As countries work to reduce pollution and meet their net zero targets by 2050, renewable energy sources like wind and solar power are growing fast. These clean energy options are essential for fighting climate change, but they come with one big problem: they do not produce electricity all the time. When the sun isn’t shining or the wind isn’t blowing, power generation drops. This irregular flow of electricity often causes price swings and makes it harder to keep power grids stable.
This is where battery energy storage systems, commonly known as BESS, come in. These systems store electricity when there is plenty of it and release it when demand rises or supply falls. In simple terms, they help balance the grid by filling the gaps left by renewable energy intermittency. According to Bloomberg NEF, global installations of BESS are expected to increase more than 18 times over the next decade, showing just how important batteries are becoming in the energy world.
Companies like Natixis Corporate & Investment Banking are already financing large-scale battery projects. Natixis has supported more than six gigawatts of battery capacity worldwide and continues to advise on new projects. Compared to older storage systems such as pumped hydro, batteries are quicker to install, take up less space, and can be easily placed near solar and wind farms.
However, batteries still face a few challenges. Their lifespan is shorter than other storage systems, lasting around 15 years on average. Building them also requires materials like lithium, which has environmental risks. Extracting lithium uses large amounts of water, especially in dry areas, and can damage local ecosystems. Efforts to recycle lithium are improving, and researchers are testing sodium-ion batteries, which could be cheaper and more sustainable in the future.
Battery projects differ from country to country depending on local policies. In the United States, California uses a mix of long-term contracts and short-term trading to make batteries profitable, while Texas depends fully on market trading. In the United Kingdom, the government supports multiple revenue streams to keep projects stable. Countries like Italy offer 15-year contracts through auctions, while Germany and China rely more on market-driven models.
There is no single business model that works everywhere. Developers often combine different revenue sources to manage risk and ensure stable income. Financing methods also vary. Projects with long-term contracts can use debt financing, while those relying on market prices often depend on equity investors.
Overall, batteries are playing a key role in helping renewable energy grow. As technology improves and financing models adapt, battery systems will continue to make electricity grids more reliable, supporting the world’s move toward a cleaner and more balanced energy future.
Many for-profit companies like QuantumScape Corp. (NYSE: QS) have taken up the challenge of bringing to market innovative battery chemistries that promise to stretch the limits of what the current battery types can offer in terms of performance, reliability and cost-effectiveness.
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