Storage: Are Utilities the Only Game in Town?

As we all know, storage is key to making variable renewables work on the grid. The natural home for storage systems might seem to be the electric utilities, which have the scale to develop large projects and integrate them with generation. But the reality is more complicated. Storage and renewables together allow for decentralization of the grid, especially through ‘behind-the-meter’ systems. Unlike utility-managed storage, these systems serve residences and businesses directly. How will ‘behind the meter’ storage impact the total storage market in the coming years?

Storage by Segment (% of total) [Source: Greentech Media]

Right now, utilities dominate

As can be seen from the graph, utilities currently account for about 90% of energy storage systems deployed. This is largely because utilities need storage to make renewables work – and the more megawatts of renewables developed, the greater the need for generation smoothing through storage. Utilities are also leading the market right now because they’re responding to local requirements. California, for example, is requiring 1.3GW of storage by 2020. With those kinds of mandates, utilities have to push the storage market forward.

Non-utility market set for major growth

But behind-the-meter technologies have also been gaining ground independent of utilities. As they become more cost-competitive, these systems will add to the advantages of residential solar. As shown above, in just a few years from now, these non-utility storage systems will account for nearly half of new deployments. Residential storage installations increased by 61% in Q2 of 2015 relative to the previous quarter, driven largely by the entry of Tesla’s home battery pack into the market. Non-residential storage had its best quarter ever, adding more than three times as much capacity in Q2 relative to Q1.

What’s the role of policy?

There’s an interesting question with states’ mandates for how much storage utilities are required to integrate: do they get to count their customers’ behind-the-meter systems? The answer is not yet totally clear, but a number of states are offering flexibility. In fact, this flexibility could accelerate storage adoption even further – with the economic power of utilities pushing storage costs lower, the case for storage would grow stronger even in states without mandates. A recent report by GTM Research highlights the power of state policy, especially in California, and notes that new policies encouraging storage are on the horizon in Maryland, Oregon, Washington, and elsewhere.

Utilities, as well as residential and non-residential consumers, all have roles to play as storage continues to revolutionize the energy landscape. Keep your eye on storage systems and their costs – whether behind-the-meter, or in front of it, these systems will bring big changes to utilities and consumers in the coming years.

*Article via g-bit.com, a clean energy research and advisory services firm. Contact g-bit at info@g-bit.com.