Julian Jansen is a Senior Analyst at IHS Markit Technology, a leading provider of research to the solar and energy industries. Julian will be speaking at the Energy Storage World Forum in May and is also webinar moderator at the first in a series of webinars for 2018 from the organisers of the Energy Storage World Forum. Read Julian’s blog on PCS and the crucial role they are playing in energy storage systems today.
Power Conversion Systems (PCS) – i.e. the inverter – are a crucial part of any energy storage system. They help maximise the use of the energy storage system to ensure long-term operability and returns for a project. At its best, a PCS does not simply convert from DC to AC but is crucial to maximise the availability, value and performance of large or small energy storage systems. As energy storage systems have to stack multiple values, an intelligent PCS is even more important to optimise system performance and project revenues. Particularly in smaller systems, much of the crucial intelligence required is embedded into the PCS, making it the ‘brain’ of the overall system. It is important for industry leaders to better understand the nature of the energy storage PCS, which is why during Day 1 at the Residential Energy Storage Forum this particular topic, will play a prominent role.
Despite the importance of energy storage PCS, insight into the market remains rare and is often overlooked. This is attributable to the fact that today the supplier base in Europe remains relatively fragmented. Based on in-depth analysis conducted by IHS Markit, it has been found that the market share of key suppliers changes significantly from year to year highlighting the dynamic nature of the market. For example, large-scale utility-side-of-the-meter projects won by a single supplier will cause year-on-year shifts in the competitive landscape. Based on this, Nidec led the German market in 2016 following the deployment of 90 MW for German power producer STEAG.
Given the rapid growth of stationary energy storage markets and the long-term opportunity this offers, an increasing number of suppliers are continuing to enter the PCS market and expand their portfolio. Especially suppliers who have a long-standing track record of supplying solar inverters are moving into the energy storage space. Large players such as ABB and Huawei are releasing new PCS for the residential behind-the-meter storage systems, while leading players such as SMA are expanding utility-side-of-meter energy storage inverter power ratings to capture larger projects.
Similar to the early development of the solar inverter market, IHS Markit expects some mergers and acquisitions to occur in the energy storage PCS market as suppliers try to consolidate and increase their market share. For example, in early 2017, leading Japanese industrial supplier Nidec acquired Emerson’s PCS business, IHS Markit expects further acquisitions to occur especially in the utility-side-of-meter segment as the market rapidly expands across Europe. In the residential behind-the-meter market, suppliers are considering partnering in order to share and reduce R&D costs. A recent example of this was between Kostal and Steca in Germany in order to accelerate next generation PCS releases and assist with sales and marketing operations.
In fact, price declines in PCS have been a pivotal factor in improving the economic feasibility of energy storage systems. While traditionally industry commentators have been focused on the spectacular price declines of Lithium-ion batteries – more than 50% since 2012 – PCS costs continue to contribute between 15-20% of total storage system costs.
IHS Markit has seen average global PCS prices decrease by 30% between 2015 and 2016. This can be attributed to price premiums over PV inverters being largely reduced as suppliers compete for large utility-side-of-the-meter projects or partnerships with leading system suppliers in the behind-the-meter segments. Across Europe, IHS Markit expects that a small price premium will remain in the residential market over the next five years, while the commercial & industrial market is scaling fast and therefore, attracting new PCS suppliers to take advantage of the opportunity.
All in all, the energy storage PCS market represents an exciting opportunity for new business and existing leaders who are diversifying from established solar inverter or industrial businesses. In the long-term, energy storage PCS are likely to follow the trend set by their solar counterparts and become increasingly standardised, mass produced and further decline in costs. Although, the unique requirements of every energy storage system do make complete standardisation a challenge. As the energy storage market in Europe is poised to grow the PCS market is too good an opportunity to pass up.
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