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Commentary

Storage Systems can Empower Emerging Markets

Andrea Webster, Senior Advisor at SustainFinance, says innovation must disrupt the status quo in traditional energy systems.

Idealists imagine clean renewable energy powering a content and peaceful world around us. Solar panels adorn rooftops and wind turbines swoop to catch the breeze. Reality paints a very different picture; we not only need to re-think and re-engineer the world around us, we also need to persuade many people it is a priority that needs paying for. While the cost of renewable energy is falling, resistance to re-engineering our daily lives is growing.

This is a battle for the narrative. One size does not fit all and motivations to embrace change differ depending on where you are sitting in the world.

For developed economies, the energy transition means replacing existing reliable but high-carbon energy sources with a clean and affordable alternative. Meeting national net zero commitments creates the imperative; however rises in inflation, interest rates and supply chain woes have pushed up the cost of living and reset priorities. We are seeing this reflected in politics with a move to the right.

For developing economies, the challenge is building new sources of affordable energy to meet increasing demand. Reliable energy is fundamental to economic development because it generates prosperity which ultimately helps underpin social order. Providing reliable, clean supply to millions on a low income is a political challenge for many governments.

Fundamental changes

While the global push toward renewable energy has made remarkable strides, with solar and wind power leading the charge, it is simply not fast enough. This was finally acknowledged in Dubai, reaching a new level of global consensus on the need to tackle climate change. COP28 did not go far enough for the scientists, but it was historical in its commitment to phase down unabated coal power. This text will translate into a scaling of fundamental changes in how electricity is generated, stored and distributed; in other words, it will accelerate the structural shifts taking place in electricity supply across the world.

Within the electricity supply chain, energy storage stands out as the crucial piece in building trust with end users and governments to reshape our power supply systems. Robust storage is needed to integrate and manage renewable energy sources to smooth out the intermittent nature of renewable generation. Being able to manage the peaks and troughs of changing user demands and ensuring a reliable power supply from intermittent solar energy and irregular wind energy is dependent on robust battery storage.

Innovation in the storage sector in recent years has expanded the sophistication of how energy storage systems operate, reducing costs and increasing battery life cycles. This has continued to pique investors’ interest in their hunt for the next unicorn.

Centralise or decentralise?

The opportunities for investors in batteries are linked to the sheer scale of the market, plus the ability to offer different battery solutions for different economic and political landscapes. This is important as companies can pivot their narrative to appeal to different client groups.

Traditional energy delivery based around a grid is obviously desirable as it builds resilience. However, this is not a one-solution panacea. We need only look at what happened in Texas in 2021 with the Arctic blast to realise our historic grid infrastructure is ripe for upgrading.

With the innovation in battery technology enabling individuals to generate their own electricity, not only taking control of their own energy costs and supply, this surely opens the debate for innovation in our grid systems too. Individuals should not only generate their own energy from sustainable sources at their disposal, but be compensated for supplying electricity back to the grid. This is surely a strong counter-argument to the push-back on cost. Now we have the battery technology, we can create these win:win scenarios.

Economic empowerment

The win:win in developing economies is surely even greater. Currently, many emerging economies have insufficient reliable energy to meet their growing needs, so capacity building remains a priority. To give perspective, a staggering 675 million people in mostly less developed countries still lacked access to electricity in 2021.

Many of these countries have natural resources that make them ripe for matching renewable energy access with affordability. Solar and wind projects and innovative off-grid battery solutions should proliferate in these regions, especially where there is limited access to traditional energy sources.

Beyond increased energy capacity, if governments and incumbent utility providers are prepared to disrupt the existing status quo, they could create the means for businesses, individuals and even communities to offset energy costs and also potentially generate revenue from the grid. Prioritising the employment of mobile energy storage solutions, particularly for these disadvantaged communities, can not only ensure continuous access to energy but also increase the welfare and life quality of communities living in these areas.

Emerging markets pathways

According to a McKinsey report, more than US$5 billion was invested in battery energy storage systems in 2022. While the breakthrough technologies provide a solution, the greatest investor opportunities are where the need for reliable energy is the most acute, and where there is an incentive at a community and individual level to embrace renewable energy.

Emerging markets have the need and the sheer size. For example, Turkiye has Europe’s fifth-largest installed renewable energy capacity. It ranks third in Europe in terms of renewable energy installed capacity growth over the last six years.

A recent report by PwC emphasised that improved storage techniques, diversification of import sources and flexibility in the natural gas network have strengthened the country’s position in negotiations with suppliers.

In a notable development within the energy sector, Pomega, a subsidiary of Kontrolmatik Technologies headquartered in Istanbul, has developed groundbreaking energy storage facility and innovative storage technologies. The firm’s LFP (lithium, iron, phosphate) batteries are gaining recognition for their resilience, sustainability, and impressive energy storage capabilities, prompting Turkiye’s Ministry of Energy to introduce storage power plant obligations for licences granted to solar and wind power plants.

Pomega Batteries is set to make significant strides in the Middle East and Europe, potentially disrupting the dominance of traditional energy players like China.

More winners than losers

Just as access to food or clean water is deemed a fundamental right, so too should access to energy be recognised. The call for innovation in energy systems resonates profoundly as we navigate the complexities of the change needed.

While the ideal of a clean energy future remains compelling on a standalone basis, we must look at the bigger picture and create more winners than losers for it to endure. We have proof it is possible for emerging markets to come out as winners.

This article was co-authored by Kubra Koldemir, Co-founder of SustainFinance.

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