How Renewable Portfolio Standards Push Energy Storage Growth

BeVault Energy Storage and RPS, Renewable Portfolio Standards Blog PostBattery Energy Storage is in the news, all over renewable energy commentary sites, and on the minds of investors the world over (not to mention sitting in both the U.S. House and Senate in the form of sibling Energy Storage Acts).

Growth of energy storage technologies and their applications is at an all-time high, but why? Some of the same reasons why we think this just may be the year the Energy Storage Act passes are also clear drivers of storage industry growth. But another important factor to consider is Renewable Portfolio Standard (RPS), the more and more broadly adopted state-by-state mandate that a portion of electricity demand be met through renewable sources; growth is seen not only in the number of states who are adopting an RPS, but also seen in increasing percentages required within states who have had a RPS in place, some for many years (California, always a leading example, has had an RPS in place since 2002 and recently raised their standard from 20% to 33% to be met by 2030).

Currently, there are 32 U.S. states with RPS, a number that has grown steadily since the first RPS was introduced in 1983, with a major jump in adoption and percentage requirements in 2000. Current RPS states have mandates for renewable energy levels that range from 8% to 40% with goals to meet these mandates ranging from 2013 to 2030. The majority have legislated mandates in the range of 20% and many aim to hit that goal by 2020. Since all RPS mandates are based on future goals, even if there are no further RPS adoption or percentage increases, the supply of renewable energy is legislated to keep growing.  

As electricity demand continues to grow across the fifty states, obviously that will demand an even greater growth in renewable supply to meet RPS standards based on percentages. While few will argue that more renewable energy needs to be brought online to meet these and larger growing energy needs, an important component to support this growth is and will more increasingly prove be energy storage for renewable energy.

In addition to increasing renewable energy capacity, by making more of the current production usable through battery storage and other complimentary technologies, we can meet our expanding needs more efficiently and with less new development, relatively speaking. This is because energy storage, such as Lithium-Ion battery storage, makes it possible to use energy generated in off-peak hours during times of high-peak demand, resulting in less lost energy from renewable sources (such as extra, i.e. unused, energy produced by wind farms on above-average windy days, and similarly by solar arrays on sunny days when demand is lower than at night). Implementing energy storage solutions is generally less costly than developing new energy production, so this will save both utilities and consumers money; a compelling reason for the former to consider it closely in light of growing RPS requirements and related electricity needs.

This answer is not a new one. Energy is either kinetic or potential, and utilities have been utilizing ways of storing energy (basically, converting it from kinetic to potential for the future reverse) for a long time to reduce waste and meet peak demand, RPS or no. One example is pumping water to elevated reservoirs during times of low demand (and thus excess energy) to let it later drop through turbine generators during times of high demand (aka pumped-storage hydroelectricity, or PSH). Of course, batteries are simply another kind of reservoir, albeit very efficient and increasingly high tech, that stores energy in chemical form for later application.

Today, however, there is an ever-widening availability of energy storage technologies suitable for grid-scale all the way down to single-family-home-scale implementation, and with pricing becoming rapidly more and more accessible throughout this range. Advanced Li-Ion batteries are of the most widely utilized and due to recent technological and financially beneficial advancements, battery energy storage is now feasible, reliable and scalable.

We are sure to see tandem growth in RPS rates and energy storage technology utilization as the former begets the need for the latter and the latter makes the former more feasible; while legislation, budgetary considerations, and advancements in technologies contribute to storage industry growth.

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.