Evolution of Demand, Fire Safety, and Energy Density in the US Energy Storage Market

Recently, Jaehong Park, CEO of LG Energy Solution Vertech (LG ES Vertech), shared insights during an interview with industry media, stating that by 2025, the company will add 16.5GWh of battery cell capacity for the energy storage market at its battery manufacturing facility in Holland, Michigan. This expansion marks the beginning of LG ES’s growth in the U.S. market.

In May 2023, LG Energy Solution celebrated the completion of its facility in Holland. Park indicated that the company plans to supply 900MWh of battery cells for a battery energy storage project in Poland, which will be deployed by Polish energy developer PGE.

Battery manufacturers, including LG ES and Tesla, are balancing their production between nickel-manganese-cobalt (NMC) lithium-ion batteries for electric vehicles and lithium iron phosphate (LFP) batteries for energy storage systems.

Park highlighted that LG ES has invested significantly in establishing a battery manufacturing plant in Holland, Michigan, including land acquisition, factory permits, and construction of water and other utilities. However, the assembly location for battery energy storage systems, which includes battery packs and enclosures, remains a pressing issue. He explained that while assembling these components into energy storage systems is less complex than manufacturing batteries, the sourcing of components is broader compared to producing everything on-site.

The strategy of LG ES is to position its Arizona battery manufacturing facility as a hub to serve customers on the U.S. West Coast, while a large warehouse and logistics center established in Illinois will facilitate rapid distribution across the country. Park stated, “Therefore, we will primarily operate two assembly centers for containers and battery packs, though some battery packs will also be assembled at the Holland facility.”

LG ES Vertech was created to capitalize on the increasing demand for large battery energy storage systems in the U.S. Wood Mackenzie predicts that by 2025, the U.S. will deploy 15GW/48GWh of battery energy storage systems, primarily for large-scale grid storage projects.

Despite uncertainties in policy affecting many clean energy stakeholders, Wood Mackenzie believes that the publicly announced transactions by LG ES Vertech, including a 7.5GWh battery supply agreement with Excelsior Capital and an 8GWh battery supply agreement with Terra-Gen, showcase its strong market position. Park mentioned that more transactions will be announced in the coming months, but details cannot be disclosed at this time.

He noted a diversification in project locations, with a notable increase in energy storage projects deployed outside California. A few years ago, nearly all solar and energy storage system developers focused on the West Coast, but this trend has now expanded into the ERCOT market in Texas and further into the northern U.S., Midwest, East Coast, and Southeast. Currently, approximately 60% of the orders received by LG ES Vertech are from outside California, with Florida remaining the largest market, accounting for 40% of the orders.

This trend aligns with the views of Tao Kong, managing partner at renewable energy and storage developer Luminous Energy. Although Wood Mackenzie noted in its latest report that two-thirds of energy storage projects deployed in Q4 2024 will be in California and Texas, they also observed significant growth in energy storage projects across 11 other states.

In recent discussions about fire safety in battery energy storage systems, the Moslantin battery storage project, which utilizes LG ES batteries, has garnered attention and scrutiny following a fire incident. The first phase of this 300MW battery energy storage system experienced a fire, raising concerns among users and the community. This project, built with NMC lithium-ion batteries provided by LG ES, has impacted the company’s reputation despite not being the system integrator.

Jaehong Park commented that he could not disclose many details during the investigation phase. LG ES is collaborating closely with project owner Vistra Energy on the investigation, with Vistra reporting a $400 million impairment loss on the Moslantin project. He emphasized, “The primary task for battery energy storage system operators is to ensure site safety and environmental compliance. Short-term analysis indicates positive environmental outcomes, with no impact on air, soil, or water. We are also examining the long-term effects of this fire and will share more details following a root cause analysis. After this incident, we convened a stakeholder meeting with clients, suppliers, and state government representatives.”

He asserted that stakeholders have reached a consensus on the need for appropriate regulations, policies, and technologies to reduce the risk of thermal runaway in batteries, ensuring it does not escalate into major fires. The industry has learned many lessons since the early days of the battery storage sector, which initially lacked regulatory oversight. Park remarked, “Initially, we only developed battery energy storage systems to meet application needs, but now we have standards like UL9540 and NFPA 855 along with fire codes and building regulations.”

With the advent of large-scale fire testing (LSFT), this evolution continues. Some battery energy storage system manufacturers and integrators have voluntarily implemented LSFT, which is expected to become a requirement. “Our recently deployed battery energy storage projects comply with large-scale fire testing standards. According to this standard, setting fire to a containerized battery energy storage system is monitored to see if the flames spread to adjacent systems, without any explosions or further spread occurring during this time,” he stated.

Park believes that once the modular design of battery energy storage systems is standardized, and LSFT becomes a mandatory requirement, it will significantly minimize operational risks in battery energy storage systems, marking a key development direction for the industry.

Regarding the direction of the battery energy storage industry, Park discussed the increasing focus on enhancing energy density and the growing number of original equipment manufacturers (OEMs) producing higher capacity batteries. “Many battery manufacturers are now introducing 500Ah and 1000Ah battery cells to improve energy density,” he noted.

However, he pointed out a critical issue: weight limitations. “Containerized battery energy storage systems are generally designed modularly and assembled before being shipped to the site after passing factory acceptance testing (FAT). There are also shipping regulations for containerized battery systems, where the weight must be below 40 tons; otherwise, special permits and escorts are required for transportation,” he explained.

Park emphasized that the key challenge lies not in using higher capacity batteries but in finding ways to reduce weight to increase the capacity of containerized battery energy storage systems. Currently, a typical containerized battery energy storage system has a capacity of approximately 5MWh to 6MWh, but reducing weight will be crucial for future innovations.