U.S. solar-panel manufacturers might be hurting these days, but installers’ business is going gangbusters. In 2011, more than 1,800 megawatts (MW) of utility, commercial and residential capacity were installed, according to the Solar Energy Industry Association (SEIA), more than doubling 2010’s record figure of 877 MW. The Solar Electric Power Association says 89 percent of 2011’s installations were in the residential market. Increasingly, utilities are wondering what to do with all the electricity generated by this intermittent and distributed resource. Battery-based energy storage is one option utilities—and battery makers—are beginning to explore more seriously.

Battery-based energy storage is important to consider because the solar industry is on target this year to exceed 2011’s installation figures. The SEIA said more than 500 MW of new capacity were installed in just the first quarter of 2012. While an individual homeowner’s system has little effect on the grid, entire neighborhoods powering up on photovoltaic (PV) panels can really make a difference. Soon, parts of California will feel such effects. For example, beginning in 2014, California will require new residential roofs to be “solar ready.” In such scenarios, passing clouds could create localized grid-balancing problems, while utilities still will have to plan capacity to demand targets that often peak after the sun’s most productive rays have passed below the horizon.

Batteries already are beginning to show up at the utility scale. Arlington, Va.-based utility AES has 32 MW of battery storage attached to its sister company’s Laurel Mountain, W.Va., wind farm to help buffer grid variations. And Columbus, Ohio-based AEP currently is testing community-scale batteries with each 25-kilowatt battery providing backup for two or three homes. Now, though, companies, such as installation-sales leader SolarCity, are starting to offer residential-scale systems that could allow homeowners to operate independent of the grid, even when the sun is not shining.

“That’s going to be [a] huge growth sector,” said Katherine Hamilton, policy director for the Electricity Storage Association (ESA), an industry group composed of manufacturers, electric utilities and independent power producers interested in energy-storage technology. “Batteries are becoming much less expensive, and the solar folks see energy storage as a great collaborative opportunity.”

Japan and Germany are already taking the idea seriously. Both countries have large portfolios of rooftop PV installations and are trying to cut grid-tied demand as they seek to reduce dependence on nuclear power in the wake of the Fukushima nuclear disaster.

In Germany, the increasing number of distributed solar installations has utility managers concerned about grid stability, so the government has begun reducing the percentage of electricity each installation produces that is eligible for the country’s generous feed-in tariffs. The hope is that owners will be encouraged to use more of that output to supply their own electricity needs. Panasonic is going after that market with a new energy-storage package introduced this summer, complete with an energy management unit and inverter and, of course, a lithium-ion battery pack.

Lithium-ion batteries are the variety used in electric vehicles (EVs), which makes them an ideal match with SolarCity’s PV-panel systems. Based in San Mateo, Calif., this company has begun offering residential-scale systems pairing its solar panels with batteries manufactured by high-end EV manufacturer Tesla Motors. (SolarCity’s chairman is Elon Musk, Tesla’s CEO and chairman.)

ESA’s Hamilton sees strong synergies between the EV and what some are beginning to call the “own-use” battery-connected solar market, especially with lithium-ion technology becoming the favored approach for energy-storage applications. Both applications are in the startup stage (with vehicles obviously much further along); when combined, the sales potential may help boost investors’ confidence.

“The whole issue with any new technology is how do you create an equity market,” Hamilton said, noting the added incentives tax credits and other government boosts provide. “The industry has just started to enter into the policy discussions.”

An important point in the conversation of how residential-scale energy storage might develop in the United States is knowing who will use the stored energy. Again, market-leader SolarCity could play a big role in the answer, and the result might be unexpected.

In Europe and Japan, grid operators hope widespread PV/storage combos owned by homeowners will help remove household-sized loads from the utility system. SolarCity’s business model, however, is more about leasing a homeowner’s rooftop—with the benefit of guaranteed lower priced electricity—and selling the resulting electricity and the related renewable energy credits itself, to turn a profit. In this scenario, SolarCity could become an aggregator—a kind of independent power marketer—drawing on a network of installed, solar-charged batteries. System operators now are turning to such unconventional suppliers as they bid for the ancillary-service supplies that help balance larger grid operations.

Hamilton anticipates that, however the market develops, it will do so rapidly.

“I think it’s really going to happen, as long as the states and utilities are able to structure the tariffs,” she said.


ROSS is a freelance writer located in Brewster, Mass. He can be reached at chuck@chuck-ross.com.