In our latest insight, GB Power Market Outlook to 2030, we estimate that in 2030, almost 10% of grid power comes from battery storage. Growth in the immediate future is set to be strong, in the T-4 2025-26 Capacity market auction, 2.5GW of new-build storage capacity was prequalified, of which 1.5GW was classified as 2-hour duration and 670MW 1-hour duration. 1.6GW of nameplate 2-hour battery storage secured a capacity agreement in the auction and 1.2GW of nameplate 1- hour battery storage won an agreement. This was the first time 2-hour batteries outweighed 1-hour batteries in a CM auction. On top of the existing storage capacity, this will add up to around 4GW of battery storage on the system. The real question for the sector is, will the growth continue on this trajectory?
There is a real need for batteries to address the stability and flexibility requirements on the system. This is driven by the increase in non-synchronous penetration on the system and the rise in intermittent technologies providing the bulk of power supplies. At the same time, the cost of batteries is expected to fall through learning rate-driven deployment, this is likely to be the major hurdle for a major rollout of battery projects. Especially with material costs following the wider rise in commodity prices across the world and supply chain issues in major battery production centers, particularly in China, which will impact delivery.
Based on our estimates of future costs for relevant technologies, which induce projections of learning rates based on deployment, reaching the level of battery capacity demonstrated in our 2030 outlook will cost approximately £20bn between 2025 and 2030. This is around 18% of the total investment which will be required in all technologies over the same period, including solar, wind, nuclear, and CCUS.
This shift in power markets is driven by the government offshore wind targets and net zero legislation. It will significantly shift the operation and development of the power generation mix, making prices more volatile (perfect for storage) and more exposed to weather and demand patterns. This will necessitate the development of backup technologies to carry the system through low wind and solar output periods, which could include long-duration storage, hydrogen, nuclear, interconnection, Carbon Capture, or unabated gas continuing to run at low load factors, offset by captured emissions elsewhere. Batteries won’t be immune either with development favoring two-hour and eventually four-hour battery applications.
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