Low-cost battery storage technology can change the electricity market and have a profound impact. Public utility companies should also make changes to this end to adapt to the new disruptive reforms in the power industry.

With the growth of the electronic product market and the demand for electric vehicles (EV), the value of battery storage has also increased rapidly. Many manufacturers in Asia, Europe and the United States are expanding the lithium-ion battery manufacturing industry to meet the needs of the electric vehicle industry and other power applications. With people's exploration and technological advancement in low-cost battery manufacturing, the cost of battery pack manufacturing was nearly $1,000 per kilowatt hour in 2010, but dropped to $230 in 2016.

McKinsey’s research found that for many commercial customers, storage costs are now very economical and can effectively reduce their peak consumption levels. At the same time, with the current low price, energy storage has begun to play a broader role in the energy market, expanding from simple grid balancing to a wider range of uses, such as providing power quality services and supporting the integration of renewable energy into the grid. In addition, the combination of solar energy and energy storage allows households to produce, store, and consume electricity on demand, instead of always inputting or outputting electricity to the grid, which will bring greater convenience to more solar users.

In this McKinsey report entitled "Battery Storage: The Next Disruptive Technology in the Power Industry", as these trends develop, how energy storage technology will change the way the electricity market operates and how customers consume and produce electricity will be discussed. And the role of public utilities and third parties. The report mainly analyzes the development of energy storage in Europe and the United States, and there may be more possibilities in markets in other countries and regions.

Energy storage equipment can be deployed in the power grid, or in the homes or businesses of individual consumers. Due to the complexity of energy storage technology, its economy is affected by customer type, location, grid demand, regulations, load conditions, tariff structure and application nature. It also has the unique flexibility to stack value streams and change their scheduling to meet different demand situations in an hour or even a year. These value streams are growing in value and market size.

Energy storage technology can also help solve the problem of planning and operating the grid in a market where the load is expected to be flat or declining, thereby benefiting utilities. For example, regulatory agencies in some states in the United States are testing new compensation models to obtain rewards by giving incentives to utilities and providing distributed power generation projects. This will also help utilities delay expensive new investments and reduce the risk of unused long-term capital projects.

Public utility companies purchase energy storage equipment to meet long-term regulatory requirements and short-term power needs. As the cost of energy storage drops, these projects will continue to reduce the cost of power generation, thereby reducing consumers' electricity bills, and putting further pressure on existing conventional natural gas and coal power generation. Utilities must understand low-cost energy storage technology and adjust themselves from two aspects:

First, the salary structure should be redesigned to explore new opportunities. Regulators and utility companies need to find new ways to restore their investment in the grid.

The power grid is a long-lived asset, and its construction and maintenance costs are high. Consumers do not like the fixed cost of grid connection. However, levying a fixed fee can ensure that everyone who uses the grid pays, and people are accustomed to paying for the energy they use. But as more and more customers produce their own energy, grid access for reliability and market access becomes more valuable than electricity itself.

Since any rate design changes are slow and gradual, especially those transitioning to fixed fees, utility companies need to try to realize new market ideas by obtaining new revenue opportunities from expanded services and new transaction fees. In Australia, utility companies are providing consulting services for solar and energy storage installers; in the United States there is a new pilot program to sell advanced analytics and data management services to consumers to help them manage energy use. Several states Of utility companies are also exploring new services and investing in the modernization and electrification of the power grid.

Secondly, utility companies also need to rethink the planning of the grid system. In order to fundamentally change the method of power grid system planning, utility companies need to invest in sophisticated analysis software and advanced algorithms to modernize the power grid. This requires abandoning traditional system planning methods, reconsidering codes and standards, turning to circuit node planning, and adopting asset health assessment to ensure the highest priority requirements to solve system problems.

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