In the 1967 film “The Graduate,” Mr. McGuire gives young Benjamin Braddock the famous one-word piece of advice, “plastics.” Today he might well say “batteries.” The overall market for battery-based energy storage doubled in 2018 and is expected to do so again in 2019. Sales of home-based systems are growing even faster and actually quadrupled in 2018. Increasingly, homeowners, utilities and state regulators all have begun to see value in using electricity generated by rooftop solar panels in the home rather than shipping it onto the grid.
The sales figures come from the U.S. Energy Storage Monitor 2018 Year-in-Review published by the Energy Storage Association and Wood Mackenzie Power & Renewables. While the report notes falling battery costs certainly aid this growth, buyers also are motivated by severe-weather events that seem to be occurring with more frequency and force. These consumers see the combination of solar-plus-storage as a way to keep their homes up and running, even in the face of indefinite utility outages.
Additionally, some utilities have begun exploring options for aggregating the output of home batteries to act as wires-free virtual power plants. Last year, the Federal Energy Regulatory Commission (FERC) ordered regional grid operators to allow storage owners to participate in their electricity markets. Those rules are still being developed, though pilot efforts have begun in a few states. These new markets, along with costs that are expected to fall by approximately 10 percent each year between now and 2024, could turn battery systems into a standard add-on for many new rooftop solar installations.
Brett Simon, senior analyst with Wood Mackenzie and one of the report’s authors, said the value proposition for residential storage varies by region. In some areas, such as California, Hawaii and Arizona, utilities are shifting customers to time-of-use plans. These programs feature lower rates during daytime hours when rooftop-solar production is high and raise rates during late afternoon/early evening periods when rooftop solar production declines.
“Solar sees a bit of a decrease in its value with these rates, plus it’s the lowest rates you’re offsetting” with solar panels, alone, Simon said.
Similarly, rollbacks in net-metering programs that incentivized rooftop panels by paying customers retail rates for the electricity they produced also are changing the economics of solar- only installations.
“As that compensation is reduced or rolled back, customers see value in a storage system,” he said.
In other areas, such as the hurricane-prone Atlantic Coast, being able to keep homes powered during storm-related outages without the need to keep a generator supplied with diesel or natural gas has become a big motivator, Simon said. As an indicator of how important this market is becoming, in April, home-generator manufacturer Generac purchased Pika Energy, an up-and-coming battery-system company. In February, Royal Dutch Shell, the world’s second biggest oil and gas company, bought Sonnen, a German storage-system leader that is making big inroads into the U.S. market. In addition to batteries, the company has developed a residential energy-management platform called ecoLinx that can be integrated with Eaton’s smart breakers to give homeowners remote, circuit-level control of their homes’ electrical systems.
On the cutting edge, utilities and their regulators also are beginning to see residential battery systems as a way to improve grid resilience and reliability without the need for new substations or other “wired” investments. In one of the earliest implementations of the new FERC rules enabling storage participation in regional energy markets, solar and storage company Sunrun successfully bid into the Massachusetts 2022 forward capacity market. The plan, approved in February, will use the aggregated output of the approximately 5,000 customer-sited battery systems it plans to install in the state between now and 2022 to support electricity demand during peak periods. In this auction, the battery company was competing against such conventional generating resources as natural gas plants and hydropower.
Sunrun has 240,000 customers across 22 states, the District of Columbia and Puerto Rico. It has made a big move into pairing battery systems with its rooftop solar panels as it has seen demand drivers develop. Hawaii was the company’s entry point for storage. That state has struggled to integrate rooftop solar into its five island-based grids, and customer-sited batteries enable residents to self-supply more of their own electricity. Similarly, California will soon move more electricity customers to time-of-use rates that will encourage residents to use less grid-supplied power during evening hours.
“The brilliant thing about storage is you can do time of use or demand response in the house with zero impact on the people living in the home,” said Chris Rauscher, Sunrun’s director of policy and storage market strategy. These same advantages exist, he added, during storm-related outages. “Certainly, a lot of people also are going to storage to have peace of mind if the grid goes down.”
As with rooftop solar panels, consumers have options for financing their storage systems beyond outright purchase. Sunrun is a champion of leasing arrangements for both its solar panels and its Brightbox battery systems, in which the company retains system ownership and customers pay a fixed monthly rate for the electricity it produces. Depending on state regulations, it also has a power purchase agreement (PPA) option, under which customers pay a fixed per-kilowatt-hour rate for the electricity they use during a month.
“That third-party model helped to scale solar, and now the same thing is true with batteries,” Rauscher said.
He added that, as more states allow aggregated storage to participate in electricity markets, leases and PPAs could provide customers the additional advantage of having someone else handle the complexities of power marketing.
“They need a guide to facilitate that for them,” he said. “We see [these arrangements] having enduring value for people and the grid.”
Sonnen doesn’t offer a leasing or PPA option for its eco and ecoLinx products. It has been building its U.S. market presence through partnerships with housing developers, making headlines in 2017 with its announced agreement with Arizona developer Mandalay Homes. The Jasper planned development in Prescott Valley, Ariz., will include 2,900 homes with a total of almost 23 megawatt-hours of storage capacity. Using Sonnen’s SonnenCommunity networking technology, the battery systems will work together to make the entire development virtually invisible to the local Arizona Public Service grid during peak periods. The utility developed a special rate just for the development’s residents to incentivize this load shifting.
The company also is working to expand solar-plus-storage options for renters as well as buyers with a 720-unit apartment development now in planning stages in Cortez, Fla.
“We look at the end-user as not just being a homeowner,” said Ani Backa, the company’s U.S. director for regulatory strategy and utility initiatives, adding that the company also recently installed its systems in a 14-home affordable housing project in Vermont. “We have a lot of attention and focus on the low- and middle-income base.”
As storage adoption picks up, utilities are becoming more open to the idea of customers using their own solar-generated electricity themselves. But they also have questions regarding how such operations would work and how well the batteries will perform over time.
One such utility, the Salt River Project (SRP), which serves the Phoenix metropolitan area, has contracted with the National Renewable Energy Laboratory (NREL) to study these questions. SRP has begun a battery-installation incentive program for up to 4,500 residential customers, and NREL will be gathering data from approximately 10 percent of those systems. The laboratory will use the high-performance computing capacity of its Energy Systems Integration Facility to analyze use and performance characteristics.
“The intent of this research collaboration is not to compare different manufacturers, but rather to help SRP understand the benefits of these assets to customers, as well as how they may affect the grid,” said Adarsh Nagarajan, group manager of power system design and planning at NREL’s Power Systems Engineering Center. “This leads to the most important research topics: How do utility rate structures impact customer behavior? How does customer behavior affect grid operations and planning? And what is the correlation between battery use and battery life?”
And the electrical contractors who will be called on to install these systems likely have their own questions, as well. Adam Gentner, a Sonnen senior director, said battery manufacturers are the ones now answering most of those queries.
“Most battery companies are going to offer a training course. It depends on what system you’re using,” he said. One major difference between battery makers is how the systems connect to a rooftop solar installation and a home’s main electrical panel. For example, Sonnen’s batteries offer a direct connection to the main panel but require a separate inverter to enable a rooftop solar power system to charge the batteries. Other designs share a hybrid inverter with a connected solar array to connect with a home’s main panel.
Additionally, ECs will need to guide potential customers through the product-selection process, especially questions regarding battery size, said Michelle Mapel, Sonnen’s director of sales and marketing. “We spend a lot of time with a customer, asking, ‘What are you trying to back up and for how long?’”
Sunrun’s Rauscher suggests local permitting authorities also are in need of some education. Their unfamiliarity with how battery systems should be installed is beginning to affect overall affordability.
“Increasingly, it’s the soft costs that are taking up space in the stack,” he said, speaking of the price of everything beyond the basic equipment. “A lot of that is in permitting. There’s just such a wide variety of authorities having jurisdiction. As this scales up, one thing we’re really focusing on is driving down the costs of permitting.”
Home battery systems are certainly picking up steam, and with that, even more companies will develop and expand programs for the homeowner. With the impressive options available now, and many more on the horizon, there is certainly a great future in batteries.