The rapid growth of wind and solar power comes with a well-known problem: They don’t work all the time. Energy storage is a solution investors should watch in 2021, even if it doesn’t yet lend itself to stock picking.
Governments around the world greatly raised their decarbonization ambitions this year. There is great uncertainty about how their promises will be delivered, but almost all scenarios involve massive building of solar and wind farms. As their share of power production grows, it will become crucial to bridge the times when the wind doesn’t blow and the sun doesn’t shine.
Building wind and solar together can reduce the gaps, while gas-fueled power plants can provide a nonrenewable backup. Also helpful are demand-side response agreements—when big power consumers promise to cut their usage during pinch points in exchange for lower prices.
Even with all these methods, though, it will be necessary to store excess electricity for use in lean times.
Lithium-ion batteries similar to those that power an electric vehicle are expected to provide most of the new storage capacity. Residential batteries can store power from rooftop solar panels, but it is so-called utility-scale stationary solutions for wind and solar farms that are really needed. They are often customized turnkey installations that provide between one to four hours of backup power. Battery packs cost nearly 90% less than in 2010 and will continue to get cheaper, according to researchers at BloombergNEF.
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