Visitors to last week’s Intersolar North America conference in San Francisco could not help but notice the presence of a benign invader: energy storage vendors. Half the second-floor exhibition space at the Moscone West convention hall had been rented by energy storage companies.
According to Markus Elsaesser, CEO of Intersolar, the number of companies exhibiting energy storage technologies at Intersolar has increased from about a dozen just three years ago to more than 200 this year.
The surge in companies entering, or expanding into, the energy storage space is no accident. Bankruptcies, a panel supply glut, and falling feed-in tariff rates have shaken the PV industry. Panel and system manufacturers are looking for ways to grow earnings, and one likely new revenue source is energy storage. According to Elsaesser, the PV industry expects to boost revenue by $10 billion by 2017 globally with storage.
“The PV industry needs to look for future profit pools,” Markus Hoehner, founder of the International Battery and Energy Storage Alliance (IBESA), said at an Intersolar briefing. “When we look at the PV industry on the global level, most of it was feed-in tariff driven. It was about IRR [internal rate of return], making money out of the PV system. Now, due to the downturn in the feed-in tariff markets, and due to the much lower system cost, we’re talking about saving money.”
Homeowners in markets with high retail electricity rates, he said, are looking to shield themselves from rising energy costs with storage. Take the example of Germany. Matthias Vetter, a researcher with the Fraunhofer Institute for Solar Energy Systems (ISE), who also spoke at the briefing, said that he pays 26 euro cents ($0.34) per kilowatt-hour (kWh) for grid electricity in Germany.
“A [rooftop PV] system owner who has installed 10 years ago, like my father, he gets, still, 55 euro cents [$0.77] per kilowatt-hour,” he said. “He never comes to the idea that he will install storage.”
But for German homeowners who install a new rooftop PV system, the financial incentives look very different. After a series of scheduled reductions, the feed-in tariff rate for rooftop PV now pays 14 euro cents ($0.18)/kWh, according to Hoehner. Homeowners who invest in PV energy storage can therefore store electricity for use later and avoid buying electricity from the grid at 26 to 30 euro cents ($0.30 to $0.39)/kWh.
Hoehner conceded that after accounting for the present cost of battery storage “even in Germany, the investment in a PV system without storage is more profitable.” But, he added, “decreasing FITs [feed-in tariffs] will push the attractiveness of PV storage systems” – as will government incentives.
On May 1, the German federal government launched a program offering a subsidy covering up to 30% of the purchase price of storage systems deployed with new or existing PV installations.
How solar energy storage looks from California
Hoehner then compared Germany to another booming solar market: California. “When we look at the system price … the combination of PV and storage is paying off, has a net positive net present value, in the German market,” he said. But, in California, “when you look at the combined net present value [for PV and storage] the combination is not paying off.”
What accounts for the difference? Germany has much higher retail residential electricity rates ($0.30 to $0.39/kWh) and lower installed PV system costs ($2.51/watt) than California ($0.15/kWh and $5.80/watt, respectively). “Comparably low electricity prices in California as well as high PV system costs are still a barrier for a mass market of PV storage systems,” concluded Hoehner.
Over the short term, it may be that systems installed by large commercial and industrial electricity consumers will do more to drive the energy storage market in California than those installed by homeowners.
“Demand charges are quite high in many states in the U.S. In California, summer peak rates for demand are $25 per kilowatt,” said Tom McCalmont, President, McCalmont Engineering. “It doesn’t take much of a reduction in those kilowatts to have significant benefit.” He noted that advanced energy storage systems qualify for incentives under California’s Self Generation Incentive Program.
The California Energy Storage Alliance (CESA) issued a proposal, he said, arguing that solar coupled with storage and deployed as an energy system should be eligible for the federal investment tax credit. “With the [federal] tax credit and self generation rebate, the payback periods can be quite low.”
To save money with energy storage, large commercial and industrial facilities, including those that have already installed solar, may turn to the same financing vehicle that unlocked the PV market in California: power purchase agreements (PPA) and third-party ownership. Tad Glauthier, Vice President of Customer Development and Operations with Stem, Inc., said his company both sells and leases energy storage systems.
“The very first PPAs that we’ll be releasing are going to be funded by private investors as opposed to banks,” he said, noting banks’ aversion to new financing tools. “You’ll pay as you go and be effectively ‘in the money’ from day one – saving more than you’re paying – from the get-go on your kilowatt reduction.”
“We’re developing those products both as stand alone, as well as paired with solar partners, where the solar partner actually rolls the demand reduction into their PPA,” he added.
