March 1, 2019

By Lisa Cohn

Energy storage markets are growing quickly, driven by regulations, demand charges, plus utilities’ need to integrate solar into the grid and avoid building new peaking power plants.

By SergeyIT/Shutterstock.com

In fact, innovative utility-scale energy storage projects are popping up across the nation, with utilities and cities using storage to avoid building underground transmission, escape high demand charges from independent system operators and integrate more renewable power into the grid.

What’s more, used electric vehicle (EV) batteries are expected to drive battery prices down in the future, further boosting the market, said Peter Kelly-Detwiler, Northbridge Energy Partners principal. He was summarizing the messages from the Massachusetts Institute of Technology’s (MIT) Enterprise Forum’s event Feb. 27, “Energy Storage: New Business Models Fuel Rapid Growth.”

The forum aimed to advise startups about how best to thrive in the growing markets. One warning, Kelly-Detwiler said: Companies shouldn’t be too enamored of their technologies. They need to find markets for their products and be prepared to flex as markets change.

“They need to focus on where to play, how to work the markets and who wants to buy their products and services,” said Kelly-Detwiler, who moderated the event.

Role of states, FERC

Understanding the bigger picture means keeping up with leading state legislation, including efforts in California, Massachusetts, Maryland and New York.

Massachusetts, for example, recently committed to boosting solar-plus-battery energy storage for the grid in two decisions. The Massachusetts Department of Public Utilities focused on net metering for solar-plus-storage projects and also on the capacity ownership rights of projects.

The Maryland Energy Administration (MEA) is now accepting applications for its 2019 Energy Storage Tax Credit program, which aims to boost the use of storage by homes and businesses in the state. It was the first state to pass a bill allowing taxpayers to claim an income tax credit on energy storage.

Andin an important move, the California Public Utilities Commission on Jan 11 approved proposed rules allowing “stacking” of energy storage — using energy storage to provide multiple benefits and services. Resources can be compensated for their full economic value.

In addition, the Federal Energy Regulatory Commission (FERC), in Order 841 directed all grid operators to propose models for the participation of storage as a wholesale generation asset, said Kelly-Detwiler.

But these regulations — only a few examples of what’s happening across the country — aren’t the only market drivers.

Another opportunity is addressing the “duck curves” created by high solar production — in California, Massachusetts and elsewhere.

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“One April in Massachusetts, demand was higher in the night than in the middle of the middle of day,” said Kelly-Detwiler. “There are pretty good opportunities in these cases for storage to mitigate the intermittency of solar.”

In addition, utilities are beginning to embrace storage to help manage their grids, he said.

For example, both the municipal utility in Princeton, Mass. and Vermont’s Green Mountain Power use storage to mitigate demand charges from ISO New England, he said.

Martha’s Vineyard, an island off the coast of Massachusetts, is turning to storage to help reduce carbon emissions and avoid building or upgrading expensive underwater transmission lines, said Kelly-Detwiler. Eversource has proposed an energy storage project on the island that aims to reduce emissions from five diesel generators and help meet demand for electricity.

Energy storage is helping utilities in other areas of the country avoid building expensive peak power plants, Kelly-Detwiler said.

For example, Arizona Public Service has contracted with AES for a 10-MW/40-MWh storage system that will provide peaking capacity. Arizona utilities are grappling with changing peaks due to high solar penetration.

How rates drive energy storage markets

High demand charges are also boosting demand for energy storage.

In California, up to 50 percent of utility bills can come from demand charges, said Kelly-Detwiler.

Storage provider Stem is aggregating behind-the-meter energy storage to lower these charges, he added. Stem says it now has hundreds of systems up and running, many in California, where the high demand charges along with state incentives have created a large market for behind-the-meter storage. Stem is also building a 235-kWh energy storage system for the City of Huntington Beach’s Civic Center to help the city avoid demand charges. The system will work alongside 2 MW of solar.

Changing time-of-use rates are also boosting the market for storage, said Kelly-Detwiler. San Diego Gas & Electric has implemented time-of-use rates with peak prices as high as 50 cents/kWh, he said.

“The prices are so high, people are using storage to shift away from those hours,” he said. As a result, companies like Sunrun are adding storage to their solar offerings. During Sunrun’s third quarter of 2018, the company installed a record number of solar energy and home batteries, the company said.

“Demand charges and time-of-use rates are driving this,” said Kelly-Detwiler.

Used batteries to flood market, drive down prices

Used EV batteries are expected to start playing an important role in energy storage markets, driving down the price of batteries.

In Amsterdam, the Johan Cruijff Arena, a football stadium, employs used and new EV batteries to store up to 3 MW of solar power. The battery system also provides power to the grid.

“Used EV batteries still have 80 percent of their value when they come out of cars,” said Kelly-Detwiler. “Within a few years, we’re going to be flooded with cheap, useful batteries.”

With all these developments in energy storage markets across the country, startups need to keep their eyes open and adapt quickly as new markets open up, Kelly-Detwiler said.

“Startups need to understand the bigger picture, the context,” he said. “They need to pay attention to what’s happening across the country.”