Powering the Future: How Canada Can Lead in Energy Storage Innovation

The International Energy Agency’s (IEA) 2024  World Energy Outlook signalled the need for the world to “massively increase its energy storage capacity” in the coming years and further highlighted that energy storage resources will be a “key source of dispatchable capacity globally.” In 2023, the global energy storage market nearly tripled, and 2024 is positioned to deliver more than 100 gigawatt hours (GWh) of capacity in a single year for the first time. Established energy storage technologies, such as lithium-ion battery energy storage systems (BESS), have reached their lowest price point since 2017, dropping to $115 per kilowatt hour (KWh). Emerging technologies are transitioning from pilot projects to large-scale deployments, offering a diverse array of storage solutions for grid operators.

In this global context, Canada is well-placed to be a leader in the development and deployment of energy storage technologies that will drive the future of the energy sector. Canada has an abundance of natural resources, a clean electricity grid, and an established innovation ecosystem for energy. The country has a well-established infrastructure, a skilled workforce, and access to critical minerals, supported by massive potential for continued renewable energy development. In addition, Canada is already internationally engaged in climate and energy issues and has established strategic partnerships with other energy leaders identifying and deploying solutions that will address global energy challenges and accelerate the clean energy transition, including energy storage.

Why Storage and Why Now?

The phenomenal growth we are seeing in the global energy storage market stems from a few key factors, the most prominent being the tremendous increase in energy demand expected in the next two to three decades. Increased demand is compounded by broad efforts to decarbonize and electrify energy systems, the continued reduction in the cost of renewable energy assets and dropping prices for the dominant storage technology of the day – lithium-ion batteries. 

Canada is experiencing a similar transformation in its energy sector, spurred by ambitious decarbonization goals at both the national and provincial levels, significant demand growth, and the declining costs of renewables and energy storage. With provinces like Alberta and Ontario already making significant strides in grid-scale storage projects and others like British Columbia and Nova Scotia setting aggressive targets, the country is increasingly becoming a testing ground for new storage innovations. Canadian research institutions and private sector companies are also at the forefront of developing next-generation storage solutions, from lithium-ion batteries to emerging storage technologies. 

A report commissioned by Energy Storage Canada in 2022 estimated a minimum of 8-12 GWs of short-duration (6 hours or less) energy storage would be necessary just for Canada to meet its net-zero targets for 2035. This does not include the important role for long duration energy storage (LDES) or the continued increase in projected demand growth across the country. Moreover, while energy storage is a critical component in a net-zero or low-carbon grid, balancing intermittent renewable assets and meeting increased system demand is only part of the value proposition for energy storage.

The Benefits of Energy Storage

Energy storage plays a crucial role as a system optimizer. By ensuring that generating resources of all types are used efficiently, storage enhances the effectiveness of clean energy generation, supporting decarbonization goals and increasing the reliability of the grid for ratepayers. Beyond this, the efficiency provided by energy storage also helps reduce costs by delaying or even preventing the need for large-scale transmission or distribution infrastructure, such as peaker plants, to meet demand surges. Instead, localized energy storage can provide the necessary capacity, minimizing the need for additional costly assets.

Moreover, energy storage enables the shifting of electricity use to off-peak hours, helping to lower electricity costs for ratepayers. It also boosts self-sufficiency by reducing reliance on imported energy, particularly fossil fuels, and contributes to resilience in the face of natural disasters. In remote communities, energy storage can store excess energy from local renewable resources, reducing dependence on diesel generators and ensuring a more reliable electricity supply.

The flexibility and scalability of energy storage technologies further enhance its value. From electric vehicle (EV) batteries to residential storage systems and large-scale grid projects, energy storage serves a wide range of applications. Distributed Energy Resources (DERs) like EV batteries or residential storage systems can help communities optimize local energy generation, providing even more tailored, resilient solutions. Energy storage systems can be deployed quickly and adapted to the specific needs and environments of different regions, making them a versatile tool in the transition to a sustainable and reliable energy grid.

Beyond meeting domestic energy needs, the growth of Canada’s energy storage industry will position Canada to be a global leader in the low-carbon economy. The energy storage market is expected to grow 15-fold by 2030, with the IEA projecting that energy storage could meet up to 40% of short-term electricity flexibility up to 2050. This rapid growth in the low-carbon economy presents significant opportunities for those ready to take part in its development.

Moreover, as with any industry, the growth of the energy storage industry in Canada will stimulate growth in related sectors, like battery manufacturing, and stimulate growth in existing industries like engineering, construction and asset maintenance. Canada the potential to maintain its global leadership in energy by advancing its storage industry. However, to fully realize this potential, Canada must take key steps to foster further growth and innovation in the sector.

What Should Canada Do Next?

First, Canada must establish a policy and regulatory environment that actively supports the deployment of storage, both streamlining the processes to accelerate the development of the industry now and integrating storage into long-term system planning. Energy is regulated at the provincial level in Canada, resulting in a varied level of readiness for storage integration. It is important that all provinces include storage in their regulatory frameworks and create mechanisms for valuing the diverse contributions storage can make to the energy system. 

Additionally, Canada must provide market certainty to investors and developers by setting provincial targets, launching procurement initiatives, or developing market mechanisms (in the case of Alberta, for example) to secure the specific services energy storage provides. Clarifying the scale and pathways for energy storage development at the provincial level can be further supported by federal incentives, such as continuing or expanding programs like the Investment Tax Credits (ITCs).

Ensuring supply chain stability and strengthening domestic manufacturing for energy storage is crucial. This involves enhancing the resilience of the supply chain for critical minerals and investing in local or regional battery production facilities to reliably meet growing demand. In Canada, part of securing the supply chain includes building partnerships with Indigenous communities to tap into local resources and expertise. A consistent supply of energy storage components will allow Canada to confidently promote its products, technologies, and services in global markets. This, in turn, provides continuity for international investors while also offering certainty to those looking to develop energy storage projects within Canada. 

The Opportunity

By taking the necessary steps, Canada can position itself as a global leader in energy storage, fully leveraging the benefits energy storage offers domestically and abroad. The global market for low-carbon, clean energy continues to expand, and energy storage will not only provide short-term dispatchable capacity but also address the long-term challenges facing the world’s energy systems with a mix of chemical, mechanical, thermal, and electrical storage technologies. These challenges include integrating intermittent renewable energy sources, managing peak demand, and ensuring energy reliability during grid disruptions or natural disasters. Energy storage, with its diverse range of technologies—chemical, mechanical, thermal, and electrical—will be key in meeting these evolving needs. Each of these technologies offers unique solutions that can be tailored to different regions and energy systems, providing the flexibility required for a sustainable energy future.

Moreover, Canada’s energy storage industry is ready to develop these resources. By aligning its energy policies with the growing global demand for energy storage, Canada can position itself as a key player in the international market. The world is actively looking for reliable and innovative storage solutions, and Canada has the resources, expertise, and potential to meet this demand. With a proactive approach, Canada can not only meet its own energy needs but also serve as a leader in the development and deployment of the energy storage technologies that will drive the future low-carbon economy.