What’s next for the battery storage boom? [partner content]

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Jeff Waters started his career in the semiconductor industry in the late 1980s, right when the industry was going through a major shift. You know, at the time, the US was the dominant player in the world. The Japanese, however, were making significant gains. Japan was a dominant force in consumer electronics, but it wanted to control the entire supply chain, and that meant bringing semiconductor manufacturing to the country.

And they went to the semiconductor companies and said, if you want to sell into our market, we're gonna tariff you up, or if you come in and join, set up JVs with Japanese companies and do production here within Japan, we'll give you better access and entry into the market. Policy had many dimensions, tariffs, incentives for manufacturers, and university programs to build a skilled workforce. They created an whole infrastructure to build up a wealth of knowledge of semiconductors.

And within about a decade's time, you now saw Japan as a player in semis. Later you saw Taiwan do the same approach, you saw Korea do a similar type of approach, and you're seeing China do the same kind of thing. Later, Jeff went to work in solar manufacturing. Today, he's the CEO of Powen, a leading energy storage integrator. And after seeing the centers of power for semiconductors shift, he watched China execute the exact same playbook for solar and batteries.

And as he told Stephen Lacey, America needs to learn from it. What does that tell you about what we need to do today to own in America more of the battery storage supply chain? When I hear people talk about storage and say, Well, you know, we don't want you know, Chinese companies investing or getting taxpayer money to build plants. I think it's a ridiculous notion. The only way we're gonna get anywhere in the US market with storage is by partnering with the Chinese.

And it can be with their technology, licensing the technology. Can be helping them build plants within the United States. And not just that. I think we need to do. the other pieces to the puzzle, right? The other parts of the playbook, get universities investing into creating students that'll have that kind of capability. Allowing employees to come in from overseas to help train us up on how to get it done and all the equipment that goes along with it.

If you do that and you partner it up with building the infrastructure like the Japanese did for semis, you can result, you know, in in five to ten years from now with the US having that same capability. Let's piggyback on what's been done. And make the US a strong player within

In the last five years, the storage market has seen hockey stick growth. In the US, batteries were the second biggest source of new capacity on the grid last year. But uncertainty around domestic incentives and tariffs is challenging growth. And there are conflicting views on how best to support manufacturing. In this episode, produce in partnership with Powin.

Stephen Lacey talks with Jeff Waters, the CEO of Powen, about the state of the US storage market. He explains why he's still optimistic, even with policy headwinds. Nearly two years ago, Jeff took the helm at Powen, a leading storage integrator that designs, commissions, and services some of the biggest utility scale batteries in the world. So the way we like to think about it is if you are a utility or if you're an IPP.

If you want to integrate storage and own and operate a storage asset, we are that one throw to choose. After decades in semiconductors and solar, Jeff turned his attention to batteries. I saw storage as a good place for the US, for my home country to kind of reestablish itself and and create an important technology that would help with renewables, but also grid stability.

Jeff has a unique view of the battery storage market, which is seeing immense growth and also emerging uncertainty in the US. He recently sat down with Stephen Lacy to take stock of the market. They talked about project sizing, technology trends, policy shifts. and why batteries are so critical for meeting surging electricity demand.

The US storage market is booming. Right now, on a quarterly basis, we're seeing multiple gigawatts installed. Uh just in Q two of last year, we saw a seventy-four percent increase in deployment. So if you look at the different factors that are driving this acceleration, what stands out to you? Yeah, I would say it it all kind of gets back to electrification. And I think that drove the big boom, you know, going back, let's say, four or five years ago.

Now what you see is uh data centers. And you know, with the strong surge in data centers and Michigan's a good example of that, but you're seeing it in Virginia and uh all across the country. Just the amount of demand that's putting on the grid is just really upping the stakes on growth. And that's why you're seeing even the projections for, you know, 5% year growth for power demand in the US.

That's double what people were were projecting probably a year or two ago. And when you talk with the industry market pundits, they'll tell you that that's probably even too low based on where data centers are are heading in the deep pockets that exist within within that industry. You know, if you want to think about how you address that surge, there's a lot of talk right now about SMRs, right? Small modular reactors. The challenge there is that.

between permitting and technology development that needs to happen, you're probably talking about, you know, mid-2030s before you see that become a real play. Another would be natural gas, right? There's a lot of talk about natural gas. You know, turbines today for natural gas, you know, if you place an order today, it's you're not gonna see that until let's say twenty thirty.

So you've got this long latency here where you're going to see this big surge in demand for energy, how you're going to address it. And and that's why you're seeing such a push towards storage. Uh, you know, Illinois has set a 15 gigawatt energy storage target. to uh can help reduce their costs and help meet the the demand. Virginia is ten gigawatt by twenty forty five. Michigan has their two and a half gigawatts by twenty thirty.

Uh it's expected, just to give you a broad number, by twenty thirty-three, the market is projected in the US to hit about 170 gigawatts of storage. You can look at it as something that is kind of a hot trend that people are talking about today, but there's really a long term need for this.

Given the flexibility, given the small footprint, given the fact that the technology's here and and then on top of it, that there's been such a, I would say, a large supply chain around it that you've seen costs come down very significantly as well.

Let's talk about sizing and deployment models. You and I talked previously and you said around eighteen months ago. your average project size was in the 100 to 300 megawatt hour range and then 300 megawatt hours became the average and now you're seeing projects well over 500 megawatt hours. What is behind this astonishing scaling of project sizes?

Yeah, I think part of it is cost. So the costs for, you know, LFP batteries have come down nearly fifty percent over the course of the last year or two. That contributes, makes the economics easier. The other is just the interconnection piece. When you have an interconnection.

You want to capitalize on it as much as you can. And that's one of the other reasons why I think we're seeing people saying, Hey, given the value of that interconnect, if it's already permitted, ready to go, let's maximize it to the full extent that we can.

And then I think it's also just the demand, you know, seeing that surge, seeing the offtakers expressing the need for even more demand than maybe what was even originally cited when they first sat down and had the conversations on putting in storage. All of that's contributing. When we see a 500 megawatt hour project now, it is by far the the rarity. I mean, typically now we're seeing one gigawatt hour, two gigawatt hour project.

What about actual deployment models? There are three different categories. You've got market trading, you have co-location with renewables and then you've got standalone storage that harness existing grid connections. Which of these applications dominates uh Powens deployment and and what's what's growing the fastest right now?

You know, if you'd asked me this question maybe two years ago, we probably would have said that the standalone storage for trading was was probably one of the biggest growth areas that we saw. I think now it's it's really around co located storage. Given all the renewables that you have out there, even in the state of Michigan, how do you really monetize them in the best way that you can and and help serve the grid?

Standalone is still, I would say, something that we're seeing. And it really gets to situations where you've got grids that are maybe imbalanced. And Um, so I would say we still see a fair amount of growth there. The market trading piece has softened a little bit just because those markets have been reasonably saturated, both in ERCOT and KAISO. But um, you know, right now I would say it's it's really the the the co-located piece.

I want to get your thoughts on where the most attractive markets are. So California, Arizona, Texas, those are really hot markets. What kind of activity do you see there and beyond the established markets, do you see anything emerging for upcoming significant growth?

Yeah, I'll say just generically speaking, you know, you're looking at markets that have high renewable penetration, ones that have uh strong mandates around retiring fossil assets and more broadly just aggressive clean energy mandates. And that's where you're gonna see most of the growth. And you know, right now I would say, you know, New York, uh, PJM, Myso, those are all regions where we expect to see a lot more growth than we've seen historically.

You know, I would say the traditional markets are still gonna keep growing. I mean, California will still keep cranking along. It's at uh, you know, whatever it is, nineteen I think the target right now for them is nineteen gigawatts by twenty thirty-five. But I would say the the where you're gonna see more of the growth. are relative to what you've seen historically will be New York, PJM, MISO.

So battery system prices have continued to decline over the last year. We've seen them decline by about a third. Where do you see battery pricing headed and balance of systems pricing headed? Well, I'd say let's set aside tariffs for a moment. I think if you just look at battery pricing, I think for as much as the cost of LFPs have come down. I think, you know, people are thinking that there's going to be a a bit of a saturation on it.

Kind of from what we're hearing from the supply chain is if you go out over the next couple of years. There's a decent likelihood we'll continue to see pricing go down. You know, I've heard some claims that you could see it go down as far as, you know, from$50 down to even$25 over the course of the next couple of years. I think it's realistic to think about that. I mean, the supply chains for uh four LFPs have been largely within China. You're seeing that now spread more broadly.

So Indonesia, Morocco are all areas now where you're seeing a lot more investment going into it. So you see an expansion of the supply chain. I think for the rest of the the balance of system. You know, I would expect that to track as well. Having lived through solar, you know, we continued to hit points in solar where we thought, you know, between panels and everything that goes into panels that she would hit some kind of a saturation point.

You know, the reality of it it it keeps grinding down. I mean, I I just even what's happened in the last two years with solar astounds me. Given the volume that you're going to have with storage, the attractiveness of of the growth, a lot of money is going to flow into that and people investing in a way where profit margin isn't going to be the priority. It's going to be more around growth.

Well you mentioned tariffs and I want to talk about tariffs. Um How How will those impact the battery supply chain specifically? Um, how much heartburn are you getting from the the prospect of tariffs and and what else is giving you heartburn right now in the market? Yeah, I would say within the US market. Now we're a global player. So we, you know, we do a lot in Australia, we do a lot in Europe and increasingly Southeast Asia.

But when you look at the US market, it has been rough. I mean, it's been rough for about the last year. I think as soon as there was anticipation about the upcoming election and the impact that that could have. On tariffs and also on the on the IRA, it has really put things into a bit of a state of suspended animation. You know, right now I was I was at a show a couple of weeks ago, the Solar and Wind show, and we're talking with various developers and and you're hearing that right now it's

Effectively, the market is waiting to see what happens once we get through reconciliation. I people think people are thinking that could be as late as. Q3, Q4 of this year. They're waiting for tariffs to stabilize. And effectively what's happening now is you're you're seeing a bit of a push from off-takers to try and push more of the tariff risk. onto developers and developers trying to push it more onto uh, you know, guys like us, like the integrators and and the the cell suppliers and

The the challenge is that the risk is just far too high for anybody to take on. And that's why you see the delays. But regardless, you you do have a number of utilities that need to build out. they're really going to hit a point where they're not going to have much of a choice. And so then what you'll see is anything around tariffs or IRA incentives getting cut will likely get passed on to the ratepayers. That's my my best guess from what I'm seeing.

One thing that we have learned over the decades is that the renewables industry and now the battery storage industry, the energy storage development sector. i is very resilient. Uh there this has been an industry that has been characterized by stops and starts and policies, um it really extreme volatility. What does that tell you about the industry's ability to get through this really uncertain moment and what kind of policy consistency would you like to see?

Well, I think resilience is the key word. It's a it's a word I use all the time, you know, going back to when I first started in solar. It almost to be honest, it almost doesn't matter what the clarity is. If it's higher tariffs than we currently have, if it's a reduction in the IRA incentives, this industry will figure out a way to work with it. Right? They'll they'll come up with a balance of kind of cost sharing and other mitigating actions.

to help keep things rolling forward. What's hard is when you don't know if things are going to change. And then when it comes to the IRA, whatever you're gonna have around domestic content incentives, whatever you're gonna have around the tax credits and the incentives that drive that, let's just get them stabilized and we'll roll forward from there. It's it is an industry that knows how to deal with this. What we're doing is important.

And it's not just important anymore from a from an ecological perspective. It still is, but it's not just that anymore. It's really how do we create the right energy portfolio in the US? to help us be successful. Storage in particular is a critical part of that.

Okay, so in 18 months, a leading integrator like Powen is going from a hundred to three hundred megawatt hour projects now to five hundred megawatt hour projects. If we look out in the coming years, what do you think the typical utility scale battery storage project is gonna look like in terms of size, duration, use case?

Yeah, I think you're you're gonna see them continue to grow in size. You know, I would expect If we were to even talk two years from now, I think two gigawatt hours will probably be the size of projects that will be more the the median than than even the maybe eight hundred megawatt hour that you have today.

LFP will, I think, remain dominant in that timeframe just because you're gonna see the cost curves continue to drive down. What you are gonna see though, I think more is more of a push toward long duration. You know, in some ways LFPs can there's a crossover point where LFPs are are probably not going to be as cost effective as other technologies.

Um, I think that'll get extended because you'll see, you know, margins start to drop in a way that people will keep pushing just to try and keep uh taking advantage of of factories that have been created. But you will start to see more eight hour, twelve hour type applications emerging. And I think as that happens, you'll see other technologies kick into gear that will will enable that better than LFP.

I think where that sits right now, it's a bit tough to say. I the other one I would talk about is sodium. You know, sodium is it has the promise of being very, uh, very safe, uh, you know, in that you don't have a lot of the same issues that you do with uh with lithium-ion batteries.

Um, I think it remains to be seen if we'll if it'll ever hit the cost points that will allow it to be adopted. Um and I think as well, the other challenge you have with sodium is that the safety around LFPs is just continues to get better and better. So as that becomes less of an issue. I think sodium has a little bit of a a steeper hill to climb there, but um it's something we still track. We think still think there's a lot of promise and and depending on the application, we think it's

It's something that will um will have some potential out there. The last piece I would just throw in is I think you're going to see a heightened sensitivity around cybersecurity. It's something we're putting a lot of juice into as a company. You know, we do have systems that have Electronics and computing and communications that reach into the grid. So it does create access points for bad actors.

Our utility customers talk about the thousands and thousands of intrusions and attempts they have at at the grid to try and shut pieces of it down. I think that's something that's going to be a significant push, especially when you look two, two to three years from now in storage.

So we could see Seventy five gigawatts or more. Yeah. deployed in the US, battery storage deployed in the US through twenty twenty eight. If you look at what could happen between now and then, what are you worried about and what do you think is gonna accelerate the industry?

You know, we we talked about the resilience before. I think uh in the industry, I think you always have to expect that every probably five or six years you have two really bad years. And it usually goes back to something around well, with the exception of COVID.

usually goes back to something around policy. So I would say of everything, you know, the things that keep you awake at nights are the things that you have a hard time controlling. Um so I would say policy continues to be just the challenge and and

How do you make yourself as nimble as you can to handle, you know, like changes in the IRA or changes in tariffs or in in domestic content policies? Supply chains, you know, if we do have a shutdown coming out of China, are we able to pivot to other supply chains?

uh to keep things rolling. That I think is the only thing that's going to stay in the way of storage getting adopted. And I think the the numbers that that you know we've been citing, I think those are conservative. I think they factor in a lot of these artificial barriers that could come up. Remove those and I think storage will be pervasive. Jeff Waters, CEO of Powen. What a great tour of the utility scale battery storage industry. Thank you so much.

Well, thank you, Steven. I really appreciate the time. This episode was produced in partnership with Powen. Powen is pushing the frontiers of energy storage. To learn more about Powen's integrated energy storage systems, and to read case studies of how the company is executing projects, go to Powen.com.