The economics behind commercial energy storage options are growing in popularity, according to new figures from GTM Research, and are set to be increasingly attractive in the coming years.
A new report from GTM Research, The Economics of Commercial Energy Storage in the US, analyzed rate structure across 51 utilities across the United States, assessing the opportunity for demand charge management for commercial storage customers. Demand charge management is the use of batteries to charge on electricity during low-demand, and therefore low-price periods, so that consumers can discharge the battery, or use its contents, in high-demand, high-cost periods.
According to the research, the resulting figures shows commercial energy storage economics are currently attractive in seven US states, and are expected to increase in attractiveness over the next five years to 19 states.
“In this report, we wanted to provide an outlook for demand-charge-based economics of commercial storage, treating storage as a one-trick pony,” said Ravi Manghani, GTM Research’s director of energy storage and lead author of the report. “In reality, policy and market structures are evolving to help storage owners capitalize on other value streams as well. Effectively, this analysis should be viewed as the floor for commercial storage potential. The results establishing attractive economics in over a third of the states by 2021 is a promising sign for the future of commercial storage in the US.”
Commercial energy storage in the United States grew fourteen-fold between 2013 and 2015, the fastest segment of the US energy storage market — however, given the fact that the original install base was relatively small, any growth is big growth. GTM Research found that adoption is still relatively small, and localized, limited to a small handful of states across the US.
However, as storage costs decline, adoption continues to grow.
The new report modeled the internal rate of return for 1-hour and 2-hour storage systems for both small- and medium-sized, and large commercial customer segments. Demand charge rates of at least $15 per kW per month are required for favorable economics, but this will drop to as low as $11 per kW per month by 2021.
The report concluded that large commercial customers in 17 US states will have an internal rate of return of 5% or higher. Small- and medium-sized systems will be economically attractive in 14 states.