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A Brand-New Market Set to Grow 4,000% in the Next Decade

With many industries focused on lowering carbon emissions and avoiding the high cost of fossil fuels, the energy storage segment is evolving into a big-time profit opportunity.

In fact, according to a new report from Pike Research, the global market for energy storage will expand by more than 4,000% over the next decade, rising from less than $20 million now to $872 million.

You see, as the name implies, these storage systems capture energy that would otherwise be wasted and store it for future use.

For example, railway operators can capture the extra energy exerted from the brakes of an electric train, pushing it back to the third rail. But when an excessive amount of voltage is created, it ends up being released as heat.

However, a new energy storage project in Philadelphia has found a way to make even better use of this excess power. The Recycled Energy and Optimization project uses a dc-to-dc converter made by Envitech Energy to draw this voltage into a large lithium-ion battery pack. This saves it for use when the rail’s voltage drops too low.

Produced by Saft Group (PINK: SGPEY), the battery is roughly the size of 280 Toyota (NYSE: TM) Prius battery packs put together. And it’s capable of serving five or six stations on the train line.

Of course, energy storage applications go far beyond electric trains.

With so much added focus going green and avoiding the high cost of fossil fuels, the energy storage segment is evolving into a major component of the alternative energy market.

Where Green Energy Goes, Energy Storage Follows

Indeed, the prospects for energy storage are greatest where it can be coupled with alternative forms of energy production, such as solar and wind.

You see, one of the big drawbacks to solar and wind energy is that they’re not the most consistent energy sources. Mainly because it’s not always windy and sunny.

Advanced forms of energy storage solve that problem, since storage systems can save the gathered power for use at a later time. In other words, as more alternative energy initiatives take shape, the battery storage market should take off, too.

For instance, California has expanded its Self-Generating Incentive Program (SGIP) to include energy storage. The program offers a rebate of $2 per watt for the installation of renewable energy systems. And once energy storage initiatives were introduced, the number of program applications rose from six in 2010, to 147 in 2011.

The greatest opportunity for energy storage lies in Asia, though.

The Asia/Pacific region already has the largest base of energy storage, with 60 gigawatts of installed capacity. But that’s poised to shoot significantly higher now that Japan just launched a huge solar energy initiative.

In short, on July 1, Japan implemented so-called feed-in tariffs. These require utilities to buy electricity from renewable sources at preset premiums, for up to 20 years. Per the plan, utilities pay 42 yen, or $0.53, per kilowatt-hour for solar-generated electricity.

That’s double the tariff offered in Germany, which saw its solar industry triple output in less than a decade. And it’s more than three times the tariff paid in China. Residents who install solar panels on their homes will receive subsidies, as well.

As a result of the new tariffs, the government estimates capacity from renewable energy will surge from 19,500 megawatts now to 22,000 megawatts in just nine months. To cope with the new energy targets, the government also says that by 2020, more than 25 gigawatts of storage will be needed for every100 gigawatt hours of energy emitted.

Of course, the market is still young, but that’s exactly what makes it such a terrific growth story.

As Pike Research points out, the number of global energy storage projects (both deployed and announced) rose 8%, from 600 to 649 during the first six months of 2012.

As it stands now, the energy storage market is dominated by a large group of small and volatile players. But larger companies, such as ABB Ltd. (NYSE: ABB), are starting to take notice.

That means the energy storage segment offers some very promising takeover targets – in addition to its intrinsic growth potential. Stay tuned for further analysis of some of the fastest movers in this budding market.


Jason Simpkins

Jason Simpkins

, Energy Editor

View More By Jason Simpkins