The biggest criticism of wind and solar energy has long been their variability as sources of energy for the grid. The sun is only out during the day, and the wind doesn't blow 24/7. They're not great "baseload" sources of electricity, and their variability can make the rest of the grid harder to manage (see California's "duck curve"). 

To solve this challenge, cheap and abundant renewable energy needs to be moved from when it's produced to when it's needed. Energy storage is the answer, and it's becoming big business faster than you might think. 

Solar panels with wind turbines in an urban landscape.

Image source: Getty Images.

Energy storage growth

The estimates of energy storage's growth are incredible. According to GTM Research, energy storage installations in the U.S. totaled 260 MW in 2016 and the industry will grow to 478 MW in 2017 and 2,045 MW in 2021

Chart showing GTM's projection of energy storage growth.

Image source: GTM Research.

Furthermore, Bloomberg New Energy Finance projects that 25 GW of energy storage will be installed worldwide in the next 12 years from less than 1 GW today. But that's assuming battery prices fall to $120 per kWh by 2030. 

These are high growth estimates, but they may not be bullish enough. Estimates are that Tesla's (NASDAQ:TSLA) costs are already below $190 per kWh and GM has reportedly gotten cell prices as low as $145 per kWh, and prices on the market are already trending lower than industry experts think. 

New, cheaper batteries

Eos Energy, which makes a zinc hybrid cathode Znyth battery, recently announced that it's taking orders for energy storage systems at $160 per kWh for delivery this year and at $95 per kWh for 2022 shipments. 

This is the lowest price I've ever seen quoted, but it's probably just the beginning. Tesla has been an industry leader so far, and with the company projecting lower costs from the scale of the Gigafactory, it could be below $100 per kWh for utility-scale projects by 2022. The $100 per kWh level would only be a reduction of 12% annually based on costs reported in 2016, which is very manageable for an industry cutting costs rapidly. 

The economics of energy storage are compelling

At $95 per kWh, Eos estimates the levelized cost of energy storage is approximately $50 to $60 MWh, or $0.05-$0.06 per kWh. With wind and solar prices now at $0.02-$0.05 per kWh, energy storage could be economical in many states in the U.S. and countries around the world. 

The chart below shows the range of wholesale electricity prices in different trading hubs across the U.S. You can see that electricity at $70 to $110 per MWh ($0.07-$0.11 per kWh) would be competitive in the Northeast and at times in other parts of the country as well. 

Ultimately, it's these wholesale markets where wind and solar plus storage will be very disruptive. Fossil fuels can't keep storage applications out of the wholesale market, and with the price of renewables and energy storage coming down, the market gets bigger and bigger by the day. 

Don't fight the future of energy

On a per-kWh basis, wind and solar energy are already competitive with fossil fuels in most of the U.S. and much of the world. Their only problem is their time of production, a problem that's solvable with energy storage. 

As we see lower-cost energy storage solutions emerge -- whether it's lithium-ion batteries, other battery chemistries, mechanical storage, or other methods -- the renewable energy industry will only grow. Expect the disruption to continue, and within the next few years, energy storage may be the most disruptive energy innovation we've seen since Thomas Edison unveiled the first electric grid over a century ago. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.