While we remain bullish on solar, there’s another clean energy solution that’s starting to come on strong: energy storage.
When solar and battery storage are paired together, even more of the sun’s energy can be captured and used when the sun isn’t shining, electricity rates spike, the grid needs some help, or the grid goes down. The list of current and potential “solar-plus-storage” applications spans all market sectors, from offgrid to residential to commercial and industrial to university and government to the utilities themselves. We believe that the combination of solar and storage may eventually become the ultimate clean energy killer app.
Much like its solar cousin, storage has enjoyed huge decreases in cost over the past few years. Lithium ion-based systems have seen costs drop from $1000 per kilowatt-hour four or five years ago to $300-$400 to well under $250 per kilowatt-hour—a much faster decline than most industry experts predicted. The cost reduction trend will continue as mega-manufacturing plants scale, the systems become more efficient, and deployment accelerates.
While lithium ion, flow, and other battery technologies are improving and the costs continue to come down, solar-plus-storage isn’t right for every solar installation. The decision to add storage will largely depend on the economics and application as well as the specific incentives and regulatory environment. Nevertheless, hundreds of megawatts of batteries and other systems have been deployed across the U.S., and the market, incentives, and applications are only expected to grow.
For the most part, the U.S. storage market can be divided into two categories: “behind the meter,” which consists of the residential, commercial and related sectors, and “front of meter,” which is largely the domain of large commercial entities connecting storage to the grid and the utilities themselves. The reasons why homes, businesses, universities and utilities would install solar with energy storage will vary greatly, and we’ll be addressing these specific applications in future blog posts. Here are some use cases.
For homes: While the backup power aspect of most residential solar-plus-storage systems has received much attention in the mainstream and tech media, that’s actually not the most compelling value proposition for home systems. Storage gives the customer the ability to optimize their self-consumption of the solar-generated electricity by using the stored energy to reduce or eliminate either high overall utility rates or offset high peak-demand and other time-of-use (TOU) rates.
For businesses: The same optimization of utility rates applies to business owners as well, especially ones that see a huge spike in rates with demand charges or when energy consumption soars during peak rate times. Energy storage can leverage the stored solar (free!) energy to offset those highest rates. The higher the TOU rates, the faster the payback for businesses investing in a solar-plus-storage system. One energy storage application we’re proud of is our CuisinArt Resort installation on the island of Anguilla, an offgrid/microgrid example of a business successfully pairing batteries with solar.
For utilities: Utilities can use energy storage for many applications. One of the most ambitious solar-plus-storage power plants can be found in Hawaii. The Kauai Island Utility Cooperative (KIUC) contracted SolarCity/Tesla to build a 13 MW solar array integrated with a 52 MWh battery storage facility, which came online earlier this year. In effect, this is a fully dispatchable, renewable energy baseload-style power plant. Under the terms of the PPA, KIUC is paying Tesla 13.9 cents/KWh for the power (much less than the cost of fossil-based generation), and the plant (pictured above) will allow the island electric co-op to reduce expensive diesel generator fuel use by 1.6 million gallons per year. Other utilities are deploying smaller combo systems at the substation level to help grid reliability by controlling voltage and regulating power frequencies when needed.
The above example applications will only grow in the U.S., especially in front of the meter. In fact, the recent “U.S. Energy Storage Monitor Report” issued by GTM Research and the Energy Storage Association noted that 91% of the 71 megawatts (power capacity)/234 megawatt-hours (energy capacity) of systems deployed during the first quarter of 2017 sit in front of the meter. The behind-the-meter residential and commercial segments slipped some during the same period, although these sectors will likely gain more traction as prices decline and state programs like the California Self-Generation Incentive Program (SGIP) open and word spreads about their benefits.
GTM expects the market to increase to 2.6 gigawatts annually by 2022, about a twelvefold increase from 2016. In dollar terms, the sector will be worth more than $3 billion within five years, with California, Hawaii, Texas, Arizona, Massachusetts and New York being the largest state markets.
In future blog posts, we’ll drill down into different storage technologies, take a deeper dive into the specific economic use cases for storage, and discuss the specialized skills and training that are needed for solar installers and EPC firms looking to add storage to their product offering.
