversation. I first met Jaffe when he was active at Navigant Research as their main energy storage analyst, and he has since moved on to become Managing Director at Cairn Energy Research Advisors (Cairn ERA). Jaffe’s spent more than 10 years in energy storage as an analyst, consultant, entrepreneur and executive from all ends of the business. So he’s practically been watching this space since before it became relevant.

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In late 2014, a virtually unknown company called Alevo announced it was entering the energy storage market with a new inorganic, sulfur-based lithium ion battery technology that it had acquired from the bankrupt German company fortu PowerCell. Alevo entered the U.S. with a big splash, investing over $68 million in the 3.5 million-square-foot former Philip Morris tobacco factory in Victory, North Carolina, outside Charlotte. It also announced that it would hire up to 2,500 workers over three years, with a potential maximum workforce of 6,000 capable of turning out thousands of megawatts of electricity storage products annually. In other words, Tesla would not be the only storage company with a gigafactory.

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In late 2014, a virtually unknown company called Alevo announced it was entering the energy storage market with a new inorganic, sulfur-based lithium ion battery technology that it had acquired from the bankrupt German company fortu PowerCell. Alevo entered the U.S. with a big splash, investing over $68 million in the 3.5 million-square-foot former Philip Morris tobacco factory in Victory, North Carolina, outside Charlotte. It also announced that it would hire up to 2,500 workers over three years, with a potential maximum workforce of 6,000 capable of turning out thousands of megawatts of electricity storage products annually. In other words, Tesla would not be the only storage company with a gigafactory.

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In 1882, Thomas Edison built the Pearl Street Station, the world’s first steam powered electrical distribution plant. In the years that followed, intense competition broke out between he and George Westinghouse, which became known as the War of the Currents, and the technology improved markedly in the coming decades.

As Robert Gordon pointed out in The Rise and Fall of American Growth, by 1940 life had been fully transformed. Even middle class homes had most of the modern conveniences we enjoy today, including refrigerators, air conditioners, telephones and radios. Soon, they would have TV’s as well.

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