Episode 13: The Surge in Energy Storage

Germany is aiming to become climate-neutral by 2045 – to help combat climate change but also to become more resilient in its energy supply. Russia’s war oin Ukraine highlighted an aspect of energy provision most people had previously ignored: storage. As renewables take over an increasing share of the powermix in Germany, opportunites are being created everywhere for innovated solutions in the energy storage sector. We take a deep dive.

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Our guests

Lars-Stephan-Foto_RZ

Lars Stephan

is senior policy and market development manager for Europe, Middle East and Africa at the Fluence company. 

Fluence is a global leader in energy storage products, services and software, operating in 47 markets around the world. The company was founded in 2018 as a joint venture between Siemens in Germany and AES in the United States.

Beatrice-Schulz_Foto_RZ

Beatrice Schulz 

is head of technologies and markets at Germany's BVES Energy Storage Systems Association. 

The BVES is the largest trade association in the world for players in the energy storage sector. It represents a spectrum of storage technologies in the sectors of electricity, heat and mobility.

Links to sound clips

• Joe Biden: https://www.youtube.com/watch?v=pK80IAM7Pgg

• Boris Johnson: https://www.youtube.com/watch?v=pK80IAM7Pgg

• Olaf Scholz - One: https://www.youtube.com/watch?v=P1Lvhy5sZ-4

• Olaf Scholz - Two: https://www.youtube.com/watch?v=hEjdiduyQXI

Transcript of  this episode

Presenter: In February 2022, the world economy had begun to recover from the damage and constraints of the coronavirus pandemic. Things were looking up. And then THIS happened.

+++ SOUND COLLAGE +++

Joe Biden, US President: "The Russian military has begun a brutal... this is a premeditated attack." 

Boris Johnson, Former British PM : "President Putin has unleased war on our European continent. He's attacked... credible excuse." 

Olaf Scholz, German Chancellor: "We will not accept Russia's infringement of Ukraine's sovereignty. With the attack on Ukraine, Russian President Putin hopes to turn back the hands of time. But there is no returning to the 19th century, when major powers made decisions over the heads of smaller states. No turning back to the Cold War, when superpowers split uo the world into zones of influence." 

+++

Presenter: That last sound bite was German Chancellor Olaf Scholz. The attack on Ukraine created a particular problem for Germany because it sourced so much of its energy from Russia. Germany immediately set about finding alternatives. And did so with astonishing speed.

Olaf Scholz: "We became independent of Russian coal, oil and gas in only eight months. In only eight months we fully restructured our energy supply system, with brand new pipelines and terminals for liquid gas. Nobody had to freeze. There was no economic collapse. No industries were shut down." 

A lot changed in Germany during those eight months, and the change is ongoing. New markets, for instance, have been created.

Beatrice Schulz BVES: What you what you were able to see in the news that this gas storage just we had in place already. Never before anyone talked about it in the public because it was not interesting. But then they did reports day by day. Now our storage systems are filled 96%. Now they are have 98%. But what it did for all other kinds of storage system as well is that the awareness was getting much more than it did before.

Presenter: Hello and welcome to INTO GERMANY, the German business podcast, brought to you by Germany’s international business promotion agency, Germany Trade & Invest. I’m Kelly O'Brien.

As we just heard from Beatrice Schulz of the German energy storage systems association B-V-E-S, the new energy sources Germany has found has changed mindsets. And created new DEMAND for energy storage solutions – both industrial and domestic. 

The German market for storing energy is absolutely surging. Schulz from B-V-E-S anticipates that turnover at German energy storage companies will hit nearly 17 billion euros this year, up dramatically from just over 12 billion euros just one year ago. That’s not only - or even primarily - down to Ukraine. The war is only indirectly related to the rapid rise of energy storage systems. The larger factor is Germany's phasing-out of fossil fuels and transition to renewable energies. Because their production is less constant and harder to plan, more and more energy needs to be stored for later use.

We’ll return to Beatrice Schulz later. But first let’s examine the case of a company  called Fluence that's having success in the German energy storage market. One of the global leaders of industrial-strength battery storage systems, Fluence is a US-based company with roots in Germany. It installs storage systems all over the world. We caught up with Lars Stephan, Fluence's Senior policy and market development manager for Europe. We asked him to tell us about the company and how it sees business in Germany: 

Lars Stephan: Fluence is a global leader for energy storage products, services and digital applications. This means we have three specific pillars of areas where we create value for our customers. The first energy storage product is probably the most obvious. It's containerized storage solutions and we've deployed more than seven gigawatts. I have in deployment globally of those hardware solutions. 

Our second pillar are services where we provide operational maintenance service to our customers along with different warranties and guarantees, performance warranties, to increase the value of those assets over time. The third distinct element is our Fluence IQ digital platform, which maximizes renewable and storage revenues through, on the one side, an asset performance management tool, which is Nispera. On the other side, an automated bidding platform, which is called Maserik. If we take all of those different elements together, we're trying to make it work. to help our customers to increase the value of their assets, both of energy storage, but also renewable assets across the whole lifetime of their projects."

Presenter: Fluence has installed battery storage capacity of seven gigawatts. That's seven billion watts of capacity. So how long has Fluence been around? 

Lars Stephan: "Fluence was founded in 2018 as a joint venture of both Siemens in Germany and AES in the United States. And the storage team and the projects of both companies were merged into Fluence. If you think about Fluence in Germany, at the end of 2019, we had around 35 employees. And today we have around 150 employees in Germany. So, our German roots are an integral part of the Fluence history. And we're continuing to invest in Germany, to hire people in Germany. And we see, of course, huge potential in the German market, which drives our interest in our investment into Germany.

Presenter: We heard earlier that experts are predicting a huge demand for energy storage capacity worldwide, driven by huge amounts of energy coming online from renewable energy sources. 

Lars Stephan: Now that we see more volatile renewables coming into energy systems, we need to store this electricity to make it available, not when it's being produced, when the sun is shining and the wind is blowing, but when it is being consumed by the consumers. This is where we need to bring flexibility in our power grids. And energy storage is a key element of this flexibility. Additionally, energy storage can shift the energy around, but it also provides system services. The energy system stable because it can react really, really fast to changes in voltage and frequency on the grid. It also can provide dispatchable capacity. When the renewables are not producing electricity, storage can come in and fill this gap. So energy storage is an asset class as a technology that we see globally coming alongside the increasing shares of renewables. And we're happy to be in this part to provide our solutions to the energy transition globally.

Presenter: Fossil fuels are deeply embedded in production processes in Germany... and other industrialized nations. Switching to renewables with sophisticated energy storage systems won't happen overnight, although it almost has to, to meet climate goals... 

Lars Stephan: The market for energy storage is really just, you could say it's taking its first child steps and we're going to grow into a really big part of the energy system. If you look back, for example, take Fluence as an example, we were founded in 2018 with 40 employees. Today we have 1,200 employees. And we are planning to grow 35% to 40% per year. 

If you take it, if you put this question into Germany, at the moment in Germany, we have around 1.2 gigawatt of utility scale energy storage integrated in the German energy system. The forecast where we need to go are much higher. So the German regulator alongside the network operators in Germany predict that by 2037, we'll have around 24 gigawatt of energy storage in the German system. This means between today and this 2037, we need to build 1.5 gigawatt, actually even a bit more on an annual basis. This is on an annual basis build as much as we have today in the system, something that we've built over the last maybe decade. And this target of 24 gigawatt, this is even a conservative target from many perspectives.

Presenter: With these ambitious targets, presumably market access and regulatory issues are working in favor of companies like Fluence.

Lars Stephan: If we look at the market side and the regulatory side, we see that different markets around the world taking different speeds when it comes to deploying renewables and also deploying energy storage. Typical barriers are around questions. What is energy storage? How does it fit into the regular context of a specific energy market? Barrier that we have in Germany specifically, which we're working on at the moment is for example, grid fees.

Does energy storage need to pay grid fees when it charges electricity or doesn't it? Because at a later stage when the electricity will be finally consumed, those grid fees are actually charged. There are often questions about market access to wholesale markets, to auxiliary service markets, to capacity markets, which need to be unlocked for energy storage to be able to earn revenues in all of those different market segments, which really then brings forward and drives the value of energy storage.

I think one key element that we haven't unlocked in Germany, but also in many other markets, is really the question, how can we bring the flexibility that energy storage can offer to the system, not just into energy markets, but also into the energy grid, in a sense of how can we use energy storage to overcome congestion in the German grid. Last year, we paid 4.2 billion euros in Germany in congestion costs. We curtailed around 8 terawatt hours of renewable energy because the grid was congested. So, I think there's another element where storage can create huge values to the system, which we still need to unlock.

Presenter: Wow that is a lot of energy wasted in the grids, isn't it? Before we finished, we asked Lars to give listeners an idea of some of the companies Fluence works with. 

Lars Stephan: We have a couple of different customers, and I'll tell you how they classify it in different groups. So on the one side, we have those big energy companies that probably everybody knows, like the Vattenfall, the Stuttcrafts, the ESBs, to whom we all sell in Europe. Globally, we've also sold to Engie, RWA, Ersted, or AES. So these are the big energy companies that everybody knows who have been in the business for decades. Or even centuries. Then we also service independent power producers and especially independent power producers which focus on energy storage such as Goss Street, Kapelow or MW storage. We also service renewable project developers, renewable power producers such as Münch Energy for example in Germany. And to cap it off we also provide solutions to transmission system operators such as TransnetBV, Litgrid, or tenant in the European context to help them to leverage energy storage to their advantage to operate the grid in a more efficient way."

Presenter: That was Lars Stephan from Fluence, a leading provider of industrial-sized energy storage systems around the world. Many thanks to him. We'll be right back for a chat with Beatrice Schulz of Germany's B-V-E-S energy storage systems association, the largest industry group of its type anywhere. But first, let’s look at some other top business news from Germany. 

+++BUSINESS SHORTS+++

Change at the Top

Munich has dethroned Hamburg as Germany’s smartest city. In the fifth edition of the annual index compiled by German digital association Bitkom, the Bavarian capital narrowly ranked ahead of the northern German port city. The five main areas looked at were administration, ICT, energy and environment, mobility, and society and education. 

Security Boom

And staying with Bitkom, the organization says that Germany’s cyber security market will grow by 13 percent and top the 10 billion euro mark in 2024. The largest share of German expenditures in the sector – 4.3 billion euros – goes toward IT security. That market grew by 18 percent in the past year. Four billion euros was spent on services and 900 million euros on hardware. 

New Blue

Germany now has new rules that make it easier for the country to attract skilled workers. For foreign degree holders with a job offer, the minimum salary for an EU-wide work permit, the so-called Blue Card, is now only 43,800 euros. And in professions with skill shortages, the level drops below 40,000 euros. Most of those granted Blue Cards have chosen to stay in Germany.

Green Tech

Germany has launched the “GreenTech Innovation Competition” – a new 75 million euro state program that will fund 21 projects to sustainably and digitally transform the German economy. The goal of the new initiative is to strengthen Germany and Europe as locations for companies with digital business models. The program is aimed at small-to-medium-sized enterprises

And finally, Silicon Solar 

A team from the Fraunhofer Institute for Social Energy Research in Freiburg and the N-W-O Institute for Atomic and Molecular Physics in Amsterdam have set a new efficiency record for silicon solar cells. The solar cells have an efficiency of 36.1 percent, the highest ever attained for silicon-based cells. That’s thanks to a new two-layered design. Silicon cells represent 95 percent of those sold around the world.

+ + + 

Presenter: Now back to this month’s topic energy storage. As we just heard, solar power efficiency may be on the rise. But each step forward in producing energy from renewable sources increases the need for developing safe and efficient ways of storing that energy. 

Few people know that as well as our next guest. Beatrice Schulz is head of technologies and markets at Germany's B-V-E-S energy storage systems association

Beatrice, Lars Stephan from the Fluence company told us earlier that the energy storage sector is still in its infancy. So who does your association represent?

Beatrice Schulz: So the BVES at the moment represents around 300 companies. So we are an industrial association and we support companies along the whole value chain for energy storage. So being IT companies producing compounds for energy storage, um, selling energy storage products, companies doing research and development as well as recycling for storage systems, um, companies from the financial sector as well as research institutes, for example. So it is a yeah, broad chain from small startups to multinational companies. And what we are doing is we are like, like the, the gap between policy makers and the companies. So we kind of translate the messages and um, talk back and forth between these two components. Um, and yeah, these all storage systems, not only batteries, um, which is probably what people will think we will do mostly, but it's also, um, star systems in the heat sector, um, hydrogen solutions as well as, for example, pumped hydro. If you go back to, to the electrical sector. So we are really technology neutral.

Presenter: The United States and China have much larger markets for energy storage than Germany, yet your organization is the largest energy storage association in the world. How is that? 

Beatrice Schulz: So there is a joke. Or maybe it's a truth that Germany invented the electrical engineer. And this could be why. But what is true for sure is that we in Germany have, um, one of the technology leaders when it comes to energy storage. So being at way over 100 year-old companies, providing, for example, turbine solutions for pumped hydro or being companies providing batteries, making the batteries working really well on a system perspective. So integrating an energy management system or storage solutions for storing charging infrastructure. So the simple answer is because we do have these companies here in this market segment in Germany and these companies early on decided that they want to not only sell their solutions internationally, but also in Germany. And what we now see is that companies from the international part coming to Germany to sell their products.

Presenter: Why don't you start by giving us a quick overview of what technologies are in use for energy storage at the moment...

Beatrice Schulz: There are three major kinds of energy storage. So if you look at it like being three pillars on the left side, you would have the electricity storage systems. These are batteries which are the electrochemical storage systems. But not only these are also mechanical storage systems can be pumped, hydro can be flywheels, for example, can be compressed air, um, for the store of energy. And then we also have storage systems that directly store electrical energy being capacitors, for example, and supercapacitors. And in the middle you would have chemical storage systems being hydrogen, but also syn fuels in the future, for example, that can be seen there. And then you also have the third pillar of thermal energy storage systems, and they are different kinds being sensible heat store systems. So the hot water tanks, we know, for example, they can also be storage of latent heat. So you might know these little hand warmers that have a little metal plate in the middle and they start the energy in the face change. And these are also technologies that can be used for different applications for energy storage. And then we also have thermal-chemical storage systems that use other processes, for example, absorption processes or chemical reactions to store the heat. And yeah, so this is the most part from the technical perspective, if you if you go at the intersection of technical and application, you will also see storage technologies doing sector coupling. So they store energy from power to “X” something, they store the energy from power to heat and maybe back to power. And they are all these different modes that you could use the storage system for. Um, that yeah. Also determine what components will be in use.

Presenter: We've heard about the huge demands that are coming for the energy storage sector, and the skyrocketing growth of companies that are in it...

Beatrice Schulz: It is a growth market mostly because we do see more renewables. So if you look back at the oldest storage systems that we do have like for 100 years now in the German market, what they do today is really different from what they did back there. So back in the time that it's day, night shift of energy and now we do see these are mostly pumped hydro assets that they shift a lot of times per day. And this is why we need storage. So we need a lot of more flexibility on all levels, on the production sites, on the grid level and also at the consumer side, we do see a lot of more electrification. So the demand for electricity rises and if all this demand will be provided for by renewable energy, which is mostly fluctuating because if you look at wind and solar, we do need this temporary availability of energy.

Presenter: So just to be clear. Storage systems can be mechanical, or gravity-based, as you mentioned in pumped hydro, or electro chemical as in the case of lithium-ion batteries. And storage in general is central to Germany's transition to a carbon-free economy... 

Beatrice Schulz: It's the biggest key. So if you now look at where we are with renewables and where we would like to be. If you look a couple of years ahead, there is still a lot to do. So in the electricity sector, we are maybe you. I don't know. The last numbers I've seen are from last year, but we are at around 50% now in the electricity sector. And we want to reach climate neutrality until 2035. So a lot of growth needs to happen. So if we want to see that working and having still a stable grid and it being, um, in some sense still, yeah, have some energy sovereignty as Germany and not only relying on other countries, we do need this component and these are the goals that the government is going to.

Presenter: How would you sum-up the outlook for battery storage systems for consumer applications, such as chargers for electric cars and heaters, and the markets for industrial grade storage systems.

Beatrice Schulz: So the biggest growth at the moment is in the consumer level. So we do see it in households, but also the industrial market is now getting more and more interesting as well, which was not the same in the last years. And what these storage systems are doing is they provide power for all the certain applications that are needed. Um, they, they can also provide system specs into the grid. So if you can couple of different applications, the business model gets more and more interesting. This is the point I would like to make. Um, but yeah, the home storage system is the strongest we have now, more probably than 1 million home storage systems installed in batteries and homes.

Presenter: Lars Stephan from Fluence told us that a key obstacle in your industry revolves around whether energy storage systems are classified as consumers of electricity, or producers of electricity from a regulatory perspective. What are the other restrictions to growth? 

Beatrice Schulz: So what do we do year by year as an association is to ask our members what they think the biggest obstacles to growth are. So I can refer to that. Um, first of all, the biggest one will be the regulatory framework. I will give some more details on that. The second one being stability of markets, investment, security and um, smaller ones are the development of demand. But, but they don't really thought that this is a big well so like the minds and the acceptance is the smallest part. Um this is not really a big hurdle. Um, raw material prices and production costs are rising, so this is another of the smaller ones, but mostly it's the regulatory framework. So what is the lack of ? What we have seen in Germany is that storage was classified as a final consumer of energy and was it all levies and taxes, and fees and so on had to be paid twice. So when the energy went into the storage system and then the second time when the real final consumer so maybe at home your toaster oven or something like this used the energy then and this is something that is being worked on.

Our position is that Germany needs to have a storage strategy that puts into place flexible markets. It puts into place a framework that sees storage not longer as a consumer or producer of energy, and that makes it much more faster for democratic processes if it comes to the network connection of storage system. And this degree of flexibility is needed upfront. And then afterwards you will see much more growth than the market is doing now already.

Presenter: That was Beatrice Schulz of the BVES energy storage systems association and Lars Stephan from the Fluence company with their perspectives on Germany's surging market for energy storage and what needs to be done to improve market access. Before we end the podcast, here’s some brief insight into HOW GERMANY WORKS.

+++ (HOW GERMANY WORKS)+++

Well as we now know, energy storage is a massive market in Germany. But who

regulates how stored energy is fed into and taken out of the grid? That’s the job of the Bundesnetzagentur. Founded in 1998 amid the liberalization of public services market, this is a federal agency responsible for energy, telecommunications, the postal service, railways, and pretty much anything that can be described as a network. The Bundesnetzagentur’s tasks fall between the areas of responsibility of the Ministry for Economic Affairs and Climate Action and the Ministry for Digital and Transport, but it is an independent agency. If your energy storage business comes to Germany, this agency is one of your major points of interface with the government. And that’s HOW GERMANY WORKS.

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Presenter: That's it for this episode. We’d like to again thank our guests for their insight and you, for listening. We hope you found some useful information on Germany's energy storage market! If so, Germany Trade & Invest can help you set up shop in Germany - at no charge because we’re a government agency. 

Get in touch at gtai.com. We’re also keen on your opinions, suggestions and questions. Please leave a comment in your favorite podcast app or drop us a line. You’ll find all the details in our show notes.   

So, till next month, may all your batteries be fully charged, “Auf Wiederhören” and remember: Germany means business.