Where the energy storage expansion will happen first and why

Where the energy storage expansion will happen first and why

People who watch the energy storage market say they now know where and how it will break out commercially.

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," said Clean 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 provide both 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.

Why C&I works for storage

C&I sites offer larger rooftop spaces that can host larger systems that generate more energy at a lower overall cost. They are often closer to the grid and within robust feeder systems designed to manage large loads. Their large daytime demand load profiles more closely match solar output than residential sites.

Businesses also have more 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.

Capitalizing on these attributes, Sahm White said, utilities and grid operators can capture energy and capacity that would allow them to optimize their systems.

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, explained Sunspec Alliance Development 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.

Coming industry storage standards

For other uses of storage, the key to the economics is volume, and volume comes when an industry establishes standards, Keating said. The community energy storage now being tested in pilot programs by some utilities is an example.

The 25 kilowatt-hour lithium ion batteries are costing about $100,000 deployed," he said. "But a Nissan LEAF with a 24 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 cant price the risk, you cant finance it at any reasonable cost and if you cant understand the actuary data or exchange data between partners, you cant 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-validated distributed 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.

Source: Utility Dive

SMART GRID Bulletin March 2018

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