Industry news

Will Batteries Still Be The Most Expensive Part Of The PV System in 2022?

The components used in PV systems are tending to improve as the renewable industry and market continue to rise. One component that is gaining significant attention is the energy storage system.

The battery storage market has been experiencing fast growth over the last few years, reducing progressively the costs of battery storage systems. However, the price that the batteries occupy in the cost breakdown of an entire PV system might continue to be the highest compared to the other components in 2022.

In this article, we will explore the cost breakdown for a commercial PV plus storage system, analyze the factors that could affect the components cost in 2022 and especially find out if batteries will keep being the most expensive part of the system by 2022.

Overall price of the system has decreased, although the storage system kit has increased about 20%.

What Is The Cost Breakdown Of Commercial A Solar Plus Storage System?

The figure below illustrates a comparison between the cost breakdown for a 1MW commercial ground-mounted PV plus storage (BESS) system for 2020 and 2021. The comparison is done for DC-Coupled and AC Coupled systems.

 

Figure 1. Comparison between the cost breakdown for a commercial ground-mounted PV plus storage system in 2020 and 2021.
Figure 1. Comparison between the cost breakdown for a commercial ground-mounted PV plus storage system in 2020 and 2021.
Source: NREL

Though the overall price of the system has decreased, the storage system kit has increased about 20%, positioning itself as the most expensive part of the system in 2021, followed by soft costs, the balance of system (BOS), and PV modules.

How Will PV Modules Costs Change in 2022?

Over the last decade, the trend on solar panel costs has been downwards. However, supply chain constraints have appeared since the COVID-19 pandemic arrived. The cost of key raw materials to manufacture solar panels, like polysilicon, aluminum, steel, glass, and copper went up in 2021. Also, freight charges have increased, which has delayed many global projects.

Figure 2. Costs of Solar panels between 2011 and 2021.
Figure 2. Costs of Solar panels between 2011 and 2021.
Source: BloombergNEF

The solar industry might continue to grow in a high-price environment as many solar enthusiasts have the interest to pursue a decarbonized future, development of renewables, and efficiency improvement of the components. However, in 2022, difficulties in the global solar market will continue and panels plus the inverter system could compete with the energy storage kit in price.

Due to supply chain disruptions in 2021, the availability and price of PV products are in an uptrend, therefore prices for BoS in 2022 are likely to increase as well.

How Will Balance Of System And Soft Costs Change In 2022?

Balance of system (BoS) is related to the hardware components of a PV system other than the panels, such as charge controller, system controls, wiring, mounting system, switches, and others.

The price trends during the last decade have been falling for hardware components and were likely to continue going down because of the progress in the solar industry. However, supply chain disruptions in 2021 are affecting the availability and price of PV products in an uptrend which means that for 2022 prices for BoS are likely to increase as well.

On the other hand, soft costs consisting of permitting and inspection, financing costs, customer acquisition, installation labor, engineering procurement, and construction (EPC) have constrained between 2020 and 2021, probably to reach better accessible prices during the crisis. However, particularly with soft costs, projections are harder to make since they are highly related to the location and size of the project.

How Much Will Solar Batteries Cost In 2022?

Just as every other commodity, energy storage systems change their price based on demand and supply basis. The battery storage market is expected to have an important growth over the next decade as can be seen in figure 3 and this is expected to decrease prices as well.

Figure 3. Global Energy Market Forecast, Annual Revenue and Capacity demand on different segments.
Figure 3. Global Energy Market Forecast, Annual Revenue and Capacity demand on different segments.
Source: Lux Research

This growth is driven by important applications such as transportation and stationary storage systems. In fact, the transition to electrical vehicles (EV’s), commercial applications like BIPV projects, and grid-scale developments are enormously increasing the demand and supply of solar batteries.

With that in mind, it’s not a surprise that analysts were expecting the market size for energy storage systems to expand in the next few years. The market is forecasted to reach almost 100$ billion of revenues and 200GWh of demand in 2022, having a compound annual growth rate (CAGR) of around 5%.

However, these projections were made before the effects of the Covid-19 pandemic, therefore an increase in lithium costs and other important raw materials due to supply chain constraints represents enormous challenges in the battery storage market that could reverse this continuous growth and increase battery prices in 2022. This means that in the long-term prices for batteries will likely continue to fall, but in the immediate scenario, these results will not probably be seen.

Actually, evaluating results from 2020 to 2021 when the pandemic started, prices for Li-on battery cabinets increased. Moreover, PV prices back in 2020 had Li-on battery cabinets as the most expensive component of a commercial PV system (figure 4). Besides, taking into account that Covid-19 related constraints will affect prices on all components similarly, it is expected that 2022 will obtain the same results. In other words, there is no game-changing evidence that prevents batteries from being the most expensive component for 2022.

Figure 4. Cost benchmark for Commercial PV-plus-storage systems (4h duration) Q1 2021
Figure 4. Cost benchmark for Commercial PV-plus-storage systems (4h duration) Q1 2021
Source: NREL

Lithium-ion and LiFePO4 batteries are the most recommended type of batteries for new PV systems today.

Will Building Integrated Photovoltaics (BIPV) Affect Solar Battery Costs?

Another important player in the PV market for 2022 will be building integrated photovoltaics (BIPV). They are being developed in a wide range of commercial applications such as corporative buildings, canopies, carports, and many more. BIPV is essentially revolutionizing architecture and the photovoltaic industry by giving innovation and aesthetics to buildings while contributing to the decarbonized future.

Also, BIPV developments are being designed in a way to optimize building efficiency, producing more energy. If this energy is not used and it’s not exported to the grid, battery storage plays a crucial role.

The development of BIPV projects will also contribute to the demand for solar batteries, which results in reducing the average costs of BESS in the medium to long term.

Figure 5. BIPV commercial Applications

Source: NREL

Which Are The Best Solar Batteries? What Challenges Can Be Expected for Solar plus Battery Storage Projects?

To evaluate which battery fits your requirements better, it’s necessary to pay attention to its energy density, lifespan, type, charge rate, efficiency, maintenance, depth of discharge, and other factors.

During many years, lead-acid batteries dominated the market. However, lithium-ion and lithium iron phosphate (LiFePO4) batteries have been expanding and taking place in many solar-plus-storage commercial applications thanks to their high energy density, high efficiency, low maintenance, longer lifespan, stability under high temperatures and decreasing prices. Figure 6 shows the significant increase of lithium-ion batteries in the market compared to other conventional types.

Figure 6. Market Size Forecast for different types of solar batteries until 2025
Figure 6. Market Size Forecast for different types of solar batteries until 2025
Source: Grand View Research

There is no game-changing evidence that prevents batteries from being the most expensive component for 2022

Thanks to these features, both lithium-ion and LiFePO4 batteries are the most recommended type of batteries for new commercial PV plus storage systems today, even considering their higher initial cost. The long-term projection of the system becomes more favorable using lithium based rather than other technologies.

Finally, although the projections are positive as for the deployment of lithium battery energy storage systems (BESS), it is important to point out for project managers and investment planners that in the development of solar plus battery storage projects some challenges may need to be addressed:

  • High capital costs
  • Project delays due to supply chain constraints and covid-19 restrictions
  • Increased design and configuration difficulty: Creates complex models for risk management and savings projections.
  • Lack of standardization: Early-stage markets have multiple technical requirements and varied policies and processes.
  • Outdated regulatory policy: Particularly in new markets where BESS technology is not considered for retail and wholesale market rules at residential, industrial, or utility levels

The knowledge that batteries are near the most expensive part of PV+storage systems does not prevent expectations that usage of batteries will increase in the long term perspective. A definite drop in prices of batteries together with new ideas of including small and middle PV stations to balancing services for distribution networks rises expectations, that batteries will become more and more essential part of green energy development.

Do you have something to add to this article? Share your insights in the comments.

What to read next

Turning your product into solar lighting. Key factors for success

Solar market growth was 32% last year, which is a clear sign for industries that solar implementation into a product might be a good thing. Not to mention that...

Will perovskite conquer the solar market?

Relatively new yet very promising perovskite solar cell technology has it's pros and cons. Learn more about current technological flaws and future perspective of perovskite technology.

The importance of solar cell cutting in the era of Internet of Things

Solar cell cutting is small yet very important part in solar business. This process, when used properly, ensures flexibility and applicability of solar energy to various niches and applications.

Upgrading product to solar. Things to consider

Growing demand for energy forces industries to start integrating solar power into everyday objects. Turning your existing product into a solar powered one is possible even with a limited...

2018 solar forecast. Demand for solar applications is here! Are you ready for market?

2018 solar forecast covers expected market numbers, tendencies and technologies to follow this year. Past several years the solar business has been blooming. Get ready for even lower solar...

© 2022 Metsolar.eu. All rights reserved