In 2017, utility-scale energy storage moved from a handful of experimental programs to front-page news, with prominent deployments in Australia, Texas, Southern California, and hurricane-ravaged Puerto Rico. Building on these successful installations, 2018 should be an even more important milestone for energy storage, as policymakers encourage electricity system operators to include storage in their integrated planning. Regulators will also need to clarify the market rules around energy storage, to allow utilities and other storage operators to “stack” ancillary services on top of storage, as the California Public Utilities Commission (CPUC) recently did.

Energy storage will affect the entire electricity value chain as it replaces peaking plans, alters future transmission and distribution (T&D) investments, reduces intermittency of renewables, restructures power markets and helps to digitize the electricity ecosystem. For utilities, battery storage will become an integral tool for managing peak loads, regulating voltage and frequency, ensuring reliability from renewable generation, and creating a more flexible transmission and distribution system. For their customers, storage can be a tool for reducing costs related to peak energy demand.

Driving all of this opportunity is the decreasing cost of battery storage, a factor largely of the rapid increase in their development and manufacture of batteries for electric vehicles. Research by Bain & Company estimates that by 2025 large-scale battery storage could be cost competitive with peaking plants—and that is based only on cost, without any of the added value we expect companies and utilities to generate from storage. In some markets, renewables combined with battery storage already cost less than coal generation.

Utilities and their large commercial customers are also looking at ways to create more value around their investments in storage, to make deployments more feasible. It’s these stacked services that the CPUC recently addressed in a set of clarifying rules meant to deal with the ambiguity around battery storage. In addition to using batteries to store electricity during periods of low demand and then releasing those stored electrons during peak periods to shave peak loads, stored electricity can provide services like voltage and frequency modulation. And it can ensure greater reliability from intermittent renewable generation.

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Every year, the clean energy experts at Bloomberg New Energy Finance (BNEF) predict what will happen in the sector in the year ahead. This year’s predictions have landed.

BNEF chief editor Angus McCrone writes that the falling costs in lithium-ion batteries, solar and wind energy that 2017 saw will continue in 2018 thanks to economies of scale and technological improvements, while the global economic recovery and associated strengthening of oil and coal prices will make clean energy and electric vehicles more competitive against their fossil fuel counterparts.

However, tightening monetary policies and higher interest rates “could start to affect the cost of capital, and therefore the relative competitiveness, of high-capex, low-opex technologies such as wind and solar”.

The research group predicts that 2018 investment in clean energy will be about the same as 2017’s $333.5 billion, but more capacity will be installed because of “the remorseless reductions in solar (and to some extent, wind) project capital costs”. More than 100GW of solar capacity will be installed in 2018, BNEF head of solar Jenny Chase predicts and although China will still dominate with about half the market, new markets will also open up. “This is the year that Latin America, south-east Asia, the Middle East and Africa will make up a measurable slice of the total. For instance, Mexico is likely to be a 3GW-plus market in 2018, and Egypt, the UAE and Jordan between them at 1.7-2.1GW,” she writes.

The wind energy market will be steadier, with about 59GW of onshore and offshore capacity added in 2018 before a rush in 2019 as the US Production Tax Credit nears its sell-by date. Onshore, China and Latin America will continue to see growth and while the usual suspects – the UK, Germany, the Netherlands and China – will dominate offshore, there are signs that the US and Taiwan markets are set to take off. Costs continue to fall, with two bidders – Vattenfall and Statoil – already lined up for the Netherlands auction of some 700MW of offshore capacity with zero subsidy. “Competition between a strong selection of developers would be another sign of the much-improved cost-effectiveness of offshore wind,” says Tom Harries, senior wind analyst at BNEF.

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New York City is in the trenches when it comes to employing innovative energy technologies, which it hopes will help meet its goal of reducing greenhouse gas emissions by 75% by 2050. How so? By installing 100 megawatt/hours of energy storage, which may also allow the city’s consumers to avoid buying dirtier power — something that could save electricity customers there millions each year, a new study says.

Balancing the electricity load is a difficult job. Storage devices, if they can be shown to work at commercial scale, would be a huge boon for utilities that are trying to do everything from advance renewable power to cut electricity use during peak demand. Today, storage adds value to power systems because it can create capacity. And that has the potential to allow utilities to defer investment in expensive infrastructure and carbon-intensive power plants.

Power producers are infatuated with energy storage, realizing that it could be a game-changer. But they are readily acknowledging that technical and financial barriers exist and that overcoming them is paramount if the devices are to reach their potential. An application could be anything from shaving peak load to storing and injecting wind and solar electrons onto the grid.

“As the (New York) state moves forward to meet its clean energy goals of 50 percent renewable energy by 2030 and an 80 percent reduction in greenhouse gas emissions by 2050, there are increasing questions about how we can best ensure the reliability of the electricity grid while reducing our reliance on fossil-fuel generation,” New York Battery and Energy Storage Technology Consortium (NY-BEST) Willam Acker said.

“This study illustrates that replacing these older peaking plants with energy storage presents a cost-effective strategy for reducing harmful air emissions, protecting public health and maintaining grid reliability,” he added. New York City set a goal in September 2016 to install 100 megawatt/hours of energy storage by 2020, along with 1,000 megawatts of solar capacity by 2030.

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Early this month, Generate Capital, a sustainable infrastructure finance company, and Sharp Electronics Corporation’s Energy Systems and Services Group announced the commencement of a six-site solar plus storage project at the Santa Rita Union School District (SRUSD) in Salinas, California. The project will include more than a megawatt (MW) of solar arrays, combined with 1.2 megawatt-hours (MWh) of Sharp’s SmartStorage on-site energy storage.

This initiative will be supported through the state’s reinvigorated Self-Generation Incentive Program, which offers significant incentives to bring more storage to the California power grid. The SRUSD will be able to cut energy costs (during some months, as much as 70-80% of the district’s electricity needs will be met by the systems). The district will also significantly reduce its expensive hourly utility demand charges (a dollars-per-kilowatt fee based on one’s highest demand during the month that can easily contribute to 30-40% of the total bill).

This project is part of a growing trend as the U.S. market has recently seen a significant uptick in the addition of on-site energy storage. GTM research reportsthat Q2 2017 saw 443 commercial and residential storage projects installed, totaling 32 MW. A large portion of these recent projects emanated from Hawaii and California. Solar and storage hybrids are coming on strong and will likely soon become commonplace, so from that perspective, the SRUSD project is not especially newsworthy.

What is newsworthy is the fact that the project was designed not only to save money, but also to provide critical backup power to the schools in the event of power outages. The project can help the SRUSD ride through brownouts or short-term outages, as well as longer-duration events. And in the aftermath of the recent devastation in Florida and Texas, the importance of backup power has increasingly come into focus.

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In early August, I spent three days at the Energy Storage North America (ESNA) conference in San Diego. One key take-away was from the keynote delivered by Ronald Nichols, President of Southern California Electric. At one point he flatly asserted that for every utility represented by an attendee in the crowd, there is a viable and cost-effective storage opportunity somewhere on their grid today. That is a revolutionary statement, and something that would have surprised most industry observers just a few years ago.

However, that statement probably would not have surprised the leaders of AES Energy Storage. Those of us with long memories will recall that AES has been delivering utility-scale storage projects for over a decade, with projects deployed, under construction or in development in seven countries. The company currently boasts the largest lithium-ion battery-based energy storage project in the world (30 megawatts and 120 megawatthours) – built in partnership with San Diego Gas and Electric (SDG&E), to help meet peak electricity demand within its service territory in southern California. AES Energy Storage also indicates it has delivered over four million megawatt-hours of service to date. No other competitor in the battery storage space has a track record remotely close to that.

Given its heft in the market, AES Energy Storage is still surprisingly small, consisting of approximately 70 core team employees who focus on the development of storage solutions platforms. AES sells its Advancion energy storage platform and related services to multiple customers, including utilities and regional business units of the AES Corporation (AES Energy Storage’s parent company) in 17 countries, utilities like SDG&E and Arizona Public Service, and other entities who undertake power project development.

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Energiewende (energy transition). That’s the name of the German government’s ambitious goal to transform their energy landscape over the next few decades. By 2025, they want 35-40% of their electricity to come from renewable energy sources. By 2035, they’re targeting 55-60%. And by 2050, they hope to hit at least 80% renewable energy, coupled with an overall reduction in energy consumption of 25% (compared to 2008).

To get anywhere near this goal requires a huge investment in wind and solar energy generation, as well as a step up in their use of biomass and hydropower, and improving the overall efficiency of natural gas power plants. So far, signs are good, at least in terms of their energy mix. In 2015, renewable energy made up 32.5% of Germany’s total electricity demand.  On one day in 2016, renewable technologies generated 55 GW of energy – that was 87% of Germany’s electricity demand on that day. As reported in Quartz at the time, there was so much electricity available, “Power prices actually went negative for several hours, meaning commercial customers were being paid to consume electricity.”

Alongside the environmental argument for renewables, there are also economic reasons a region might want to move away from coal and oil. A 2015 report from Bloomberg New Energy Finance showed that in Germany, coal and gas were more expensive than onshore wind – $106 and $118 versus $80/MWh – and the same was true in the UK. In China, coal was still cheap in 2015, coming in at just $44/MWh. But solar power there was cheaper than gas ($109 versus $113/MWh). With China now taking a leading role in the fight against climate change, the prices of renewables are likely to drop further.

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In high school, I visited the Princeton Plasma Physics Laboratory’s fusion reactor, a huge metal donut replicating conditions at the center of our sun. But a more pedestrian 19^th century technology caught my eye: giant spinning flywheels providing an electricity buffer so the local electric grid wouldn’t blackout with every reactor startup. I’m reminded of that visit whenever I read reports of energy storage reaching its “holy grail” moment.

While a fusion reactor’s huge load may need storage to buffer its use, the rest of us don’t have to worry turning on our lights or microwave will destabilize the grid. That’s because the grid is a network that aggregates us for central power stations and averages all our idiosyncratic electricity demands into a smooth load profile managed by turning generators up and down. This is the historical reason the electric grid hasn’t needed storage: It is an expensive solution for problems easily solved other ways.

So how should a savvy investor interpret conflicting reports on grid-connected electric batteries’ breakthrough? Morgan Stanley calls it an “underappreciated disruptor,” while Deloitte earmarks it for “exponential growth – although not perhaps this year.” Has energy storage’s moment arrived, or is it still just around the corner?

Be Careful Of Narrow Energy Storage Market Opportunities

One way to understand these predictions is considering the energy storage market as a frozen pond in springtime. The battery production motivated by electric vehicles from giants like LG Chem, Tesla’s Gigafactory and Mercedes, hand-in-hand with plummeting battery costs, is turning up the market’s heat, thawing the pond. Yet like the thawing pond with scattered pockets of meltwater, energy storage has so far only taken off in various niche markets with especially enhanced value propositions.

One of the first utility-scale battery deployment niches has been ancillary services markets, which offer services for maintaining grid reliability. Payments made for small tweaks matching supply and demand on a second-by-second or minute-by-minute basis, often called “frequency response” or “regulation”, are particularly interesting here. In August 2016, the United Kingdom’s grid operator announced 201 megawatts (MW) of winning bids in its first-ever “enhanced frequency response” tender, dominated by battery storage and valued at $86.4 million.

Like scattered meltwater pools, these are relatively shallow markets in the much deeper electricity sector pond because they can only accommodate new projects by the tens and hundreds.

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There are many reasons batteries are appearing across the electrical grid—their price is falling, they may save utilities more than they cost, and they can support solar and wind by capturing peaks in production and saving it for troughs.

But their progress has been slowed by a web of regulations at every level, two grid experts said in Chicago last week.

“We have examples in New York where there are projects ready to go and they can’t get a permit from the Fire Department,” said Richard Kauffman, New York state’s energy czar. “Or there are building-permit related issues. It really raises the cost, the soft cost, a lot.”

In other places, there’s no incentive to store energy when it’s cheap, and sell it when it’s expensive, because it costs the same amount all the time. “There’s not time-of-use pricing in many places, so there’s no financial incentive to shift load,” he said.

Battery manufacturers like Tesla Motors, Panasonic, AES and LG report steady growth. Tesla, AES and Altagas cut the ribbons this week on massive new projects in California. But these companies see far more potential than they have realized. The market, as Tesla’s Elon Musk said, is “staggeringly gigantic.”

It shouldn’t come as a surprise that disruptive technologies like storage get stuck in a legacy system, said Susan Tierney, a former assistant secretary of energy.

“We think of what we’re talking about as energy policy,” Tierney said. “It’s tax policy, it’s land-use policy, it’s fire code—all of these things shape the way that things can be changed. You actually have to solve the inertia in the system on all those engineering, legal, political, financial (levels). All of those things have to fit to make the kind of changes we have.”

The Energy Policy Institute at Chicago invited Tierney and Kauffman to discuss opportunities and obstacles facing cities as they strive for their own clean energy goals, regardless of federal support.

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The energy storage industry has grown to become a $100 billion market, projected to reach $250 billion by 2040.

This massive valuation is due, in part, to more than 50% of consumer energy bills being attributed to peak hour charges. Noticing the need to make energy usage more affordable and efficient, paired with a passion to improve the planet, one entrepreneur launched a company aimed at transforming the way we use energy.

Founded in 2009 by Vic Shao, Green Charge Networks designs and installs commercial energy storage systems. Their mission is to empower businesses, municipalities, and schools of all scales to use energy more efficiently, by limiting carbon emissions and minimizing costs through servicing energy storage. Energy storage is designed to help avoid drawing energy from the grid during peak hours, instead charging itself during regular hours when energy is cheaper. By using energy storage as a method to balance peak power demands, power efficiency increases. This subsequently reduces demand charges, reduces capital expenditures for service upgrades, and improves the planet by decreasing the usage of power plants.

Green Charge was the first to market with an ROI-driven energy storage product. Now, the company stands as the largest provider of commercial energy storage in the country, boasting a growing portfolio of 48 MWh of battery storage projects deployed or under construction across more than 150 sites. In addition to expanding their reach, the startup has successfully helped customers across the United States cut the cost of their electric bills by up to 30%.

To date, Green Charge has raised over $56 million in two rounds of funding. In May, Green Charge was acquired by global energy power Engie, an industry-leading battery storage company. Leveraging an innovative suite of patented software algorithms and smart data, Green Charge deploys, owns, operates, and optimizes battery systems across both private and public sectors.

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