Four Trends Shaping the Solar-Plus-Storage Market

Until recently, consumers and businesses embraced solar-plus-storage because they either wanted a backup in the case of utility outages or desired to be off-grid, says Wes Kennedy, instructor of HeatSpring’s Comprehensive Solar-Plus-Storage course.

But in recent years, all that has changed. Price drops in battery systems, technological advances, new utility rates, and policy advances are all re-shaping the solar-plus-storage market. They’re creating new opportunities for solar installers, homeowners and businesses, says Kennedy.

Here are four trends driving the market, says Kennedy.

Solar-Plus-Storage Helps Businesses Avoid High Utility Demand Charges

“Historically, the core market for solar-plus-storage has been people interested in backup power,” says Kennedy. “The next market was commercial demand charges from utilities.”

Here’s how demand charges work: Utilities charge commercial customers two components. The first is for total consumption per month, in kWh, and the second is for demand, based on the highest capacity the commercial customers require during a billing cycle. Demand charges are usually billed at 15-minute intervals.

National Grid explains it this way: “The price we pay for anything we buy contains the cost of the product plus profit, plus the cost of making the product available for sale, or overhead.” The idea is that the utility must pay for buying and maintaining power plants and other equipment to meet their highest demand, even though they don’t need these plants much of the time. That’s the overhead.

Using solar-plus-storage, customers can store solar energy when their demand is low, and use the stored energy to lower their peak demand. In many cases, this can lead to significant savings for the utility customer.

Recently, utilities in Arizona began offering voluntary demand rates to residential customers. In Arizona Power territory, 120,000 customers have subscribed, according to an article in Greentech Media.

As more and more utilities begin implementing such rates for residential customers, the market for residential solar-plus-storage is expected to heat up.

With Time-of-Use Rates Becoming More Popular, Solar-Plus-Storage Can Reap Benefits

While utilities have imposed demand charges on commercial and industrial customers for many years, they’re just now beginning to offer time-of-use rates, says Kennedy.

“The next trend is time-of-use,” he says.

Under time-of-use rates, utilities establish off-peak and on-peak charges. These are often optional rates for customers willing to change how they use energy. For example, in Oregon, Portland General Electric has a summer time-of-use plan divided into peak, mid-peak and off-peak rates. For off-peak—which runs from 10 pm until 6 am—the utility charges 4.399 cents/kWh. During peak hours—when customers need a lot of energy, from 3-8 pm, the company charges 13.197 cents/kWh.

To save money, customers can store solar energy during off-peak hours, and discharge their batteries during on-peak hours.

Customers who sign up for time-of-use rates will need bigger batteries, says Kennedy. Rather than just cutting their peak for 15-minute increments as they do to avoid demand charges, they’ll have to shift their usage for longer periods of time.

“With time–of-use, they’ll have to reduce demand on grid for three- or four-hour time periods,” Kennedy says. “Demand charges are 15-minute things; you can manage demand charge with relatively small changes,” he says.

Time-of-use rates, which are being offered more and more often, offer residential customers the opportunity to save money using solar-plus-storage, he adds. However, for homeowners, the success of such programs depends on the cost of batteries.  And the good news is that costs are coming down.

As Lithium-ion Batteries Become More Cost-Effective, Markets Expand

Traditionally, lead-acid batteries have been the technology of choice for storage buyers. However, lead-acid batteries are limited by their short lifetimes, which boost the cost of the batteries, says Kennedy. Lithium-ion batteries, on the other hand, have much longer lives and are becoming more cost-effective, thanks in part to the fact that Tesla’s gigafactory will bring many more batteries to the market and drive prices down.

“Tesla started a downward trend in prices,” says Kennedy. “We’re seeing the same thing we saw with PV–economies of scale and price drops.”

As a result, lithium-ion batteries are expected to create new opportunities in the market, he says.

Ever-Changing Federal and State Policies Move the Market Forward

In addition to lower prices for lithium-ion batteries, state and federal policies will continue to push the market forward, says Kennedy.

If contractors install PV and storage together, the systems will qualify for a federal 30 percent investment tax credit, Kennedy explains.  But storage alone does not qualify for the credit.

Numerous policies exist and continue to pop up on the state level. The first policy to move the market was a California mandate, established in 2010, calling for utilities in the state to acquire a whopping 1.3 GW of energy storage. California has also enacted the Self-Generation Incentive Program, or SGIP, which says the state’s investor-owned utilities in 2017, 2018 and 2019 must collect $83 million annually for the SGIP program. That’s double the amount collected in 2008, and energy storage will get 85 percent of the extra funds.

In Hawaii, due to too much solar on the grid, utilities have at times prevented solar producers from selling solar back to the utility, which also boosts markets for solar-plus-storage.

“The only way you could put solar on a home was by not selling energy back to the grid. You had to store it and use it,” Kennedy says.

Students Need to do Their Own Research about Policy in their States

State and local governments offer numerous additional incentives, and new ones are added often. Kennedy encourages students to do their research and find out what’s available in their area, then decide how best to design solar-plus-storage systems.

“I tell students, ‘Here are some examples of incentives,’” says Kennedy.  “I tell them, ‘Do your research in your area to find out what they are, and if there aren’t any, then lobby for them.’”

In addition to markets for solar-plus-storage, Kennedy’s course focuses on the pros and cons of different battery systems.  He also examines technologies such as inverters and microgrid controllers.

On grid, off-grid, residential, commercial, industrial and utility systems are also covered in the course.

“Comprehensive says it all,” says Kennedy about the course. “The most common people who take it are solar installers. They take the course and it gives them what they need to plug in the specifics about their area into their market,” says Kennedy.

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