Simplifying the energy storage customer landscape
By Steven Minnihan
The technological flexibility of electrochemical storage is both a blessing and a curse. Battery developers boast that their systems can perform an endless list of services but it is exceedingly difficult to identify your target customer, market entry point, and system size and capabilities if your value proposition is so amorphously stated.
Lux Research has published extensively on the subject, ultimately making the assessment that telecom backup power and long duration utility renewable shifting offer the two best entry points due to the economic benefits of these. However, there is an even simpler way to view the target customer for your entry product. Stationary storage customers can be lumped into two groups, customers who understand what they want from a battery and customers who do not.
Customers in telecom, commercial, and industrial segments recognize exactly what they need from an energy storage unit. These customers clearly understand that they will use the battery for emergency backup power and peak demand reduction. Furthermore, the customer has a well-defined usage profile, meaning they can definitively determine their minimum power capacity, energy capacity and cycle life requirements. While many customers in these areas are still uncertain if advanced battery technologies can offer a favorable internal rate of return (IRR), they can state the size and capabilities of their ideal system. This definition allows battery suppliers to develop standardized units, creating a small but focused product line that can address the needs of multiple customers without superfluous customization.
This standardized approach is in staunch contrast with the battery developers in other sectors. Utility customers do not know the best way to utilize an energy storage system, since the technology can theoretically address a long list of utility applications. As a result, utilities are uncertain on the best configuration, geographic layout, or size of energy storage systems, requiring battery suppliers to develop costly customized systems that are not optimized for performance in any application. While this customized trial-and-error approach is essential for cultivating the utility storage market, it can prove very costly and time consuming for the technology developer.
Therefore, players plotting their entrance in the stationary energy storage market need to consider their preferred course of action; develop standardized products for volume, or develop customized systems in order to encourage and develop. While no market segment will be easy to penetrate, there is greater obscurity around utility customers, while there is greater clarity around footprint, capacity and performance profile amongst telecom, industrial, and commercial customers.
Steven Minnihan is a Senior Analyst for the Smart Grid Intelligence Service at Lux Research, which provides strategic advice and on-going intelligence for emerging technologies. For more information, visit the Lux Research site.
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