Deployment of energy storage, especially batteries, will increase substantially in the next few years.

Three underlying trends in the energy markets will drive the growth. They are favorable federal and state regulations on energy storage, falling costs for batteries due to advances in technologies, and an improved ability by energy storage owners to tap into multiple revenue streams.

However, as with any novel technology, the array of opportunities for storage brings new types of risks. Project developers and investors need to understand the risks so that they can plan for contingencies and mitigate risks.

This article describes changes in the market that are driving deployment and improving the economics of storage and then identifies unique risks for storage projects and how participants in such projects can mitigate the risks.

Regulatory drivers

The storage market is poised for exponential growth. By 2022, Greentech Media is projecting an annual market of 2,600 megawatts, which is nearly 12 times the size of the 2016 market.

New market rules will enable owners of energy storage systems to earn revenue from a growing number of sources, such as deferred transmission and distribution upgrades, integration of intermittent resources, reduced demand or increased generating capacity to address peak load, the provision of ancillary services, and enhanced grid reliability and resiliency.

Until recently, storage was a square peg jammed into the round hole of historic regulation.

The existing federal regulation of wholesale power sales and transmission in interstate commerce was designed for a world largely devoid of any significant energy storage. Although pumped-storage hydroelectricity has been around for a long time, it has very different characteristics from modern storage technologies such as batteries, flywheels or thermal energy storage projects.

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Energy storage for the residential solar market has always been something of a holy grail for advanced energy companies. If storage becomes cheap enough, it could allow a rooftop solar system to provide all of the energy a homeowner needs, potentially making it possible to go off-grid. It could also be the energy hub for the home, deciding how to use energy most efficiently and connecting the smart devices that are beginning to become more common. 

In 2017, the commercial and utility energy storage markets started to thrive and grow, and in 2018, it looks like the residential energy storage market will start to show the same promise. Here’s why that is and why SunPower (NASDAQ:SPWR), SolarEdge (NASDAQ:SEDG), and Sunrun (NASDAQ:RUN) — and not Tesla (NASDAQ:TSLA) — are the three to watch next year. 

Energy storage systems finally make financial sense

The reason energy storage hasn’t been common in the home is that there was no financial reason to have it. Net metering allowed customers with solar systems to sell excess electricity to the grid at the same price they paid for electricity, effectively making the grid their storage location. 

As net metering has come under pressure across the country the economics of residential energy storage systems have changed. In some cases, like Hawaii, utilities are paying lower rates for rooftop solar exported to the grid, allowing a storage system to perform arbitrage. In others, there are demand changes based on the peak energy use of a home during a month, and if a storage system can lower those charges, they can be economical. Another popular structure is time-of-use rates, which adjust the cost of electricity throughout the day, something California has begun implementing. If a storage system can shift when a consumer uses grid electricity from an expensive time to a cheap one, it can make the storage system economical. 

These rate structure changes have only become widespread in the last year, driven by rate changes in California, which also happens to be the biggest solar market in the U.S. And those changes are what will make residential energy storage a booming business in 2018.  

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PALO ALTO, Calif., Dec. 26, 2017 (GLOBE NEWSWIRE) — Infinity Electrostatics LLC, a technology development firm for additive 3D printing and graphene production, is pleased to announce development of a unique process to produce a continuous formed super-capacitor to store energy.

Using graphene, or eco-friendly hemp and bamboo, almost any carbon-based energy dense material can be used to make a super-capacitor or battery.

Roll forming using a matrix of structural materials and carbon based material (such as graphene, hemp, or bamboo) allows assembly to become a battery or super-capacitor.

Layering of fine particles may be done using electrostatics and a tribo-effect similar to a laser printer. Depending on output layered matrix, the result may be a thread, tube, or meso-scale pole. Flexibility is determined by the infrastructure infusion compound, which allows the final product to be thread, rope, or a structural panel. A continuous form loom can be used to incorporate multiple fiber types, including conductors and optical transmission fiber.

When the infrastructure (supporting) material  includes carbon fiber, hemp, or bamboo mat, resin or epoxy infused composites are continuously fed so that the layered material can be vacuum bagged into a solid structure (including a 3D printer). The result of which is a structure which becomes a super capacitor, or energy storage device. Using conventional carbon fiber lay-up methods, this energy storage structure could become a aircraft wing, car body, or a ship hull. When supporting infrastructure material is combined with closed cell foam, or air, the unique insulating qualities of the structure allow it to be used to form flat, or shaped panels.

In smaller applications, a tunable electrolyte can be used between layers, including CO2. The unique qualities of the supercritical energy dense molecule allow the carbon-based energy tube to be used in energy harvesting. Since CO2 can go supercritical at 31C, low-grade heat can now be used to produce electricity using the qualities of CO2 with tribo-effect.

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It’s been an interesting year for mergers and acquisitions in the distributed energy space, with some unexpected developments.

We haven’t seen the same massive M&A deals of years past, such as GE’s purchase of Alstom or Honeywell’s acquisition of Elster — although Tuesday’s announcement that smart metering and utility software provider Aclara was being sold for $1.1 billion to Hubbell Inc. helped bring this year’s total closer to the peaks of the past. 

But when you look at the activity in 2017, a pattern emerges.

Over the past year, we’ve seen a number of major European energy companies — and some Japanese, American and Israeli ones as well — buy into the proposition that providing distributed energy technologies and services to their customers will be a significant part of their futures. 

This pattern stands out most clearly in the big European energy giants’ shopping spree this year, starting with Enel’s purchase of Demand Energy in January and closing with Centrica’s purchase of REstore in November.

In between, we’ve seen Total, E.ON, Engie and Shell also make significant acquisitions ranging from demand response and electric-vehicle management to energy storage and the connected home. 

Only a handful of these acquisitions have publicized their purchase price, including Enel’s $300 million purchase of demand response provider EnerNOC, Centrica’s $81.4 million purchase of REstore, and Ormat’s $35 million for Viridity Energy. This makes it difficult to calculate total values for the year’s M&A activity compared to multi-billion dollar deal of the past. 

But the pace of M&A activity, plus the observations of industry insiders, indicates that European utilities are in a bit of a land grab for acquisitions that can help them break into competitive distributed energy opportunities outside their core businesses — or as part of spun-out arms directly focused on the market.

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Last spring, Elon Musk made a daring bet. He claimed he could build and install the world’s largest grid storage battery in South Australia within 100 days of the date a contract was signed or the system would be free. The contract was signed on September 29. Installation was completed by the third week of November. On December 2, the giant 129 MWh system was activated.

On December 14, the Loy Yang coal power plant — one of the largest in Australia — suddenly went offline. In an instant, the grid shed 560 MW of electricity, enough to power 170,000 homes. 600 miles away, the Hornsdale Power Reserve battery system, as the Tesla system is officially known, kicked in within 140 milliseconds. It reacted so quickly, in fact, that the local grid operator was unable to measure the response time accurately. 100 MW of power suddenly surged into the grid, buying valuable time for other power sources to come to the rescue. Utility customers were largely unaware that anything unusual had happened. That’s how good grid batteries work.

State energy minister Tom Koutsantonis told local radio station 5AA afterwards, “That’s a record and the national operators were shocked at how quickly and efficiently the battery was able to deliver this type of energy into the market. Until now, if we got a call to turn on our emergency generators it would take us 10 to 15 minutes to get them fired up and operating which is a record time compared to other generators,” Mr Koutsantonis said according to the Financial Review.

This is actually a benefit of grid-storage batteries that we highlighted years ago after touring the Younicos facility in Berlin. Here are a couple of telling charts from that visit that not only highlight how quickly batteries can respond, but also how cleanly they match the needs.

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Changes to the de-rating factors for battery storage projects competing in the UK’s Capacity Market (CM) will push the sector towards longer-duration batteries, while potentially sparking a shift towards energy arbitrage as a source of revenue for shorter duration applications.

That is the view of storage sector participants in the UK following the announcement last Monday, which cut the de-rating factors for 30 minute duration batteries by almost 80%.

UK Power Reserve, which secured pre-qualification for 400MW of battery storage across the upcoming T-1 and T-4 auctions, has said attention will now be directed towards technologies which can be better rewarded in the CM. UK Power Reserve is a provider of electricity and related services and a developer of low carbon energy projects. 

Michael Jenner, director of policy and regulation at UK Power Reserve, told our sister site Clean Energy News: “We support the de-rating factor because the CM is designed to ameliorate stress events, so you should be rewarding assets for their ability to help reduce those stress events. The incentive now is there for investors to think about building longer duration battery storage, there’s no question about that.

“I still think there’s value in the bankable 15 year revenue of a CM even after the de-rating rates, so investors certainly won’t discount that but the incentive now is firmly there for investors to think about longer duration assets that can actually help to ameliorate a CM stress event.”

Speaking to CEN earlier this week at the Low Carbon Network Innovation (LCNI) conference in Telford, Georgina Penfold, chief executive of trade association Electricity Storage Network (ESN), added that “the writing has been on the wall for a long time” regarding the changes and that investors were already considering their options.

“The initial consultation documents did say that if it went ahead their proposal was from January and it was something we put in our consultation response. It’s not a surprise to the industry.

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I’m back with my yearly list of predictions for the rooftop solar industry. I did OK on last year’s predictions, only completely whiffing on two.

This year, I’m combining my solar predictions with storage, since battery storage is rapidly becoming integrated with PV systems.

1. U.S. solar cell manufacturing won’t restart anytime soon

Billions of dollars in long-term investments are required to achieve large-scale production of the next generation of high-efficiency solar cells. With the right solar industrial policies in place, the cell industry can indeed recover, and bring along associated panel and component manufacturing. Unfortunately, implementing policies to support these investments does not seem to be a priority in Washington, D.C.

2. The panel shortage will not mitigate until the end of Q2

The threat of tariffs is already causing a panel shortage. It takes about a month to finalize and ship orders to a port, and another month to ship containers from overseas — assuming panels are in stock. Without solar panels there can be no completed systems, so there will be a commensurate decline in revenue among all system components.

3. Wires will disappear from solar system monitoring 

Cellular cloud-based solutions will prove to be more cost effective for monitoring. Experienced contractors are realizing that spending a few hundred dollars more on cellular monitoring is much cheaper than Ethernet-WiFi-ZigBee fiddling, and the inevitable customer callbacks as a result of home network failures.

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Changes to the de-rating factors for battery storage projects competing in the UK’s Capacity Market (CM) will push the sector towards longer-duration batteries, while potentially sparking a shift towards energy arbitrage as a source of revenue for shorter duration applications.

That is the view of storage sector participants in the UK following the announcement last Monday, which cut the de-rating factors for 30 minute duration batteries by almost 80%.

UK Power Reserve, which secured pre-qualification for 400MW of battery storage across the upcoming T-1 and T-4 auctions, has said attention will now be directed towards technologies which can be better rewarded in the CM. UK Power Reserve is a provider of electricity and related services and a developer of low carbon energy projects. 

Michael Jenner, director of policy and regulation at UK Power Reserve, told our sister site Clean Energy News: “We support the de-rating factor because the CM is designed to ameliorate stress events, so you should be rewarding assets for their ability to help reduce those stress events. The incentive now is there for investors to think about building longer duration battery storage, there’s no question about that.

“I still think there’s value in the bankable 15 year revenue of a CM even after the de-rating rates, so investors certainly won’t discount that but the incentive now is firmly there for investors to think about longer duration assets that can actually help to ameliorate a CM stress event.”

Speaking to CEN earlier this week at the Low Carbon Network Innovation (LCNI) conference in Telford, Georgina Penfold, chief executive of trade association Electricity Storage Network (ESN), added that “the writing has been on the wall for a long time” regarding the changes and that investors were already considering their options.

“The initial consultation documents did say that if it went ahead their proposal was from January and it was something we put in our consultation response. It’s not a surprise to the industry.

Click Here to Read Full Article