It seems like, every other week, a leading research lab announces a breakthrough technology to make batteries more powerful, more durable or a whole lot less expensive—after just a few more years of research and development. The technologies are intriguing, but the just-around-the-corner aspect of these announcements could lead one to think that we’re stuck in a holding pattern when it comes to energy storage. Nothing could be further from the truth. In fact, a combination of technology and market trends is making on-site battery systems both feasible and financially attractive.


Tech tracking company Navigant Research groups these products under the broad category of “advanced batteries,” which it defines as rechargeable batteries with a chemistry no more than 20 years old. Navigant reported that, in 2012, manufacturers shipped a total of 26.7 gigawatt-hours (GWh) of advanced battery storage capacity—primarily in lithium-ion batteries. While consumer electronics made up 82 percent of that figure, it also included more than 196 megawatt-hours (MWh) of battery capacity intended for stationary-storage projects.


The stationary storage market is growing quickly, especially as distributed generation—including hundreds of megawatts-worth of rooftop solar photovoltaic (PV) panels—is added to utility grids every year. Navigant has estimated the installed capacity of energy storage just to ease the integration of solar and wind energy will hit 21.8 gigawatts (GW) by 2023. GTM Research is equally bullish, estimating that 720 megawatts (MW) of distributed energy storage will be deployed in the United States between 2014 and 2020, representing a 34 percent cumulative annual growth rate.


Energy storage includes a range of technologies, including pumped water, flywheels and compressed air—all ways in which energy can be stored for later use. But batteries are the technology in the spotlight these days. And while large utility-scale installations intended to help support distribution voltages—among other purposes—have garnered more trade press, a larger number of installations are taking place in commercial settings.


“I think that often people equate energy storage with some of the utility scale [projects],” said Matt Roberts, executive director, the Energy Storage Association. “But commercial/industrial is a larger market currently than ancillary services for the grid.”


New electricity-market conditions are helping to drive interest in this new generation of on-site power, Roberts said, though he cautioned that batteries aren’t the best option for the kind of backup requirements hospitals or factories may need to ensure continuity of their operations in the case of a grid outage.


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“You’re not going to be able to provide 24 hours for a large industrial facility,” he said. 


Instead, today’s battery-system installations are being used as a short-term electricity resource for the few hours in a day when prices are at their highest, thanks to software that can communicate with utility pricing signals to determine optimum savings opportunities. 


“They’re able to do peak offset all in one comprehensive system, and you won’t necessarily get all that from a generator,” Roberts said.


Savings possibilities expand even further when batteries and their on-board intelligence are paired with solar generation equipment. SolarCity, the largest residential solar installation company and a leader on the commercial front, recently recognized these opportunities in a new product launch. In qualifying installations, it has begun pairing a battery-based on-site energy-storage system with new solar installations. Customers won’t own the system, which is called DemandLogic. Instead, similar to the way the company leases many of its solar installations, it will offer the storage as a service for customers seeking to lower the charges utilities tack onto large customers’ bills that represent the peak amount of electricity those customers require be available throughout the year.


“We’re using it specifically to address high demand charges, especially the energy consumed between 4 p.m. and 8 p.m.,” said Chris Tan, a product marketing senior manager with the San Mateo, Calif.-based company. 


In this way, customers who may be using rooftop PV to reduce afternoon electricity bills will be able to shift some of their load to the battery system when solar-generated electricity begins to wane. The switch from PV to battery is done automatically, controlled by software that can balance diminishing PV output against current and predicted load and utility pricing signals. 


“It’s constantly learning. It’s updating its algorithms based on the actual conditions of the customer’s load profile,” Tan said.


While SolarCity is no stranger to battery technology—the company has close management ties to the electric-vehicle manufacturer Tesla and is using that company’s patented batteries—it is the software that makes DemandLogic a compelling offering. 


Similarly, Rockville, Md.-based Greensmith Energy Management Systems has built its entire business model on “battery-agnostic” operating systems that work with any manufacturer’s batteries. They deliver turnkey systems with a modular design that allows easy battery upgrades while maintaining advanced software controls.


Like many PV installations, these on-site battery systems still are expensive enough to require utility or state-government incentives to make financial sense, so SolarCity is concentrating on regions of California, Connecticut and Massachusetts where local utilities are seeking new ways to reduce peak demand on their systems. And, the DemandLogic qualification form on the company’s website asks two very straightforward questions: Does your company spend more than $5,000 per month on electricity? And do you have more than 50,000 square feet of usable space for solar?


Both are important questions for SolarCity because, with DemandLogic, SolarCity retains ownership of the systems, selling electricity to the property owner and applies solar renewable-energy credits to its customer’s rates so they benefit from the incentive discount. This arrangement is also why the company is only offering DemandLogic as an add-on to new PV installations. When both components are installed together, the combined system is considered a solar-power system eligible for investment credits. This isn’t the case when storage is added to existing solar sites.


Bridging the gap between residential and solar settings, the energy conglomerate NRG is incorporating a storage option in its new modular solar canopy product, just launched in October. Customers have a range of finish choices that can turn the freestanding canopy into anything from a poolside patio shelter to a commercial carport. 


“Pricing is comparable to rooftop systems, depending on the model, region and other site-dependent features,” said Jeff Holland, NRG Solar spokesperson. “And it provides the added benefit of expanded outdoor living space for an additional nominal fee.”


Sold as pre-engineered kits in four configurations, the canopies can operate as grid-tied units without any battery storage or function grid-free, with or without battery storage as a backup. NRG is establishing a network of solar installation companies to work as channel partners for bringing the product to market.


However, residential-scale storage remains a niche product, largely because the economics don’t yet match solar panels for homeowners looking for a simple return on their investment. 


“Right now, it’s definitely an early adopter [market],” Roberts said, though he sees signs that this could change. “I think the prices have room to come down. As you see energy prices continue to rise, the value equation makes storage more and more appealing.”


SolarCity has begun exploring home-sized battery systems with a pilot program sponsored by California’s three investor-owned utilities. Tan said that, unlike commercial systems, these installations are being used for backup power, instead of peak shifting, because these customers don’t face the same demand charges as businesses and institutions. However, as with DemandLogic, SolarCity retains ownership of the storage and sells the backup capability as a service, with 10-year contracts. Currently, though, only California offers incentives for residential storage.


“We’re seeing that change rapidly,” Tan said. “So we’re thinking that market might open up.”