Corporate investment in energy storage nearly hit $660 million in the third quarter, a five-fold increase from third quarter 2015, according to the latest U.S. Energy Storage Monitor from GTM Research and the Energy Storage Association.

The all-time high mark in investments is an indication that more and more companies are entering the energy storage space. “More players are coming into the sector, and there more are on the horizon,” Matt Roberts, executive director of the Energy Storage Association, said. 

In the first three quarter of the year, there was a total of $812 million of corporate investment in energy storage, according to the report. That far outstrips the $416 million for all of 2015. To date, the 2016 total includes $167 million of venture capital funding and $645 million in project financing.

The increase represents a 20% year-over-year rise and reflects a maturing of the industry as it evolves away from early stage venture capital funding, Roberts said. “It shows that there are more viable places to put projects.”

Storage companies such as Stem and Advanced Microgrid Solutions have been ramping up their project finance capabilities. In August, Stem secured $100 million in financing from Starwood Energy Group Global. CEO John Carrington said he plans to use the funds to support project finance deals. In a project finance structure, each project is set up as a special purpose entity that is solely responsible for repaying loans without recourse to the corporate parent, usually the development company.

In July, Advanced Microgrid Solutions signed a deal with Macquarie Capital for the capital to jointly develop and construct a $200 million fleet of the energy storage projects. CEO Susan Kennedy describes AMS as a development company that tailors solutions for customers more than a storage company that installs batteries.

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Following on the heels of record breaking year, energy storage in 2016 is on track to break through last year’s record.

The year-over-year increase will likely not be as dramatic as 2015’s 243% increase over 2014, but several developments in 2016 show that the storage market is developing in ways that could clear a path for accelerated growth in future years.

In its third quarter, the U.S. Energy Storage Monitor, GTM Research and the Energy Storage Association said they expect the U.S. energy storage market to grow to 260 MW in 2016, up from 226 MW in 2015.

Analysts, however, say that it is not just the size and number of the installations in 2016 that is notable, but the quality and specific characteristics of those installations.

2016 has been a “transition year” for U.S. energy storage, said Brett Simon, energy storage analyst with GTM Research. And Alex Eller, energy storage analyst with Navigant Research, said “2016 has seen a much more diverse energy storage market, both in terms of the types of systems (market segments) being deployed and the business models.” While utility scale installations dominated the market in previous years, Eller said 2016 has seen more progress at all market levels. He pointed to contracts for demand response capacity and utility ownership programs as key drivers in that transition.

In June, for instance, Consolidated Edison, along with SunPower and Sunverge, announced a $15 million pilot program for a virtual power plant.

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NextEra had been on the verge of selling its Wyman plant, but after it proved its mettle during the Polar vortex, the company opted to keep the plant. But Wyman is oil-fired, and NextEra is better known for renewables and clean energy technology. The addition of a 16 MW battery system helps bring the plant in line with the company’s overall direction.

Greentech Media reported last year that NextEra plans to invest $100 million in battery storage for its solar and wind projects. Vijay Singh, NextEra’s executive director of business development for energy storage, told the news outlet that the company anticipates battery storage will play a much larger role on the grid within the next five years. NextEra already operates batteries in conjunction with renewables in the PJM territory.

Last year, NextEra Energy CEO Jim Robo said that by 2020 energy storage will begin to replace gas peaking plants.  Robo expects energy storage prices to fall in a similar fashion to solar costs, which would put the technology on par cost-wise with gas peaker plants.

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Following on the heels of record breaking year, energy storage in 2016 is on track to break through last year’s record.

The year-over-year increase will likely not be as dramatic as 2015’s 243% increase over 2014, but several developments in 2016 show that the storage market is developing in ways that could clear a path for accelerated growth in future years.

In its third quarter, the U.S. Energy Storage Monitor, GTM Research and the Energy Storage Association said they expect the U.S. energy storage market to grow to 260 MW in 2016, up from 226 MW in 2015.

Analysts, however, say that it is not just the size and number of the installations in 2016 that is notable, but the quality and specific characteristics of those installations.

2016 has been a “transition year” for U.S. energy storage, said Brett Simon, energy storage analyst with GTM Research. And Alex Eller, energy storage analyst with Navigant Research, said “2016 has seen a much more diverse energy storage market, both in terms of the types of systems (market segments) being deployed and the business models.” While utility scale installations dominated the market in previous years, Eller said 2016 has seen more progress at all market levels. He pointed to contracts for demand response capacity and utility ownership programs as key drivers in that transition.

In June, for instance, Consolidated Edison, along with SunPower and Sunverge, announced a $15 million pilot program for a virtual power plant.

The project, which is part of New York State’s Reforming the Energy Vision (REV) effort, will outfit about 300 homes in Brooklyn and Queens with leased high-efficiency solar panels and lithium-ion battery energy storage systems as a way of demonstrating possible revenue streams that from could come from energy storage uses such as peak shaving and frequency regulation.

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The largest battery storage system in the world will also be one of the fastest constructed in history.

In August, San Diego Gas & Electric tapped energy storage company AES to install two energy storage projects totaling 37.5 MW, 150 MWh. When completed, the larger, 120 MWh project is expected to be the single biggest lithium ion battery in service on a utility grid in the world. 

Both battery facilities are expected to be online by the end of January 2017 — nothing short of miraculous in an industry where deploying assets, especially newfangled technologies, can take years. 

And the companies are not alone. Southern California Edison and Tesla announced a 30 MW, 80 MWh project in September that is expected to be online even sooner, and will be the largest operating battery for a time.

The accelerated deployment comes in response to an unprecedented shortage of natural gas for electricity generation in southern California. Last October, a leak at the Aliso Canyon gas storage facility outside Los Angeles caused it to be shut down, constricting fuel supplies for area plants. 

Fearing blackouts, the California Public Utilities Commission quickly mandated a series of mitigation measures, including an expedited procurement for local energy storage resources. The more renewable energy that can be stored during the day, the reasoning went, the less need to fire up fossil fuel generators as electricity demand increases in the evening.

The CPUC order directed the utilities to identify storage projects that could be sited, constructed and put into operation in only a few months. Though the regulators said storage resources must be “cost-effective” compared to other local capacity products, no pricing details for the projects have been released.

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It is often said that an energy storage project needs more than one stream of revenue to succeed and often regulatory barriers are seen as the biggest impediment to reaching that goal.

Indianapolis Power & Light’s 20 MW, 20 MWh Harding Street storage facility that entered service in May is one example. It provides grid services for IPL, but market rules in the Midcontinent ISO are not conducive to battery storage plants, so IPL has petitioned the Federal Energy Regulatory Commission to find that MISO’s rules are discriminatory and need to be revised.

However, some storage companies have built a dual revenue stream into their business model. They see the market for energy storage not as a flow of services from on one side of the meter to the other, but as more of a two-way street serving customers on both sides of the meter.

A big part of Advanced Microgrid Solutions’ business, for instance, involves installing behind-the-meter energy storage systems, but as CEO Susan Kennedy said, “We are a utility-facing company.”

That was evident in the company’s July 2015 announcement of a deal to deliver 50 MW of energy storage for Southern California Edison. Under the deal, SCE will purchase capacity from the storage systems under a 10-year contract, and expects to use the electricity stored in AMS’ hybrid-electric buildings to offset the power once produced by the decommissioned San Onofre nuclear power plant and other soon-to-be retired gas-fired plants.

But the storage system to provide the utility those services will reside on the customer side of the meter in what AMS calls hybrid electric buildings. There, a combination of energy storage technology and analytical software will enable the building owners to improve energy efficiency, lower energy bills and reduce greenhouse gas emissions.

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Walmart is moving toward 100% renewable energy. The retail giant does not have a time frame for that target, but says it already derives 25% of its global electricity needs come from renewable sources. That said, Walmart has also starting eyeing energy storage as a prime investment to help smooth the intermittence of renewable energy. Right now, the retail giant has 17 energy storage projects in California, including six 200 kW, 400 kWh solar-tied batteries. 

“Walmart is actively evaluating different energy storage technologies that have the potential to reduce our operating costs and improve stores’ resilience during power outages and extreme weather events across our portfolio,” Mark Vanderhelm, vice president of energy for Walmart, said in a statement.

Axiom Exergy, on the hand, is carving out a niche in the energy storage sector by targeting supermarkets, making it a good fit for a company like Walmart. Supermarkets have thin margins, making cost savings an important contributor to profitability.

Axiom says its refrigeration battery can reduce on-peak electricity demand at the Walmart store by up to 40%. It also has the potential to reduce refrigeration related operating costs and improve resilience across stores. Refrigeration can represent up to 55% of the average supermarket’s electricity consumption.

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When smart phone batteries catch fire or laptop batteries explode on airplanes, it makes the news.

So far batteries used to store energy at the residential and commercial level have avoided those headlines. But eventually there will be a problem.

“Battery fires are rare, but when they happen you have to be prepared,” said Lt. Paul Rogers with the Fire Department of New York’s hazardous materials operations division.

Rogers works with a team within FDNY’s hazardous materials operations division, and he has become the point person on energy storage safety issues. “I am a one man show,” he said, operating as a liaison with regulators, researchers and industry.

As the headlines suggest, much of the current safety concerns about batteries revolve around lithium-ion batteries. Those concerns are well founded: Li-ion batteries have a lion’s share of the energy storage market and are the fastest growing storage technology.

Li-ion batteries have become ubiquitous in laptops and smart phones. But batteries used for grid-tied stationary storage applications are quite different than those used in robust, long term use case scenarios such as behind-the-meter applications or on a transmission or distribution system, said William Tokash, a senior research analyst with Navigant Research.

Grid connected batteries have sophisticated software systems that manage the battery during charging and discharging cycles, and they are equipped with thermal control systems and software designed to ensure safe operation, as well as early detection of any operating concerns.

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The first energy storage project in the Midcontinent ISO is up and running, but it is not being compensated for the services it is providing in the MISO footprint.

Indianapolis Power & Light’s 20 MW, 20 MWh Harding Street storage facility went into service in May, but as valuable as those batteries may be, there is no regulatory path for IPL to get paid.

IPL is working on that problem, but it could be a heavy lift.

Late last month, IPL filed a complaint with the Federal Energy Regulatory Commission, asking the regulator to find that MISO’s rules for energy storage are deficient and should be revised.

The fast track complaint seeks three changes. IPL wants to see MISO revise its tariff for primary frequency regulation (PFR) by unbundling it and paying locational marginal prices (LMP) for the service under its own schedule. Because it is an automated function, current rules do not consider PFR to be a market operation because there is no bid and dispatch function.

The utility also wants MISO to revise its dispatch protocols for secondary frequency control. As currently designed, lithium-ion batteries wanting to participate in the MISO market would be forced to operate in a way that would degrade their batteries quicker than usual.

Those protocols were designed for flywheel storage devices, but forcing li-ion batteries to provide one hour of injection and one hour of withdrawal prevents batteries from “being used in the most valuable manner,” the filing says.

Cell life of the Harding Street battery would be reduced to three years, instead of the 10 years if it were cycled properly, IPL argues. IPL also wants to be paid, not charged, the LMP when withdrawing power from the grid in response to frequency deviations.

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Companies are continuing to turn to energy storage as both an environmental and financial solution, with the ability to provide services back to the grid generating more opportunities to grow revenues. For Lockheed Martin, the latest installment cements the aerospace and defense contractor’s entry into the energy storage market. 

Lockheed Martin’s GridStar system consists of modular, scalable energy storage units that contain batteries, local-controls software and all required balance-of-system components. Lockheed Martin said each unit can be configured to provide up to 375 kW of power and up to 600 kWh of energy storage. 

Within Lockheed Martin, the company’s Lockheed Martin Energy is a line of businesses focused on energy solutions like demand response solutions, energy efficiency, energy storage, nuclear systems, tidal energy technologies and bioenergy generation. Earlier this year, Lockheed Martinexpanded its interests to include energy storage, including both lithium ion and flow battery technology.

The company will target small to medium utility projects and C&I customer uses like demand charge reduction for its lithium-ion offering while attempting to commercialize its flow battery for longer-duration, grid-scale functions.

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