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Published on December 9th, 2015 | by Silvio Marcacci


Falling Costs, Rising Applications Will Boost US Energy Storage Market

December 9th, 2015 by  

The US energy storage industry has already enjoyed its best year ever, with 100 megawatts (MW) of new projects installed through Q3 2015 en route to an estimated 192MW of deployment in 2015, but past is not prologue and the industry is evolving – for the better.

Annual energy storage installations will grow from 51 megawatt hours (MWh) in 2013 to 3,659 MWh by 2020 on the strength of improving economics and policy developments, predicted GTM Research Senior Vice President Shayle Kann at the keynote speech kicking off this week’s US Energy Storage Summit 2015.

US energy storage market 2013 to 2020

US energy storage market 2013 to 2020 chart via GTM Research

Broadly speaking, Kann noted energy storage is the one technology benefitting from “dramatic transformations of the power sector” – decarbonization through the Clean Power Plan, decentralization through distributed energy resources, and vehicular electrification. But while industry growth will be unevenly split across the three individual market segments, Kann predicted new opportunities for them all – depending on how a few key questions are resolved.

Utility-Scale Shifts From PJM To California

This market segment has been almost entirely concentrated in frequency regulation projects across PJM Interconnection, home to 185 MW of operating projects and 86% of all projects deployed in 2015, but Kann expects California to seize momentum based on a 4.1-gigawatt (GW) project pipeline (out of a 5.6 GW total across the US) under development. Kann also noted 616 MW of new projects are under development in Texas and 478 MW are under development within PJM.

US grid scale energy storage pipeline

US grid scale energy storage pipeline chart via GTM Research

However, total installed capacity may not be the metric to judge success in this market segment – watch out for total megawatt-hour (MWh) capacity to judge success, says Kann, who labeled most projects to date “fast acting but low duration.” Average storage discharge duration is currently 30 minutes, but should hit three hours by 2020.

Kann also notes energy storage projects will continue to be valuable for renewable energy at a system-wide level, but will not need to be co-located at the same site as renewable generation assets to provide value to the grid.

Declining Costs Can Catalyze Commercial Projects

The commercial customer market segment is “in an interesting spot,” said Kann. 79% of all activity and development in this segment has happened in California (primarily to alleviate demand charges), with an additional 11% across New York and Hawaii. This geographic concentration is primed to spread out, however, according to Kann.

Commercial energy storage economics

Commercial energy storage economics chart via GTM Research

To understand when energy storage economics will work for a large commercial customer, GTM modeled out state economic projections using a large hospital as an example. Assuming a system able to meet 25% of peak load between 300–400 kilowatt-hours (kWh) with a three-hour duration and a 9% annual cost reduction, GTM estimates 8 states will exceed the 10–20% internal rate of return (IRR) required to make projects economics work by 2020 – California, Delaware, Florida, Hawaii, Massachusetts, Michigan, New Mexico, and New York. Under this scenario, project costs fall from $1,030 per kWh today to $654 in 2020.

2020 energy storage states 9% cost decline

2020 economical energy storage states with 9% cost decline chart via GTM Research

But under a more aggressive outlook where energy storage project costs decline 15% annually, falling from $1,030 per kWh today to $457 in 2020, the states where energy storage will work for commercial customers expand to Arizona, California, Delaware, Florida, Hawaii, Massachusetts, Michigan, New Jersey, New Mexico, New York, and Utah, and Vermont.

2020 energy storage states 15% cost decline

2020 economical energy storage states with 15% cost decline chart via GTM Research

While fast-falling system prices are “a necessity, not a benefit,” said Kann, other economic factors may also accelerate the market. Demand charges proposed by many utilities to balance out rooftop solar’s proliferation, represent a majority of storage system values, but aggregating projects across the grid and improving system performance can also improve project economics.

Backup Power, Net Metering Fights Could Revitalize Residential

This market segment may enjoy most of today’s popular hype (just consider the Tesla Powerwall), but “it’s not a big market relative to the hype,” said Kann. Only 4 MW of residential storage projects have been grid-connected through Q3 2015, but Kann thinks this is a market segment ripe for expansion.

Unlike the utility or commercial markets, residential customers place greater value on backup power, and today’s market is sizeable. 3.5% of all US homes already have backup generators (3.4 million individual units) in a billion-dollar annual market, but just one company serves 70% of this market and almost all units use fossil fuels – making it “ripe for disruption,” according to Kann.

By placing a value on backup, customers may look beyond dollars and cents when considering a residential energy storage project, embodied by Green Mountain Power’s recent Vermont rollout offering Tesla Powerwalls for residential customers — leased for $0 down and $37.50 a month or sold for $6,500. There’s also a middle option where you buy the Powerwall for $6,500 but get a $31.76 credit on your electricity bill each month if you provide Green Mountain Power access to the battery.

But even without placing value on backup, solar net metering policy fights may wind up improving the economics of storage. Kann noted Arizona’s Salt River Project utility territory, where regulators approved a demand charge on rooftop solar customers, as well as potential solar self-consumption decisions in Hawaii and California, to show how solar-plus-storage can make sense where the economics of solar alone don’t work.

If you’re interested in more insight on the US energy storage market, check out the summit’s video live stream.

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About the Author

Silvio is Principal at Marcacci Communications, a full-service clean energy and climate policy public relations company based in Oakland, CA.

  • vensonata

    A bit of a jarring note in the article on the powerwall price “or sold for $6,500” How many times at the announcement did every single media source get the price garbled? Lyndon Rive said that Solar City would install the powerwall for 7,000! This is Musks cousin who should have known better. Others talked about thousands for the installation. Finally Elon Musk himself had to have a private word with Rive not to shoot from the lip. “The cost of the Powerwall 7 kwh model is $3000 to the customer…not the wholesaler”Musk said. Get that straight, retail $3000. And the installation “should be about 400 to 500 dollars”. You would think people could read Musk’s lips! But here we have Green Mountain Power pedaling the battery for $6500! How does this stuff happen? Well, if people don’t inform themselves they will hand over twice the price that the selected sellers (selected by Tesla) have been explicitly contracted to sell this battery for. What is it about battery information, pricing etc that seems to have to go through a meat grinder every single time?

    • Yeah… confusing. Am curious to see the final prices from other sellers. Still just a reservation page on TreeHouse: https://treehouse.co/tesla-powerwall/

      • vensonata

        I think the mystery was cleared up: It includes the solaredge inverter. Now maybe they are in line.

        • eveee

          A 10kw SolarEdge inverter is advertised for about 2k. That makes it 5k plus install. Still 2k short of that 7k estimate.
          But thats misleading. If you are installing solar, you need the inverter anyway. So apples to apples it is not. It really should not include the inverter cost as Tesla intends the PowerWall as an add on to existing solar systems primarily. It all depends on compatibility with existing systems.

          • vensonata

            Ya, I’m with you on the price. Nothing can really rationalize it.

    • Ivor O’Connor

      Nice catch vensonata.

  • Deep Time

    I am definitely interested in storage and backup power is a significant factor in that interest. We lost power for a week during the freak October snowstorm in 2011 and gas was scarce to power our generator.

    Having the peace of mind of battery backup, plus the ability to reduce utility power purchases at night make it a very attractive solution. But cost and reliability/cycle life are important factors to consider.

    • Calamity_Jean

      “I am definitely interested in storage and backup power is a significant factor in that interest.

      (Emphasis mine.) I can’t help but think that this will prove a bigger factor in the residential market than is currently anticipated. Many people who either have generators or are thinking of getting generators are likely to prefer batteries instead, if they are available at a reasonable price and will provide power for an adequate length of time.

  • Adrian

    3 hours avg. discharge by 2020 is nice and will put a big hurt on NG peakers. 6 hours by 2025? will lop the head off the duck curve and make a lot of “medium-speed-ramp” fossil plants uneconomic to operate.

    Bring it!

    • bink

      its more like 4-6hr depending on where you are. But all the peak demand projects we have worked on the demand period is minimum 4 hours

  • kvleeuwen

    Grid-scale batteries are (these days) not at all meant for storage but for surge and frequency control. For these grid services, response time (no ramp-up or spin-down time) and peak power are more important than storage capacity.
    @ivoroconnor:disqus milliwatts?

    • bink

      kvleeuwen, Ivor is notorious for coming up with non-sense. Actually the voltage and frequency control services you refer to would fall into the power application category. Peak power duration (energy) does require 2+ hours of energy capacity. avg is about 4-6hr.

      • Ivor O’Connor

        Ahh, so you are awake this morning but hiding away rather than offering any links to back up anything you say.

    • Ivor O’Connor

      I can barely type.

  • Give me a reason

    I feel funny about a battery price for kWh. Say lithium battery can last for 1000 cycles, and some flow battery can last for 10000 cycles, then we can not compare them just on the basis of their prices for kWh, can we?

    • bink

      then you would use LCOS (levelized cost of system) which accounts for battery cycling and other variables and would be more of a accurate picture.

    • Agreed. Should be using LCOS, even if it’s an estimate (well, it has to be an estimate).

    • eveee

      Thats right. The cost depends on application and technology. If a technology is capable of high cycling rates, it should be cycled more frequently to make best economic advantage. Many applications cycle daily. There are some practical limits to how much cycle life can be increased based on that. Over 20 years, the interest based value of a future payback diminishes. On the other hand, very frequent cycling can happen in applications like hybrids or grid stability. Hybrids charge and discharge often as one uses regenerative braking in stop and go traffic. And grid stability requires storage to smooth out the frequency and voltage variations all day long. Such application may also benefit from a high power to energy ratio, or the ability to charge/discharge quickly. There has been some discussion about using two different terms to describe the initial energy storage capacity cost as $/kwhr-initial and the lifetime energy cost as $/kwhr-lifetime, because they are different. The lifetime cost must take into account the number of cycles. While that will serve to make the terms clear, it doesn’t make the calculations easier. The different applications cycle energy much differently. Utility storage can be for grid stability and regulation. Then charge/discharge is happening often every day. In a peaker application using flow or lithium its happening for a shorter duration once a day. In a solar microgrid, the storage might use flow to last several days. The number of cycles and calendar duration influence the rate energy is stored and that changes the economics. The more frequently storage is used, the faster the payback. The highest cost energy on a cost/kwhr basis is storage is emergency backup, because its hardly ever used.

  • Graphite Gus

    This is a very aggressive forecast. Presumably we have the battery capacity with the Gigafactory. But who are the companies who will sell, install, integrate and maintain this. This is a tall order!

  • Graphite Gus

    yes I`d like to see the battery forecast if they include cars along with stationary storage

  • Ivor O’Connor

    192mW of battery storage in 2015? That’s almost the equivalent of 2,000 Tesla cars in terms of battery capacity. So you could say Tesla, which makes about 1,000 cars a week, is putting out 25x more battery capacity? Thank you Tesla!

    • Frank

      And if they get the mod 3+gigafactory done a lot more people wiĺl be able to get in on the action.

    • Ha. Interesting point. And extra interesting if V2G ever takes off.

      • Ivor O’Connor

        There needs to be a log file of all activity on the batteries before V2G is ever rolled out.

      • Otis11

        But the beauty is you don’t even need V2G – you can create a lot of virtual storage by using the charging demand to shift load. This would free up other utility resources that are currently dedicated to frequency regulation to instead work on power storage.

    • TD1

      “Average storage discharge duration is currently 30 minutes” Taking this as a guide, and with 192 MW (Megawatts power) installed for 2015,

      192 MW x 0.5h = 86 MWh energy capacity.

      Assuming an average Tesla battery capacity as 85 kWh approx., 86 MWh = storage capacity equivalent of about 1,000 Tesla cars. At 1,000 cars/week this is about 1 weeks worth of Tesla’s production.

      60 kWh x 50,000,000 cars/yr = 3 TWh/yr in years to come (conservative figure ?) = 30 TWh over 10 years. Say 50% is usable for 10 years after car retirement, = 15 TWh.

      For the UK a conservative figure might be
      60 kWh x 2,000,000 cars/yr = 120 GWh/yr

      = 1.2 TWh over 10 years, 0.6 TWh usable.

      Assuming a total electricity requirement of 30 TWh/mth in the UK, 0.6 TWh = 14.6 hrs of storage for both domestic and industrial.

      Add to this better efficiency, storage in operating cars, utility battery storage, hydro storage, inter-country connections, biodiesel backup, and even utility energy use restrictions for several days/yr if deemed neccessary, etc., why does another outdated, dangerous, and with ignored cleanup and full waste disposal costs, nuclear power plant have to be built ?

      Nuclear power plants shut down on a GW scale. Utility battery storage will have lower grid loses, be more reliable, and can be arranged to shut down by <100 MW at a time. Distributed battery storage may have a negligible total shutdown rate by comparison.

      By the time it is finally switched on, enough of the above can, and quite possibly will, be in place to make another nuclear power plant obsolete from the start.

      • Ivor O’Connor

        why does another outdated, dangerous, and with ignored cleanup and full waste disposal costs, nuclear power plant have to be built [in the UK]?

        Because Amber Rudd, the UK’s Secretary of State for Energy, has a brother that is going to become rich, Rich, Super Rich, by building the nuclear power plants there. Whenever you see a big power plant, whether nuclear or fossil fuel, look for a politician and then follow the money.

        • TD1

          Batteries allow the time shifting of energy. If the EV revolution goes ahead on the scales anticipated, and batteries retired from cars are used as envisaged, it will be possible to greatly extend the rollout of variable supply lowcost renewable energy sources.

          It would be sadly ironic if this capability ends up being used to time shift expensive nuclear energy from a new fleet of plants instead, a method that would result in greater costs, taxes, and profits for a few.

          • Ivor O’Connor

            I can imagine all power plants using batteries. If a power plant requires H hours to ramp up to 100% of the Max M output and in that time they lose P power (P <=M*H) then if the batteries were free they'd want a battery pack capable of P or more. It would make power management very easy for them.

            I think my musings are far too simple and I can think of many more variables but in the end batteries do make a lot of sense. I think this sadly ironic capability will come to pass before we can phase out all the FF and Nuclear plants.

      • Larry

        Power grid engineers are a lazy and slow learning lot. They understand one method and woe to anyone who suggests there is a better alternative than the one and only they are comfortable with

    • eveee

      Yes, thats pretty low compared to Tesla auto output equivalent. Looks like 164MHhr energy from the graph. The other figure is 192MW power. Tesla has orders for about 625 million worth of PowerBlocks at about $250/kwhr, and that comes out to about 2.5 million kwhr or 2,500 MWhr. Thats a large chunk of the 3,600 or so MWhr predicted by 2020 if they are taking that into account. IMO, its underestimated. If Tesla has that much demand and can’t fill it, the market is wide open and limited by production capacity, not demand.

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