2021 will be a record year for the energy storage industry as installations exceed 10 GW for the first time, increasing from 4.5 GW in 2020. As a critical component of the energy transition, energy storage systems are needed to help balance intermittency of renewable generation, provide a cost-effective and lowemission source of critical capacity, and empower customers to manage their energy demand.

Despite the uncertainty caused by current economic challenges, there has been an even stronger focus on mitigating climate change. This has stimulated the power sector's transition from fossil fuels to cleaner energy sources - driven by both policy and an influx of fresh capital.

Policy makers across the world continue to pivot towards taking greater climate change action outlining plans for greenhouse gas (GHG) emission reduction. In the United States, President Joe Biden signed the "Executive Order on Tackling the Climate Crisis at Home and Abroad," recognizing the urgency of the climate crisis and the need to put the United States on a path to achieve net-zero emissions by no later than 2050. Mainland China's momentous 2020 pledge to become net zero by 2060 sets 26% of today's GHG emissions on a path toward eradication. In Europe, the European Commission will start reviewing its renewables target, its carbon market and possibly consider a carbon border tax in 2021.

This policy drive, but also continued cost declines will be the foundation for continued growth in the deployment of renewable energy resources, with annual gross additions reaching almost 300 GW by 2024. The increase in intermittent renewable generation, coupled with the electrification of transport, drives emission reduction action. At the same time, it creates an ever more urgent need for critical system flexibility and "peaking" capacity.

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Posted 06 May 2021 by Julian Jansen, Associate Director Consulting, Climate & Sustainability

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.