Energy storage deployments in emerging markets could grow 40% annually over the next five years, from 2GW today to 80GW, but barriers include the lack of access to low-cost capital, a new report from the International Finance Corporation has found.  

The IFC, which finances and provides advice for private sector ventures and projects in developing countries, has produced Energy storage trends and opportunities in emerging markets. Its authors, analysts Alex Eller and Dexter Gauntlett of Navigant Research, took an exhaustive look at everything from physical grid infrastructure to market design and regulatory structures and the different uses and applications for energy storage.

At present, some 1.2 billion people in the world lack access to electricity. Eller and Gauntlett quote the United Nations Sustainable Energy for All Initiative (SE4All) that US$45 billion in investment through 2030 would be required to provide universal access to “modern electric power”.

Energy storage is a vital tool for enabling the increased use of renewable energy and other distributed resources and in providing resilience to power supplies, the report says, but the development of energy storage systems (ESS) has been confined to a small number of select markets.

“Despite rapidly falling costs, ESSs remain expensive and the significant upfront investment required is difficult to overcome without government support and/or low-cost financing,” the authors write.

Eastern Europe and Latin American countries showing promise

Much of the report is an overview assessment of the global picture including the factors which might influence the speed and scale of adoption of energy storage in different regions. Worldwide the report’s authors anticipate the addition of 378.1GW of solar and wind generation capacity over the next five years, with the added variability forming a powerful driver for utility-scale storage in particular. The reduction of carbon emissions mandated by the multilateral Paris Agreement could also mean inertia on the grid is provided increasingly by large-scale storage systems.

While existing grid infrastructure could lean on energy storage to provide a growing number of services, remote microgrids could drastically reduce their dependence on diesel fuel to meet energy demand, the report highlights. Cost comparisons show both utility-scale and distributed lithium ion battery storage systems competing favourably with diesel in terms of annual fuel savings, with an installed cost of US$2,062 per kilowatt and US$2,150.3 per kilowatt respectively and saving US$2,223.6 per kilowatt in fuel costs in either case.

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A US-based coalition featuring companies such as Apple, Microsoft, Amazon and Tesla as members has applauded the efforts of the Federal Energy Regulatory Commission (FERC) to open-up US wholesale electricity markets to energy storage and demand response initiatives.

The Advanced Energy Economy (AEE) seeks to impact policy decisions to influence energy concerns. Its members, which also includes General Electric, Veolia, Siemens and a host of renewable energy companies have penned a joint statement to the FERC over the integration of energy storage into selected US electricity markets.

The FERC issued a Notice of Proposed Rulemaking (NOPR) for the energy storage market in November last year, after external campaigning form organisations such as AEE. Under the rulemaking, companies and organisations were invited to submit comments about expanding the market, which were due last week.

“We are entering a new era where advanced energy technologies can compete based on lower costs and increased reliability but are not allowed to do so because of market rules that were designed with incumbent technologies in mind,” AEE’s vice president of federal affairs Arvin Ganesan said.

“This rulemaking can remove some of the market barriers these technologies face, allowing advanced energy businesses to provide reliable energy at lower cost.”

The FERC established the parameters for what types of organisations and what types of energy and infrastructure can connect to power grids in the US, and how the technologies will be subsidised. The latest NOPR has agreed that battery storage can support the grid and ruled that the technology should be viable to receive income from transmissions, making them more attractive to investors and private sector companies.

The new amendments will likely target markets overseen by US Regional Transmission Organisations (RTOs) and Independent System Operators (ISOs). These third-party operators were put in place to ensure that no bias or preference is given to certain generators, and cover two-thirds of the US’ economic activity.

The NOPR will now seek to remove barriers for energy storage and demand response in these markets and RTOs and ISOs will likely be required to revamp tariffs. However, any amendments will have to wait until the FERC is at full capacity. Currently, the Commission is waiting on the appointment of three new commissioners to fill empty seats, and the vetting process could take at least two months.

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Solar Leaderboard (solarleaderboard.com) published its January 2017 Solar Index report and initial estimates indicate that installation activity declined by approximately 40% year over year. The Solar Index tracks permits issued in select areas and is meant to be an indicator for activity across the state.

The report is available for download here.  There are a number of factors that are likely causing the decline including record precipitation, high solar penetration and net metering changes.  We believe that weather has had the most significant impact.

Weather Impact

California experienced strong rain in January, which likely had a major impact on the decline.  Most areas of California experienced rain levels 300% higher than average for the month of January, as reported by the National Weather Service of California.  January is already a slow month for solar and the rain constrained sales and installation activities.

High Solar Penetration

Certain areas in California have high solar penetration and early adoption may have hit a saturation point.  Our research indicates that residential solar penetration in CA reached 7.2% in mid 2016 with some areas reaching as high as 20%, as indicated in the map below and the list of the top 20 CA zip codes with the highest solar penetration.

Net Metering Changes

Net metering 2.0 was introduced in much of California in 2016 with SDG&E switching in mid-2016 and PG&E in December 2016.  SCE is expected to meet the cap by mid-2017.  The changes include TOU rates, interconnection fees and other charges.  Although the financial impact of the changes is relatively minor, it may cause pause for some potential solar adopters.

2017 Outlook

The long-term outlook for rooftop solar is positive, particularly as prices have come down and February and March activity will help validate that the January slowdown was primarily weather related.  Subscribe to our Weekly Solar Index to receive an update on February activity the first week of March.

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Spurred by state mandated renewable energy goals, Panasonic, Xcel Energy, and Younicos have formed a public/private partnership with the city and county to promote a microgrid centered around the Peña Station NEXT, a 382-acre transportation hub located near Denver International Airport. The Xcel Energy feeder for Peña Station NEXT already has 20% solar penetration and is expected to have 30% solar penetration by the time the microgrid project is completed in the first half of 2017.

The project will feature a 1.6 megawatt carport solar system, a 259 kW rooftop solar array installed mounted on top of the Panasonic Enterprise Solutions Company’s building and using Panasonic HIT solar panels, and a Younicos 2 megawatt/2 MWh lithium ion battery system with inverter and controls. The battery storage component will be integrated into the company’s innovative Y.Cube system. Panasonic’s Denver operations building, which has an intelligent building energy management system, will serve as the initial anchor load for the microgrid.

“We’re so excited about this ‘portfolio’ microgrid….because of how a system such as this can unlock more benefits for more stakeholders,” said Peter Bronski of Panasonic, “and how this public-private partnership approach to the microgrid and the battery system’s stacked use cases can strengthen the overall economics and value propositions.”

“Many microgrids and energy storage systems are deployed for single use cases by single entities, such as a corporation pursuing demand charge reductions or a university campus strengthening energy resilience. By contrast, the Peña Station NEXT project used a public-private partnership approach that resulted in a multi-stakeholder “portfolio microgrid.”

The battery energy storage system will have five usage scenarios:

1) Solar energy grid integration via solar smoothing ramp control and solar time shifting

2) Grid peak demand reduction

3) Energy arbitrage

4) Frequency regulation

5) Backup power for Panasonic’s network operations center

“As part of Xcel Energy’s Innovative Clean Technologies program in Colorado, we’re eager to demonstrate how energy storage can integrate more solar energy on our system. We’ll also examine how battery systems can become more cost effective by supporting the grid and providing reliability for customers,” said Beth Chacon, director grid storage & emerging technologies at Xcel Energy.

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An energy trade association which includes Apple, energy storage maker AES and solar giants SunPower and First Solar in its leadership has welcomed the proposal by US energy regulator, FERC, to remove barriers to participation in wholesale markets for energy storage and distributed energy resources (DERs).

Advanced Energy Economy (AEE), which seeks to have an impact on policy matters shaping future energy concerns, was among the groups submitting lengthy documents to FERC, which was soliciting views until 13 February on its Notice of Proposed Rulemaking (NOPR).

The NOPR was issued in November last year and proposed to integrate electricity storage into organised markets, specifically the wholesale markets operated by the US’ Regional Transmission Organisations (RTOs) and Independent System Operators (ISOs), which between them ensure the reliability of the majority of the country’s electricity supplies.

In order to remove barriers to participation in these markets, RTOs and ISOs would be required to alter tariff structures in order to recognise specific characteristics of energy storage resources and give energy storage operators a new classification for their assets.

Critical first step

Acting chairwoman of FERC, Cheryl LaFleur, was widely quoted as saying the regulator had received “a lot of comments” in her appearance at the National Association of Regulatory Utility Commissioners (NARUC) earlier this week.

Advanced Energy Economy, which also includes Johnson Controls, Schneider Electric and GE in its leadership council, along with general members that include Amaresco, Alevo, Tesla, Sunverge and Younicos, from the world of energy storage along with diverse mainstream names such as Amazon and Facebook, was “strongly supportive” of the FERC NOPR, its comments said.

“The NOPR is a valuable and critical first step in what must be a comprehensive effort to eliminate unjust, unreasonable, and unduly discriminatory barriers to participation for advanced energy technologies in FERC-jurisdictional wholesale markets,” AEE said.

Currently, FERC, which should have a five-person executive board, is led by former utility executive LaFleur and just one other board member, Collette D Honorable, who is set to step down in summer as her five-year term ends. The NOPR cannot be acted upon definitively until the full board is completed, which requires nominations from the White House, followed by a vetting process and confirmation vote, which some sources said could take at least two months.

Battery-friendly PJM’s ‘supportive’ response

PJM Interconnection, which is noted in energy storage for being the first of the US RTOs to allow batteries to provide frequency response grid services in a competitive market, said it was “supportive” of the NOPR. PJM coordinates wholesale markets in 13 US states and the District of Columbia.

“…Electric storage resources (“ESRs”) have already flourished in a number of PJM markets, and through its stakeholder process, PJM is working to expand its market rules to allow for additional opportunities for ESRs and distributed energy resources,” PJM’s comment said.

Nonetheless there were two areas where PJM said it wanted to see changes in the NOPR before it passed into a new set of rules. The first was on “key threshold issues such as potential jurisdictional issues” which relate to charging and discharging of behind the meter resources, the second was that rules should be flexible enough to accommodate the sometimes subtle differences between each RTO/ISO.    

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Call it one of the stranger battery storage systems out there. California municipalities are reportedly placing orders for as much as 1 MW of ice storage batteries from firm Ice Energy.

The Southern California Public Power Authority (SCPPA), an organization of the municipal utilities of 10 cities and one irrigation district is placing the order with the systems to be installed at consumer’s homes in a pilot program.

The battery storage market is booming – literally growing by several hundred percent annually over the last few years – in large part because traditional utilities are excited about the opportunity to avoid costly investment in new peaker plants. Using home battery storage systems enables these firms to defer that investment.

The ice battery systems are slated to be installed in about 100 homes with each 9.6kW system replacing the outdoor condensing units of homeowners’ air conditioning systems. Ice Energy’ batteries in off-peak (low energy cost) periods use copper coils filled with cold refrigerant to create ice from the homeowner’s regular tap water.

Once the ice is created, the residential Ice Bear 20 can cool a home continuously for four hours, and the company says that can save 95% of associated electricity costs compared with traditional HVAC units. The firm also has a large Ice Bear 30 for commercial customer. The system is particularly beneficial in states with large time of use differences in electricity pricing such as northeastern states like Connecticut and west coast states like California.

Utilities like those in the California alliance benefit from reduced peak load demand thus avoiding the cost of buying peak wholesale power or (eventually) building new peaker plants.

Ice Energy is not the only firm in the market for ice batteries though. Competitor Viking Cold reported last year that a California utility was interest its products to help counter the challenge the “duck curve” of solar energy energy supply and demand.

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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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In recent months, the Federal Energy Regulatory Commission (FERC) has taken several steps toward fully incorporating energy storage in U.S. wholesale energy markets — which, if successful, could be a major boon for the energy storage industry.

These actions reflect the fact that there’s an exponential amount of energy storage slated to come on-line, as well as its “unique abilities to help in different ways,” said Acting FERC Chairman Cheryl LaFleur, speaking this week at the National Association of Regulatory Utility Commissioners’ winter meeting.

“Sometimes it [benefits] transmission, sometimes it’s generation, sometimes it can help with ancillary services, and we’re proposing to require changes in the wholesale market to reflect that,” said the commissioner, who is a Democrat.

In November, FERC issued a proposed rulemaking that would require each regional transmission organization and independent system operator to remove any barriers in their tariff structure that are inhibiting the market participation of storage resources.

“We wanted them to be able to participate to the full extent of their capabilities,” said LaFleur.

The same proposal would also allow distributed energy resources, including but not limited to energy storage, to be aggregated and bid directly into organized wholesale markets. The proposal specifies that resources looking to participate at the wholesale level cannot already be receiving payments through the distribution system, such as net metering.

Commissioner LaFleur has expressed some concerns over opening up market competition and is viewed by some as more friendly to traditional market players. And with three seats currently unfilled on the five-member FERC panel, there’s uncertainty around how, and how quickly, energy storage and other advanced energy technologies will be recognized at the national level. 

Several clean energy stakeholders filed comments on Monday urging FERC to allow advanced energy technologies to compete on providing energy and reliability services.

The proposed rule was just the first step in opening up energy markets. FERC commissioners still have to decide whether to finalize it — which will have to wait until the open seats are filled. Regional markets will then have 18 months to change their tariffs, which is a process that goes through FERC review and is also judicially challengeable.

“These technologies aren’t new,” said Arvin Ganesan, vice president of federal affairs at Advanced Energy Economy. “So it’s not a matter of whether they can technically provide [grid] services, but it becomes a question of whether RTOs will change their tariffs to allow these technologies to compete to provide that service.”

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The news has been flying thick and fast about Germany-based sonnen, maker of the sonnenBatterie “eco compact” energy storage system. Billing its technology as “the smart way to capture the sun,” sonnen seems determined to race neck and neck with Tesla to fill strong demand in the US for small scale batteries with slim, sleek silhouettes.

In the latest development, sonnen has just just announced the opening of a new manufacturing and R&D center in Atlanta, Georgia. So, why Atlanta?

Another New Innovation Hub For Atlanta

The new facility, dubbed the sonnen InnovationHub, will start churning out product in April.

As an R&D facility, the InnovationHub will ramp up sonnen’s US business, which is already growing at an “exponential” rate according to the company. Here’s a snippet from Christoph Ostermann, sonnen Group CEO:

We expect that linking our US manufacturing and R&D teams in one facility will increase the rate of product innovation, and enable us to better adapt to the future needs of the high-growth U.S. residential energy storage market.

Like Tesla, sonnenBatterie is based on lithium-ion technology. One difference is that sonnnen enables its customers to dip into the community aspect of small scale, distributed energy production and storage, paving the way for the “virtual power plant” of the future:

Through its sonnenCommunity, energy independent homeowners throughout Europe can produce, store and share their own electricity. sonnen’s latest developments, the sonnenFlat-Box, which connects non-solar customers to the sonnenCommunity and grid services, and the sonnenFlat tariff, which provides community members with energy at $0 for 10 years, are changing the way energy is used.

As for the choice of Atlanta, that’s a natural. Sonnen already has a foothold in California and when it went shopping for an east coast location, Atlanta’s Midtown Alliance probably caught its eye with pitches like this:

Vibrant. Innovative. Sustainable. A community at the epicenter of life and business, urban and natural, technology and culture. Home to the city’s premier green space, historic neighborhoods and Southern landmarks. This is Midtown Atlanta – in the heart of it all.

Midtown Atlanta’s Innovation District is already a hotspot for clean tech companies and other R&D, anchored by Georgia Tech University, so there’s that.

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