Battery storage: The next disruptive technology in the power sector

Low-cost storage could transform the power landscape. The implications are profound.

Storage prices are dropping much faster than anyone expected, due to the growing market for consumer electronics and demand for electric vehicles (EVs). Major players in Asia, Europe, and the United States are all scaling up lithium-ion manufacturing to serve EV and other power applications. No surprise, then, that battery-pack costs are down to less than $230 per kilowatt-hour in 2016, compared with almost $1,000 per kilowatt-hour in 2010.

McKinsey research has found that storage is already economical for many commercial customers to reduce their peak consumption levels. At today’s lower prices, storage is starting to play a broader role in energy markets, moving from niche uses such as grid balancing to broader ones such as replacing conventional power generators for reliability, providing power-quality services, and supporting renewables integration.

Further, given regulatory changes to pare back incentives for solar in many markets, the idea of combining solar with storage to enable households to make and consume their own power on demand, instead of exporting power to the grid, is beginning to be an attractive opportunity for customers (sometimes referred to as partial grid defection). We believe these markets will continue to expand, creating a significant challenge for utilities faced with flat or declining customer demand. Eventually, combining solar with storage and a small electrical generator (known as full grid defection) will make economic sense—in a matter of years, not decades, for some customers in high-cost markets.

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Source: McKinsey & Company; June 2017

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