Stationary storage is poised for enormous growth in the coming years and has the potential to become a significant player in the lithium market, but it faces a crucial challenge – with a lithium deficit predicted for 2027, the sector must secure lithium supply to avoid being overshadowed by electric vehicles (EVs).
According to estimates from S&P, energy storage systems typically only accounts for only 8.6% of total lithium demand in 2023, while the EV sector consumes a substantial 66.2%. However, the stationary storage sector is expected to increase significantly, with a jump of 193.5% between 2022 and 2027.
Despite this intense projected growth, stationary storage faces stiff competition from automakers who have considerable market size and funding capabilities. Carmakers are actively investing in the development of lithium projects and securing long-term agreements, giving them a significant advantage over stationary storage producers in securing reliable lithium supplies. This advantage is further amplified by the fact that very few companies are dedicated to stationary energy storage.
Aran Waid, a senior analyst at Benchmark Minerals, told S&P in the same report, “One thing that has held back the growth of stationary storage is a lack of [cell] producers producing dedicated cells for the energy stationary storage market.”
Yet, lithium and battery suppliers are finding stationary storage to be a stable customer, compared with the more volatile EV market, contributing to dipping lithium prices. Demand for lithium from the stationary storage market is expected to jump 83.0% year over year in 2023, faster even than the 41.5% increase estimated for the EV sector, according to S&P insights.
With the dynamic slowly changing, companies like KORE Power Inc. and Our Next Energy Inc. are starting to focus on the stationary storage sector. Additionally, LG Chem Ltd. plans to build a massive battery hub US$5.5B in Arizona that will manufacture lithium-iron-phosphate (LFP) cells for stationary storage.
These developments indicate a growing emphasis on the sector, but it still has a long way to go before catching up with the EV market. Similar to struggles in the EV sector, connecting stationary storage projects to the grid is hampering its market growth. Overcoming regulatory hurdles like the lengthy approval timelines is crucial for the sector’s advancement.
“The stationary storage market will hold a certain final baseline for lithium demand, but the prices are still going to be very much sensitive to what happens in the EV market,” Waid added.
In response to the anticipated lithium shortage, the industry is also exploring alternative battery technologies and chemistries. The relatively new sodium-ion battery holds promise for the storage sector especially. Although sodium-ion batteries have lower energy density and require more space in battery units, they can still be effectively deployed in stationary storage systems. While LFP batteries will remain the focus for stationary storage in the interim, sodium-ion batteries are on the horizon as a potential solution.
The stationary storage sector plays a vital role in ensuring a constant stream of renewable energy to power grids and its demand for lithium is relatively small compared to the EV market for now, but its impact on lithium prices could change. Finding solutions and advancements in alternative battery technologies will be key to unlocking the full potential of stationary storage going forward.
