The Shifting Reality of Residential Energy Storage

on October 26, 2016

Electric-Light-and-PowerThe residential energy storage industry has gained significant momentum during the past year. Yet while there has been substantial progress, recent high-profile product launches have led to media attention that overestimates the current state of the industry. Despite the potential of residential battery energy storage systems to drive transformation in electric power systems, they are an economical investment only in select markets today.

Going forward, utility involvement in the residential energy storage system (RESS) market will be a turning point for the industry as utilities look to own, distribute or access these storage systems. This article explores the evolving economics of RESS, how utility involvement is rapidly shifting market dynamics and the potential for this technology to lay the foundation for the distributed energy revolution.

Evolving Economics

Residential storage is a flexible resource that provides benefits for both utilities and their customers. These systems are typically installed to help homeowners save money on monthly bills, improve the economics of new or legacy solar photovoltaic (PV) systems and act as a backup power source. In addition, RESS technology is increasingly being recognized for the grid services it can deliver. Benefiting from economies of scale from the consumer electronics and electric vehicle (EV) industries, RESS lithium ion battery costs have come down dramatically. By some estimates, costs have come down by 80 percent for an installed system in leading markets in the past 18 months. This industry’s growth is directly tied to a number of interrelated factors that will dictate residential storage economics, as well as market size in a given country.

One of the most significant factors that will dictate the residential energy storage industry’s growth is how domestic customers pay for electricity around the world. Adjusted compensation paid for excess solar PV generation, time-of-use pricing and the implementation of residential demand charges can quickly change the economics of RESS for a given customer. The reduced compensation paid for excess PV energy sent to the grid has been the foundation of the residential storage business case in leading markets. Due to the growth of the solar PV industry, compensation programs (including net metering and feed-in tariffs) are being phased out or replaced with alternatives.

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Electric Light and PowerThe Shifting Reality of Residential Energy Storage