Disruptive Technology: Energy Storage

By: The FHE Team

Energy storage refers to the conversion of electrical energy into a form that can be stored and converted back to electricity when needed. The applications of stored energy are vast and run the spectrum from battery-powered consumer electronic devices, to electric cars, and grid energy storage solutions. It is clear that the acceleration of storage technology use has immense potential for economic and societal impacts.

Batteries are the most commonly used means of energy storage, and the newer lithium ion, or Li-on, batteries power electric vehicles, and most modern electronic gadgets. Technological advancements such as silicon anodes, layered-layered cathodes, and optimal cathode-electrolyte matching significantly improve battery performance, widening the number of potential applications. One of the greatest implications is for electric and hybrid vehicles, which in the upcoming decade could have a possible economic impact of $415 billion annually.1

ABB and GM Electric Car Battery Research

ABB/GM Research: Electric Car Fueling

Currently, electric and hybrid vehicles are nowhere near as cost competitive as ICE (internal combustion engine) vehicles. Most people who purchase these cars do so out of concern for the environment. However, as the capacity of Li-on batteries improves, and the cost declines, the electric-powered vehicle could become just as affordable as the ICE vehicle. By 2025, the cost of energy from Li-on batteries could decrease by as much as $395 per KWH,2 creating important opportunities for vehicle manufacturers.

Utility grids also stand to benefit greatly from progress in energy storage systems. Advanced batteries could greatly enhance various aspects of energy production and distribution, including frequency regulation, peak load shifting, and infrastructure deferral.

Current grid energy storage techniques include the well-known pumped hydro-electric storage (PHES) as well as the newer compressed air energy storage (CAES). These are used by power plants to convert electrical energy to potential energy during periods of low electricity costs. When the demand for electricity is high, the stored energy is used to drive turbines to generate electric power. Today, nearly 4 percent of the total electricity produced worldwide is stored in this way, with PHEAS providing around 120,000 megawatts of storage capacity.3 Unfortunately, both PHES and CAES are highly dependent on the availability of suitable geographic formations, creating the need for more flexible energy storage techniques.

Advanced batteries could be used in the future to discharge energy into the grid during periods of peak demand. Not only would they be able to store the energy produced during off-peak, inexpensive periods of power generation, but would also enable the utilization of intermittently available energy from renewable sources such as wind and solar power farms. Furthermore, by positioning the energy storage units near areas where demand exceeds transmission line capacity, utility companies could defer the building of further infrastructure for energy distribution. Such enhancements of power supply during peak load hours could lead to an economic impact of around $35 billion annually by 2025.1

Frequency regulation is another aspect of electricity production that could benefit from energy storage.  Currently, up to 4 percent of generated energy is dedicated to maintain the alternating current at a constant frequency of 50-60 Hz. Batteries could eventually become a cost-effective method of frequency regulation, saving billions of dollars per year.

Advanced energy storage systems also have major implications for distributed energy, otherwise known as on-site generation. Distributed energy allows the stabilization of unreliable electricity supply, and is also a crucial means of getting electricity to remote and undeveloped areas. Developing countries, for instance, are generally unable to meet electricity demands because of fuel shortages and faulty grid infrastructure. More importantly, electricity distribution systems often do not extend to rural and remote areas. Energy storage could be used in these countries to augment existing power generation capacity and provide electricity to remote areas by the method of on-site generation. Distributed energy could thus be the impetus for enormous economic boosts in developing nations, with the potential to create an economic impact of around $150 billion in 2025.1

The widespread use of storage technology could ultimately lead to enormous drops in C02 emissions. Currently, electricity generation and transportation together release around 20 billion tons of C02 annually.4 Batteries provide the means to integrate sustainable, nonpolluting energy sources into the traditional power supply, decreasing the pollution generated by fuel combustion. Similarly, as more electric cars replace ICE powered vehicles, there will be a further decline in C02 emissions attributable to fuel combustion.

Before the world can benefit from the full potential of energy storage systems there are still certain challenges that need to be addressed. For example, energy storage mediums will have to improve significantly in terms of capacity, efficiency, and price to become cost competitive with existing energy solutions. Electric vehicles will have to become more affordable to allow sales to increase globally, and infrastructure for recharging vehicles will have to be constructed.

In grid storage applications, deregulated electricity industries will face greater hindrances to the adoption of energy storage systems. Electricity deregulation essentially means that the various components of power supply (generation, and transmission and distribution) are owned by different companies. Since energy storage provides the greatest economic benefits when used to enhance both energy and transmission together, utility companies will have to collaborate in order to make the technology cost competitive.

In the future, policy makers will be key players in enabling the success of energy storage systems. With regulations that allow energy storage to compete fairly with other solutions, consumers and businesses could reap the numerous benefits of storage technologies much earlier than anticipated.


  1. McKinsey Global Institute, Disruptive technologies: Advances that will transform life, business, and the global economy, May 2013
  2.  Russell Hensley, John Newman, and Matt Rogers, Battery technology, The McKinsey Quarterly, July 2012.
  3. Electricity storage, International Energy Agency/Energy Technology Systems Analysis Program and International Renewable Energy Agency technology policy brief E-18, April 2012
  4. World energy outlook 2011, International Energy Agency, November 2011.