U.S. Battery Storage Market Set to Boom: Stocks to Gain

With the climate crisis becoming more acute with each passing day, the importance of batteries used for energy storage has grown manifold over the last decade. Notably, without effective energy storage techniques, increased adoption of renewables, particularly solar and wind, would not have been possible.

Therefore, demand for large-scale storage remains the need of the hour, as the entire U.S. economy is shifting toward a renewable-fueled society.  

Factors Driving the Battery Storage Market

A major catalyst driving the battery storage market growth is the rapidly declining cost of storage in the United States. Evidently, as stated in a research report by BloombergNEF in December 2020, the cost of Lithium-ion battery pack prices declined close to 90%. Notably, prices were lower than $100 per kilowatt-hour (kWh) for the first time.

Another factor instilling growth in the battery storage market is the emergence and rapid adoption of electrified transportation, better known as electric vehicles (EV). Obviously, battery storage holds the key to the EV industry’s bloom.  Per International Energy Agency, in the United States, electric car sales in 2020 were 4% higher than the 2019 level, amid a car market that shrank by 15%.

Another driving force for the market is the federal government’s investment tax credit (ITC), which has immensely benefited the growth of battery storage across the nation. Such tax incentives drag down the overall cost of installations, thereby offering the opportunity to deploy more energy storage systems.  

Future Prospects

Earlier, an ITC was allowed for energy storage only when it is installed in conjunction with a solar energy system. Impressively, in February 2020, a proposal was put forward for inclusion of similar ITC eligibility for standalone storage. If approved, it will further enhance the battery storage market’s growth. On the other hand, Swiss investment firm, UBS estimates that over the next decade energy storage costs will fall between 66% and 80% (as stated in a CNBC report).

All such projections must have led the U.S. Energy Information Administration (EIA) to estimate that a significant number of battery energy storage systems will be added to the U.S. power grid. As stated in EIA Annual Energy Outlook 2021’s (AEO2021) reference case, 59 gigawatts (GW) of battery storage will serve the power grid in 2050.

Stocks Poised to Gain

Considering the aforementioned growth projections, we have mentioned a handful of stocks that are involved in the battery storage market and boast solid growth prospects, thus demanding investors’ attention.

NextEra Energy NEE: This utility provider has more energy storage capacity than any other company in the United States, with more than 150 MW of battery energy storage systems in operation. The company’s 409-MW Manatee Energy Storage Center, which will be the world's largest integrated solar-powered battery system, is currently on track to be placed in service later in 2021. It boasts a long-term earnings growth rate of 7.8%, while the Zacks Consensus estimate for its 2021 earnings indicates year-over-year growth of 8.2%.

Enphase Energy ENPH: This solar microinverter manufacturer’s next-generation battery —Enphase Encharge 3 or Encharge 10 storage systems — has usable and scalable capacity of 3.4 kWh and 10.1 kWh, respectively. The company expects further revisions of its storage products with Ensemble technology to be released in 2021. It boasts a four-quarter average earnings surprise of 23.17%, while the Zacks Consensus Estimate for its 2021 earnings indicates year-over-year growth of 43.8%.

General Electric GE: This conglomerate’s renewable energy division offers customized storage products that include advanced lead-acid batteries as well as Energy Management Systems (EMS) to integrate the battery management system (BMS) into a fully functional storage digital controller. It boasts a long-term earnings growth rate of 4.3%, while the Zacks Consensus Estimate for its 2021 earnings indicates year-over-year growth of 2,300%.

Fluence – a joint venture between AES Corp. AES and Siemens AG SIEGY, is a global leader in the market for utility-scale energy storage technology and services. It has won the title of No 1 utility-scale energy storage systems integrator in 2020 from Guidehouse Leaderboard. While the long-term earnings growth rate of AES Corp is pegged at 7.5%, the same for Siemens stands at 16.10%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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