The global battery storage market is growing rapidly, expected to achieve revenues of $165 billion by 2030, growing at a CAGR of 15.3%. As Mexico establishes itself as a regional renewable energy hub, we expect battery storage to become an essential means for enhancing the flexibility of its grid system to provide more versatile energy delivery across the country.
Battery Storage and Renewable Energy Projects
Mexico is successfully increasing its renewable energy capacity year-on-year, mostly centered around solar and wind power. However, its battery storage industry is still small, with most renewable energy being sent directly to the grid as it is produced. The government is aiming to produce 50% of its electricity from green sources by 2050, and battery storage will be a vital tool to achieve this goal.
Incorporating battery technology into renewable energy operations can help enhance production through the storage of excess energy during high-production hours, it can also improve the security of the grid system by reliably delivering power at all hours, helping to avoid power shortages at peak usage times.
However, Mexico will have to overcome several regulatory constraints to effectively develop its battery storage industry. We expect the government to introduce several new regulations to support the adoption of battery storage technology and ensure it will benefit the grid, guaranteeing that companies using the technology will be compensated for battery services to support their return on investment.
Strong Fundamentals for Energy Storage Technologies
Mexico has extremely favorable wind and solar conditions for power generation in much of the country, making it attractive to foreign investors. Mexico held its first renewable energy auction in 2016, and by its third auction, the country was offering the lowest cost wind generation in the world, at $17.70 per MWh. Auctions were supported by a transparent and competitive tender process, strong legal, financial, and technical procedures, and assurances of protection from liabilities for applicants.
Following the success of Mexico’s renewable energy auctions and the rapid development of its solar and wind power industries, we believe the next obvious development is battery storage through the construction of hybrid power plants.
We expect the incorporation of battery storage into renewable energy operations across the country to introduce greater flexibility to Mexico’s electricity system over the next decade.
Declining Battery Costs are Driving Adoption
Progress in battery materials and related technologies is making them more attractive, while the decline in battery costs is encouraging smaller energy companies to invest. The sharp increase in electric vehicle production and consumer demand for EVs has driven down battery prices substantially, falling by approximately 97% over the last 30 years.
Although battery storage was once viewed as highly expensive, innovations in battery technology over the last few years, thanks to an inflow of investment, have helped lower the costs and make it more accessible. This is a trend we expect to continue, as more companies and governments fund research projects and adopt higher levels of battery technology across renewable energy developments.
Battery storage can greatly improve the efficiency of solar and wind operations, as well as help to avoid the unnecessary loss of power due to a lack of storage. Furthermore, we expect prices to keep declining as investment in the mining for lithium and other vital battery components rises.
Our Outlook Remains Positive
While we expect battery storage to add value to Mexico’s renewable energy market, there are still some challenges and unknowns due to the recent scaling of new battery technology. The degradation rate for lithium batteries is still largely uncertain, and the operational characteristics of batteries will likely change over time due to regular innovations in the technology.
We expect battery storage technology to be highly valuable in Mexico’s green energy transition, helping it to become a renewable power hub in the Americas over the coming decades. Contact us to learn more about onsite solar with energy storage in Mexico.