Sizing Up the Residential Energy Storage Opportunity

Energy Storage for Homes, Residential Solar Arrays

When considering present opportunities in the residential energy storage market, we need to ask ourselves two things: 1. Is it viable and 2. Is it adoptable; perhaps not in that order, though. Residential energy storage viability has a lot of aspects to it, both in categories and to whom it applies. There’s financial viability and functional viability to name the top two, and the players range from technology mind smiths to manufacturers to retailers (likely to be utilities or utility/producer partnerships, and power purchasing agreement providers) to end-users whose sense of viability is the foundation of adoptability. With adoptability, what we’re looking at is the public’s current and potential willingness to embrace the technology, not to mention prospective sellers’ interpretation of this market segment’s interest level, which could prompt or discourage them to get the word and product out there.

Putting aside industry-wide speculation and the assumptions of the interested public (that energy storage is simply the key to all our energy problems), let’s look at some direct applications that show us where community and residential energy storage (CRES) is succeeding right now and how it spotlights growth potential.

Earlier this month, we saw Panasonic Corp. beginning mass-production of a compact lithium-ion (Li-ion) battery storage system for the European residential market. This kilowatt scale battery production comes in addition to the company’s recent move to increase investing in development of large-scale energy storage, namely with a largely publicized partnership with Siemens. Answering the question “Why now?” we can address both questions of viability and adoptability in the market.

In countries across Europe, motivated to reduce energy costs and by increasing government pricing incentives, there is a greater and growing movement among residents to adopt rooftop solar. Panasonic is simply pursuing an opportunity in the market to provide complementary technology to home PV adopters, particularly after piloting a successful program in partnership with the German engineering firm E3/DC to install battery storage systems in households in Germany (Panasonic supplied the Li-ion batteries for E3/DC’s systems). Here, market opportunity is demonstrated in consumers’ investments in both on-site renewable technology and the complementary storage tech that optimizes their investments.

In Korea, $64.5 billion of cleantech monies are being invested between 2009 and 2013 on Jeju Island in what is expected to become the world’s largest Smart Grid community. The investment naturally includes advanced CRES technologies, research and development to greater innovate solutions, and concentrated development of business models needed to help make energy storage successful in small-scale markets.

On this side of the pond, there have been a number of programs piloted to test and then scale residential battery energy storage adoption in recent months. Late last year, the California Utility Commission awarded $14.6 million to CRES research and development, including $1.8M to residential photovoltaic company SolarCity to research the feasibility of storing electricity generated by rooftop solar arrays in batteries provided by Tesla. Similar research and community pilot programs have sprung up across the U.S.

Taking a look at how a CRES system works (indeed how residential battery systems work in general) we can speak to the question of functional viability – of course they work, and well. The battery management system (BMS) controls charge and discharge of the energy stored in the battery depending on the resident’s needs per their power usage. Here’s the quick 1 – 2 of domestic energy storage charge/discharge function:

  1. The battery system stores excess, i.e. unused, energy generated from the household’s rooftop PV system during strong daylight hours, energy that would otherwise in most cases be transferred back to the grid. 
  2. Later, when the PV system is no longer receiving solar rays, but when the home requires more energy for lighting, among other things, the system signals to retrieve the reserve energy stored in the battery system vs. acquiring it from power line connections, i.e. the grid.

Two other ways it “works” or rather, two big benefits of residential energy storage, are load reduction during peak hours, i.e. by routing excess energy to the BMS instead of the grid (this means grid systems are not taxed with intermittent and unknown/unexpected surges of energy) and cost savings as seen on consumer electricity bills (consumers save money in both uptake and downtake fees from their local utility). Basically, the systems reduce stress on both sides, promoting energy independence. This also carries obvious environmental benefits inherent in using renewable energy over conventional fossil fuels (reduced CO2 pollution, less depletion of natural resources, etc.), but with a boost in efficiency, i.e. less electrons lost in the process.

In and of itself, of course, BMS technology for domestic use does nothing. It requires pairing with an energy source (not exclusively renewable), so questions of viability and adoptability require keeping an eye on how well installed energy solutions, primarily rooftop solar, are being embraced by consumers in thought and deed. While a small number of residents, much like larger-scale commercial energy storage users, may adopt battery storage technology to optimize off-peak grid-based energy purchasing (electricity is generally cheaper when there is less need and more local production, and where the region allows peak-based pricing), the return on investment is poor in light of the minute differences of energy costs as viewed on the domestic scale, and where it is even an option. This leaves residential energy storage to be primarily, if not exclusively, a complementary technology paired with on-site renewables.

So, as far as keeping an eye on installed energy solutions to gauge viability and adoptability of home BMS, let’s check in and see how the residential renewable market is fairing. Here’s a look by the numbers for solar, by far the leading renewable technology used in homes today:

  • The solar market jumped 67% to $6 million in 2010, up from $3.6M in 2009 and growth has continued through 2011 and now into 2012
  • Q1 2012 showed residential installation growth of 12% quarter/quarter and 31% year/year (notably, that’s four quarters in a row of steady residential solar install growth in the US)
  • The residential solar market has had the most steady, least volatile growth of all the solar market segments (though naturally, this market is the smallest among categories that include much larger commercial and grid-scale installation)
  • The size of home solar installations has increased in recent years (some reporting that home array sizes have doubled to an average of 6 kW)
  • Costs of installed residential solar fell 7.3% from 2011 to 2012 increasing affordability
  • 16 different companies now offer solar lease options to homeowners
  • A survey of 72,000 homes sold between 2009 and 2011 in California showed an average premium of $17,000 per sale for those averaging 3.1 KW and two years old

Many of these solar industry insights can be found via Solar Energy Industries Association and particularly in the 2012 Q1 Solar Markets Insight Report (Executive Summary).

Pike Research forecasts the growth of installed capacity for community and residential energy storage will take the just-shy-of double-digit MW figures of 2012 all the way to 800 MW in 2021. Considering most home BMS support a range of 1 – 10 KW, that’s an estimated growth of between 2,000 and 9,000 homes this year to between 50,000 and 700,000 homes in the next ten years, and Pike confesses these figures to be very conservative.

If you are a homeowner interested in purchasing battery storage to work with your current or planned solar array, NREL (National Renewable Energy Laboratory) has a handy two-page PDF on user-end battery basics called Battery Power for Your Residential Solar Electric System.

If you are a residential developer, PPA provider or solar leasing company, or community organization interested in discussing lithium-ion battery storage options for your homes and the homes of your clients, contact BeVault and we’ll talk you through your options, answer any questions you have, and help you design a solution that optimizes onsite solar investment. 

Predicting the Fate of the Energy Storage Act, Third Time’s the Charm

Poised to be the biggest growth year for the energy storage industry, 2012 will build upon a number of promising technological, investment and legislative advancements that moved the market forward in 2011. A key player in the immediate future of the energy storage market is the Senate’s Storage Act of 2011 (along with its counterpart, the House’s newly-introduced Storage Act of 2012).

The Storage Act of 2011 (aka the Storage Technology for Renewable and Green Energy Act of 2011) is a bill to amend the Internal Revenue Code of 1986 that would provide for an energy investment credit for energy storage property connected to the grid, among other purposes. Currently the legislation does not consider energy storage as a stand-alone technology available for the credit, but the Storage Act of 2011 would change all that. The bill would make the Business Energy Investment Tax Credit (ITC) of up to 30% available for commercial and residential energy storage installation. As we’ve seen with the significant growth of renewable energy since the ITC was first provided in 2005 (and greatly expanded in 2008), this credit can make an big difference in moving energy storage from a minor to a major player across the U.S. energy system.

The Storage Act is currently sponsored by SenRon Wyden [D-OR], also the bill’s sponsor in 2010. This bill was first introduced in 2009, sponsored by SenJeff Bingaman [D-NM], and has been reintroduced twice. The current iteration of the bill was introduced in November, 2011 and was sent to the Senate Committee onFinance where it now sits for deliberation, investigation, and revision before the committee reports and sends the bill for general debate.

Obviously (and unfortunately), past versions of the bill never made it out of committee, but this time around could be different. Many of us think that the third time could indeed be the charm. A few reasons why we very well could see a different outcome this time around:

California’s Followed Example

The California SGIP (Self Generation Incentive Program) was amended in 2011 to recognize energy storage as a stand-alone technology, similar to what is being proposed in the Storage Act, incentivizing energy storage installation. We’ve seen federal regulation follow California’s lead before. For example, the introduction and installation of the federal ITC came on the heels of several years of the California Energy Commission’s Emerging Renewables Program, which funded and incentivized growth in renewable energy development.

DOE’s Innovative Push

The U.S. Department of Energy is launching a new Energy Innovation Hub focused on advanced batteries and energy storage in 2012 with $20 million in funding and a promise of up to $120 over five years. The DOE Energy Innovation Hubs are large multidisciplinary, multi-investigator, multi-institutional integrated research centers.  According to energy.gov, the new hub “should foster new energy storage designs and develop working, scalable prototype devices that demonstrate radically new approaches for electrochemical storage, overcoming current manufacturing limitations through innovation to reduce complexity and cost.”  U.S. legislators have an opportunity to pave the way for wide-scale, real-life utilization of current energy storage innovations and those that are expected to come out of the DOE Hub in the future.

President Obama’s Funding Proposal

The Presidents Fiscal Year 2013 budget request for the Department of Energy provides a strong directive from the executive branch to focus tax payer money in areas that the President and Energy Secretary Steven Chu believe will provide the greatest benefit over time. These benefits include energy independence, U.S.-based technological innovation, and jobs. The budget request includes $60 million to “perform critical research on energy storage systems and devise new approaches for battery storage”, the first inclusion of its kind for energy storage.

2011 Banner Investment Year

Energy storage markets saw a huge influx of investment capital in 2011 with an increase of 253% from 2010 to $932.6 million in 2011 in the U.S. alone. Sometimes legislation is pre-emptive in promoting markets, but it seems more often we see legislation coming behind commercial interest and following suite. If this is the case in this instance, this is definitely the time.

Demand for Green Jobs

The demand for jobs and the promise of cleantech development to deliver is ever alive and thriving. Though no hard figures have been offered up for how many thousands or tens of thousands of jobs could be created via energy storage advancement alone, we do know that the energy storage market has already begun to surpass previous growth expectation of 15.8% annually (leading to a market worth of $10 billion by 2015, as reported by SBI Energy in 2010 and with commercial building installations alone poised to reach the $6 million range according to a 2011 study by Pike Research). Not only will the industry itself sharply increase employment opportunities for technological, manual and administrative workers, but in light of the way energy storage supports renewable energy growth, the jobs that would be indirectly created in the solar and wind sectors especially exponentially increase this prospect. Our U.S. legislators must know that the boost to the country’s ailing economy would be a boon to us and to them in a re-election year.

Assuming the fate of the bill is a positive, living one, it will be off to the Senate for a vote later this year, subsequently to Congress for the same, then up to the White House for President Obama’s signature before the close of the 2012 session. Here’s hoping the committee sees it as we do and feels the pull of the law of threes emphasized all the more by an amazingly supportive national and international movement in energy storage innovative and application.

You can follow the progress of the bill through govtrack.us updates for S. 1845: STORAGE 2011 Act, and learn more about the members of the Senate FinanceCommittee.

Top 3 Success Indicators for the Energy Storage Market in 2011

Three Buildings, Energy Storage Success Indicators2011 was certainly a standout year for energy storage. A key indicator of an increasingly supportive international environment for the space was the tremendous growth seen in investment capital worldwide. According to Ernst & Young, U.S. energy storage investment alone rose 253% from 2010 to $932.6 million in 2011. In fact, energy storage led all cleantech investment sectors in Q3 with $524 million in VC injections. This came as awareness of not only the vast array of beneficial applications of energy storage grew, but also as the cost of previously cost-prohibitive technologies continued to fall into attainable range for wide-scale production and application.

Energy storage saw boons in legislative support as well, as policies were introduced and passed to support its development and application, adding to commercial and investor awareness alike. This is certainly smoothing the way towards great increases in research capital and sector growth.

Most notable of policy support was the introduction of the Storage Technology of Renewable and Green Energy Act  (STORAGE) by Senators Wyden, Collins, Bingaman which would recognize energy storage as a stand-alone technology, the spectrum of which would therefore be eligible for rebates similar to those given for renewable energy installation via the ITC (investment tax credit). This would mean that businesses and homeowners alike would be eligible to recoup up to 30% of storage project costs, including those for batteries and other storage technologies.

Another much-talked-about impact to the regulatory environment came with an important amendment to the California SGIP (Self Generation Incentive Program). The program, which has offered incentives for various energy-related cleantech in the state since 2001, previously incentivized energy storage only if it was directly connected to a renewable energy project. The amendments made last year, like that of the Storage Act of 2011, include updating the program’s view of energy storage to that of a stand-alone technology eligible for incentive independent of the energy source it is connected to. It should be noted that, like in much of the SGIP, this incentive favors end-user vs. utility-level implementation.

These three key indicators of energy storage sector momentum; 253% growth in investment, introduction of the Storage Act of 2011, and amendment of the CA SGIP, speaks volumes to the propulsion of energy storage into key playing position in the international energy community and related business and investment communities that stand to benefit from it’s growth.