Energy Toolbase hosted a webinar recently entitled “Modeling the Economics Residential Energy Storage Projects in California” where we shared our latest insights on the market. We’re constantly learning and adjusting our thinking as the market evolves. We’re fortunate to have a front row seat, working closely with many of the leading energy storage system (ESS) equipment vendors and project developers in California.

From that webinar and our experience in the industry, here are the top 6 big-picture thoughts on the current state of the residential storage market in California from Energy Toolbase:

Demand is strong and projected to continue growing rapidly
Market data definitively shows that residential storage deployments in California are growing rapidly. The Smart Electric Power Alliance recently published the “2019 Energy Storage Market Snapshot” report, which reported 175.5 MWh of residential storage capacity added in 2018, which was an increase of 500% compared to 2017 levels. In California alone, the report counted 99.9 MWh of residential storage interconnected in 2018, an increase of 629% vs. 2017 levels.

Wood Mackenzie’s “Q2 2019 U.S. Energy Storage Monitor” report also ranked California as the top state for residential storage deployments for 2018 and also Q1 of 2019. The report forecasts strong continued growth in the residential segment over the next five years, with annual megawatt storage deployments expected to more than double in 2020 vs. 2019. Looking out over the next five years, WoodMac forecasts residential deployments to grow by over five-times in 2024 vss 2019 projections.

The current allotment of residential Self-Generation Incentive Program (SGIP) dollars is virtually gone. SDG&E exhausted its residential budget over a year ago, PG&E recently opened step 5 of 5 in early July and reserved all funds in less than three weeks. SCE is currently in step 5 of 5. Meanwhile, on the commercial side, SDG&E, PG&E and SCE are still in step 2 or 3 of 5 for SGIP. The good news for residential storage developers is that the SGIP budget is scheduled to get a huge replenishment soon thanks to Senate Bill 700 which passed the California legislature last year.

California has the best TOU rates for residential ESS economics in the country
We’ve evaluated residential time-of-use (TOU) rates in every state and California’s are the most advantageous for energy storage economics in the country. This is especially relevant given that all new solar customers in the big three investor owned utility (IOU) territories in California are now required to take service on a TOU rate after going solar, which was mandated in the big NEM 2.0 ruling in 2016.

Make no mistake – the top headlines in the mainstream press this week around Australia, climate change and energy are not positive. What has been described from many quarters both within the country and from the international community speak of a dereliction of responsibility at the top level in favour of short term economic gain and the politics of coal.

That said, here’s a quick snapshot of some of the things happening at ground level across Australia. Perhaps in common with the US, enthusiasm at state level, where arguably politicians have closer relationships with their constituents, appears to run counter to apathy or obstructionism from the top.

Australian citizens, too, are still enthusiastic about installing their own renewable power plants and high electricity prices versus falling feed-in tariffs (FiTs) are building the economic case further. So while the grid is adjusting gradually, with a handful of large-scale installations, feasibility studies and pilots, behind-the-meter energy storage paired with solar in particular is racing ahead in some, though not all, states. Here are some recent developments in the space and a look ahead to what might come next.

Queensland: According to Australian Renewable Energy Agency (ARENA) figures, the state with the highest penetration of rooftop solar. Around a third of all households have installed solar: 2.GW across around 600,000 properties.

This week, our sister site PV Tech reported that the national Clean Energy Finance Corporation (CEFC) will co-fund a new financing programme run by the Bank of Queensland, investing from an AU$100 million (US$67 million) pot to support solar and (mainly EV) battery purchases. Rooftop solar installations and storage batteries for EVs will be granted annual discounts of 0.7% on their financing rates through the Bank’s Energy Efficient Equipment Finance programme.

CEFC also remains the sole financier of an AU$160 million (US$108 million) scheme, also in Queensland, that integrates solar with wind and energy storage batteries, Jose Rojo Martin wrote for the site.

SoftBank’s Vision Fund is investing $110 million in the Swiss startup Energy Vault, which stores energy in stacked concrete blocks. Quartz was the first to report on the startup when it came out of stealth mode last year.

Two things make this investment unprecedented. First, it’s an unusually large sum for a company that hasn’t even existed for two years or built a full-scale prototype. Second, by making an energy storage bet, the $100 billion SoftBank Vision Fund—which has invested in startups like Uber, Slack, WeWork, and Paytm—is signaling to the wider market that this area of technology is ripe for large investments.

So far, most investments in energy storage have gone to companies building lithium-ion batteries. They’re an attractive bet, because carmakers are willing to pay a premium for batteries that will help electric cars compete with their gas-powered cousins.

But the technology to store electricity doesn’t need to be as powerful as lithium-ion batteries. While companies like Tesla and Sonnen sell lithium-ion batteries for homes and, in larger packages, for the grid, Energy Vault’s bet is that its technology will prove to be cheaper. That’s because it uses low cost materials: cement and sand to make blocks, cranes to lift and drop the blocks, and reversible motors to convert electricity into potential energy and vice versa.

Energy Vault was founded in 2017, and it built its first energy-storage prototype in only nine months with less than $2 million. Now Akshay Naheta, a managing partner of SoftBank’s Vision Fund, believes the startup is ready for an injection of a large sum to deploy its technology around the world.

One of the most heated and interesting debates in the energy world today has to do with how far the US can get on carbon-free renewable energy alone.

One faction believes that renewables can supply 100 percent of US energy, with sufficient help from cheap energy storage and savvy management of demand.

Another faction believes that renewables will ultimately fall short and need assistance from nuclear power and natural gas or biomass with carbon capture and storage.

This war is largely being waged behind the scenes in competing academic papers, but it is highly relevant to current events as a whole host of states and cities are passing laws targeting “100 percent clean energy.” Some, like Hawaii, specifically target 100 percent renewables. Some, like Washington state, target 100 percent “clean,” allowing room for non-renewable sources.

Which target is more realistic and prudent? Just how far can renewables get?

At the heart of the debate is the simple fact that the two biggest sources of renewable energy — wind and solar power — are “variable.” They come and go with the weather and time of day. They are not “dispatchable,” which means they cannot be turned on and off, or up and down, according to the grid’s needs. They don’t adjust to the grid; the grid adjusts to them.

That means a grid with lots of renewables needs lots of flexibility, lots of different ways of smoothing and balancing out the fluctuations in wind and solar. When people predict that renewables will fall short of 100 percent, what they are predicting is that we won’t be able to find enough flexibility to accommodate them (at least not fast enough). They will require “firming” by dispatchable, nonrenewable sources.

There are many sources of grid flexibility, but the one that seems to have the most potential and is laden with the highest hopes is energy storage. To a first approximation, the question of whether renewables will be able to get to 100 percent reduces to the question of whether storage will get cheap enough. With cheap-enough storage, we can add a ton of it to the grid and absorb just about any fluctuations.

But how cheap is cheap enough?

Texas is a unique place. Within a land that celebrates great individualism, they came together to build a multi-billion dollar power grid that now allows free market capitalism to batter down the price of electricity. An interesting mix of socialism and capitalism.

In a few weeks, municipal utilities and electric cooperatives in the state of Texas will have legal confirmation on their right to own energy storage facilities that sell energy or ancillary services, while not having to register as an energy generator. Current policy in the state, Sec. 35.152, defines energy storage as a generation asset, which requires owners to register as power generators.

The act, 86(R) SB 1012, adds the below language to the above Sec.35.152:

(d) Subsection (b) does not require a municipally owned utility or an electric cooperative that owns or operates electric energy storage equipment or facilities described by Subsection (a) to register as a power generation company under Section 39.351(a).

The amendment is applicable on September 1, 2019.

In Texas’ ERCOT region (which covers 90% of the electricity demand in the state), the investor-owned companies that own the power lines aren’t allowed to own generation assets, and electricity users can contract directly with generators. However, per Texas expert Joshua Rhodes, municipality owned electric utilities and energy cooperatives are allowed to own generation assets if they choose to, and some in fact do. Which means this legislation merely reminds, and codifies what was already known.

This is a reminder of how the State of Florida and residential solar lease companies also didn’t change the law in 2018 when state regulators ruled that Sunrun’s 20-year solar equipment lease not a retail sale of electricity.

Very recently, the first co-op owned energy storage project was begun, with Pedernales Electric Cooperative (PEC) signing a deal with Aggreko for a 2.25 MW/4.5 MWh battery. The system will provide grid services, as well time-shifting solar from a nearby facility.

As solar power becomes increasingly popular, more homeowners are exploring how they can store more of the energy their solar panels generate with battery storage. In fact, the U.S. was the second biggest energy storage market last year and residential homes played a large role.

Dan Glaser, a senior sales engineer for Panasonic, says that a desire by homeowners to be more self-sufficient is driving the demand for energy storage.

“Some of the interest is from homeowners who want access to backup power during grid outages,” he says. “In other cases, people are interested in strategically using stored power, especially if they live in areas where they can’t put it back on the grid.”

An energy storage system, which is an on-site unit for storing energy generated by your solar panels, makes this possible. Glaser says that asking these key questions before you buy ensures you find the right system for your home and budget.

What components do you need for a proper battery storage system?

A standard battery storage system (also referred to as energy storage or solar storage systems) comprises batteries for storing the power and at least one inverter for converting the energy into a usable form. In some instances, there’s also a software component for monitoring energy usage remotely. Glaser notes that you can purchase one unit that includes all these components, often in conjunction with your solar panel purchase. Or you can buy a standalone system to retrofit an existing photovoltaic (PV) setup.

Whichever you decide, Glaser says this is not a DIY project. “The technology is complex enough that you want a professional installer who is familiar with how it works, and aware of local codes and regulations.”

AC or DC battery storage?

These terms — alternating current (AC) and direct current (DC) — refer to the direction the power flows. Solar panels produce DC electricity and that’s what most batteries store. However, your house and most of the appliances in it require AC power.

The system that works best for your home depends on whether you already have an existing solar power system. While an AC-coupled system requires two inverters and is often less efficient, if you have a pre-existing solar setup, then it’s the only option available.

One of the largest private Indian power transmission firms, Sterlite Power Grid Ventures Ltd, expects energy storage to open up US$35 billion worth of investment opportunities in India over the next ten years as India aims to boost its renewable capacity installations, Sterlite’s CEO Pratik Agarwal told Bloomberg in an interview published on Wednesday.

According to Agarwal, India’s central and state authorities are expected to launch tenders for energy storage capacity for several GW of capacity as soon as next year.

India has set a target to install 175 GW of renewable energy capacity by 2022, including 100 GW of solar capacity, 60 GW wind, 10 GW bio-power, and 5 GW from small hydro-power.

Earlier this year, a senior government official said that India was targeting an additional 500 GW of renewable energy for its grid by 2030, as it aims to cut dependence on coal and clean up the air.

Coal, however, will ‘still be king’ in India even in 2040, according to the BP Energy Outlook – 2019. India’s renewable energy consumption will surge by 2040, mostly thanks to the power sector and driven largely by increases in solar capacity.

“Yet despite this growth in renewables, coal continues to dominate India’s power generation mix, accounting for 80% of output by 2040,” BP says.

By 2040, coal will still represent 58 percent of India’s power generation mix.

Yet, India’s energy storage is set to grow together with renewable capacity in order to ensure integration with the grid.

Related: Oil Prices Slide On Surprise Crude Build

A recent report from India’s Central Electricity Authority forecasts that India will have 34 GW/136 GWh of battery energy storage installed by 2029-2030.

India will be one of the energy storage installation hotspots globally over the next two decades, the latest report on new energies by BloombergNEF (BNEF) showed last month.

Geographically, South Korea is the current market leader, but it will soon cede the crown to China and the United States, which will be the two major energy storage markets two decades from now. India, Germany, Latin America, Southeast Asia, France, Australia, and the UK will be the other major energy storage installation hotspots, according to BNEF.

California casts a long shadow over the solar and energy storage markets in the rest of the United States. The Golden State’s wide lead in policy and deployment proves true the maxim that as California goes, so goes the nation – usually five to ten years later.

But while California is the largest residential battery market and has the most watts of energy storage overall, this is in part due to its large size and 40 million residents. When adjusted for this, the state is not the only leading battery market, as it has been joined by the chain of islands in the Pacific that became the 50th state in 1959: Hawaii.

According to the latest rankings released by the Smart Electric Power Alliance (SEPA), three of the island state’s four utilities were all among the top 10 in the nation for per-capita energy storage installations in 2018.

Solar + batteries lead the way in Kaua’i

Leading the list by a long shot is Kaua’i Island Utility Cooperative (KIUC), where large solar and battery storage are expected to allow the utility to source more than 50% of its power from renewable energy sources this year. Mostly due to the installation of the AES Lāwaʻi plant Kaua’i put on more than 3kW of battery storage per customer last year, giving it a total of 5,036 watts per customer.

KIUC notes that this system and the Tesla solar + storage plant installed in 2017 allow it to meet 40% of evening demand with solar. It also helped KIUC restore power when large conventional generation went down through an electrical fault a few weeks ago.

Incidentally, this also puts KIUC second in total volume of energy storage deployed in 2018. This figure is particularly remarkable when you consider that Kaua’i only has 72,000 residents, and that is has more energy storage deployed than utilities that serve millions of customers.

Kauai’s per-capita figure is more than double its nearest competitor, the municipal utility for the village of Minster in Ohio. However, two of the three utilities of the Hawaiian Electric Industries also reached the top 10 for annual per-capita deployment, with Hawaiian Electric Light Company putting on 95 watts per customer and Hawaiian Electric Company installing 76 watts.