New numbers show solar plus storage technology, on the strength of 20%-plus annual price drops over the last 4 years, is on the verge of turning into a billion dollar market by 2018, Utility Dive just reported.
“This $6 billion energy market is a huge opportunity,” saidClean Coalition Economics & Policy Analysis Director Kenneth Sahm White. “The value proposition is there. The questions are how smoothly the market will open up, how fast it will happen, and who will get the economic benefits.”
Because storage can be used to provideboth energy and capacity value and a range of grid supports and services, Sahm White added, the commercial and industrial (C&I) space is “the optimal place” to market hybrid solar plus storage systems.
Businesses also havemore financial motivation to adopt storage because of higher energy charges and higher demand charges, as well as time-of-use rates and demand response opportunities not typically available to residential customers. And higher usage volumes make them eligible for energy markets that will remunerate them for grid support services.
Credit: Clean Coalition (used with permission)
Capitalizing on these attributes, Sahm White said,
Residential-scale solar plus storage systems do not yet offer high enough returns to drive a market because the cost of batteries remains high,Utility Dive recently reported. But the returns from commercial-scale solar-plus-storage systems are already potentially viable economically.
“Economics is the million dollar question,” explainedSunspec AllianceDevelopment Director Tim Keating.
“C&I is a use case for storage that you can make pencil economically now,” he said. “Where there are high demand charges for peak period electricity use, they can be 15% to 50% of a bill. Storage instantly can chop off those demand charges. And coupled with solar, storage is even a better deal because you can attack the kilowatt-hours.”
“The 25 kilowatt-hour lithium ion batteries are costing about $100,000 deployed,” he said. “But a Nissan LEAF with a24 kilowatt-hour lithium ion battery costs about $35,000. And you get the car.” Standards being established by the SunSpec Alliance will allow stakeholders, including asset owners, utilities, energy exchanges, and financial markets, to share transparent data documenting performance of distributed generation plus storage systems.
“With that data,’ Keating said, “we can attack finance costs. If you can’t price the risk, you can’t finance it at any reasonable cost and if you can’t understand the actuary data or exchange data between partners, you can’t price the risk.”
There is no “compelling” reason for residential uses of storage “because they have net metering and virtual storage in the grid,” Keating explained. But at some point, SunSpec-validateddistributed generation-plus-storage architecture could allow residential fleet operators to aggregate the energy and capacity of small systems, allowing them to bid the services of their fleets in grid operators’ markets.
“It tends to work where distributed generation is economically viable and where customers that have high demand charges also have peaky loads,” he told Utility Dive.
That tends to be C&I customers, Sahm White said. They also often havetime-of-use rates, which is important because C&I energy use profiles are similar to PV generation profiles, whereas residential load leans toward evening hours.
These factors are crucial because they make stored energy at C&I sites a potential way to flattenthe Duck Chart’s mid-morning and late afternoon load shifts that would otherwise require supplemental generation.
Anticipated value of energy storage on CAISO grid in 2020
Solar and storage are coming together at just the right time, Keating said, because in places where the penetration of distributed generation is high like Spain, Germany, Hawaii, and some feeders in California, utilities are beginning to “tap the brakes” on growth. “Solar needs to clean up the gridmess it has made,” Keating quoted a California utility executive.
Storage can help DR providers shave demand peaks and mitigate for overgeneration from rooftop solar
Credit: Clean Coalition (used with permission)
Credit: SunSpec Alliance via the Clean Coalition (used with permission)
“Storage is only economic today in a handful of circumstances but we are at the tip of the iceberg,” Higgins said. “Hundreds of pilot projects are underway. Because they have one-off costs, they are not indicative of what is possible.”
The recentSouthern California Edison (SCE) procurement of five times the energy storage it solicited, he said, “suggests even behind the meter energy storage systems can provide economically-competitive grid services.” It is worth noting that SCE’s procurement included C&I sector or grid-scale storage but no residential storage.
The next opportunities will be storage at C&I locations that help them manage their own demand charges and shifting energy use, allow them tosell capacity into wholesale markets, allow them to help shape the grid’s load, and allow them to take advantage of utility incentives, Higgins believes.
By 2018, he added, storage will be able to help meet EPA Clean Power Plan requirements.
“Utilities everywhere are starting to say energy storage makes sense and paired with distributed resources can be cost effective,” Higgins said. “They are also beginning to recognize it helps optimize the rest of the generation fleet.”