As companies and states pursue aggressive decarbonization goals, the pressure to find a cost-effective storage solution is mounting.
A growing number of companies are deploying on-site energy storage, usually paired with solar. Commercial and industrial behind-the-meter storage just had its best quarter yet, reaching 44.9 megawatts of capacity in Q1.
But C&I buyers aren’t driving the growth in storage. Utilities are, with massive energy storage deployments and announcement becoming more common. In fact, the United States just became the world’s largest grid-connected energy storage market, and researcher Wood Mackenzie’s Energy Storage Monitor shows that Q1 2019 was the best quarter for deployments, with 148.8 megawatts coming onto the grid.
Projections show utility energy storage deployments are just getting started; they’re expected to double in 2019 and triple in 2020.
Utility energy storage is growing like gangbusters
Utilities have been announcing 100+ MW energy storage plans at an impressive clip over the last six months:
- Southern California Edison selected a portfolio of energy storage projects in April, with a collective capacity of 195 MW, deciding against a 262-MW natural-gas peaker plant to fill the same function.
Reason: Falling prices for energy storage and the rise of policy that prioritizes low-carbon energy options.
- Pacific Gas & Electric (PG&E) gained approval from the California Public Utilities Commission for four energy storage projects, totaling 567.5 MW, to replace a gas plant in South San Francisco late last year.
Reason: A policy priority from regulators to shift from natural gas to clean energy sources for flexible capacity.
- Arizona Public Service (APS) disclosed in February that it plans to install 850 MW of energy storage by 2025 (the single largest storage procurement from a utility to date).
Reason: A policy that sought to grow capacity during the peak demand period, between 3 and 9 pm.
- Eversource is considering a $7 million energy storage backup system for Westmoreland, a small town in western New Hampshire that suffers from frequent power outages.
Reason: Energy reliance, as the town relies on just one power line (and no backup source), which is susceptible to falling tree branches in storms.
- Con Edison launched a pilot in March to treat energy& storage like a distributed generation asset, working with an energy developer to launch four 1-MW batteries in key locations. It’s essentially the same idea as a behind-the-meter battery to arbitrage utility tariffs — except it is dispatched by the utility.
Reason: Peak shaving applications.
- Portland General Electric (PGE) in February announced a wind and solar project that would be paired with 30 MW of battery storage.
Reason: Cost-effective option to reduce emissions.
- Energy developers floated plans in January to construct 495 MW of energy storage (next to 495 MW of solar) in Texas — but it is unclear if regulators will allow the projects to move forward.
Reason: Meet increasing energy demands in the oil-field operations in the Permian Basin.
Major drivers of all this action
- 100 percent renewable goals: Energy storage is a lynchpin for the five states, plus D.C. and Puerto Rico, working to reach 100 percent renewables goals.
- FERC Order 841, which directs the regional wholesale market operators to clarify how storage can participate in the markets based on its unique attributes, opens up new markets for energy storage.
- New York allocated $280 million for energy storage projects in an effort to deploy 3 gigawatts of energy storage by 2030.
- 13 states are considering various forms of new legislation and mandates, according to Energy Storage Monitor.
- The cost of batteries and associated hardware is dropping. From 2012 to 2017, the cost of a battery system fell by 25 percent per year, according to McKinsey.
Additional value calculations.
- The way businesses value of energy storage may be changing, as energy storage may offer multiple revenue streams, known as value stacking. This means privately owned batteries could be used as a grid resource during peak demand.
What does this mean for corporate buyers?
As was the case with renewable energy, the increase in storage deployments, favorable policies and falling cost of technologies are sure to continue to bring down costs and spur on financial models that work for more use cases.
That means more businesses soon could be thinking about energy storage as a key tool to reach 100 percent renewable goals, especially as more companies consider how to match clean energy loads with demand.
“We expect to see larger corporate off-takers looking to storage as a means to achieve cleaner energy that matches their facilities’ load profiles and add resilience attributes,” Ravi Manghni, head of energy storage at Wood Mackenzie, said in an email.
Manghni pointed out that Google and Microsoft already have made moves in this direction, and Kaiser Permanente signed a combined wind, solar and storage contract with Nextera last year.