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Energy storage already cost-competitive in commercial sector, finds study

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PV-Magazine

Global research institute McKinsey & Company has analyzed current energy storage prices and concluded that commercial customers are already feeling the economic benefits of cheaper batteries and recent price falls in lithium-ion technology.

Battery storage costs are falling, prompting an uptake among prosumers and leading to new challenges for utilities, finds the report

Battery storage costs are falling, prompting an uptake among prosumers and leading to new challenges for utilities, finds the report

With battery-pack costs now down to less than $230/kWh – compared to around $1,000/kWh as recently as 2010 – storage uptake is on the rise across Europe, Asia and the U.S.

This growth is being facilitated by a greater uptick in electric vehicle (EV) adoption, with major players now scaling-up their lithium-ion manufacturing capacity in order to meet demand.

The immediate effect of this has been a downward pressure on prices, and storage has now begun to play a more central role in energy markets, the McKinsey report said, moving from niche uses such as grid balancing to becoming a viable alternative to conventional power generators, and a stable support act for renewable energy.

Furthermore, as more and more PV markets begin to trim and pare back their solar incentives, consumers – particularly commercial-scale PV owners – are exploring with greater gusto the idea of solar+storage to allow them to consume power on demand and export excess electricity to the grid.

And the key driver behind this new trend is price. McKinsey believes that in a matter of years households and business will soon be able to pair solar+storage with a small electrical generator and defect fully from grids.

Aside from giving customers more energy independence, the impact of cheaper storage costs could be profound for utilities, the report found.

Challenges of cost
Cheap battery storage will pose an increasing challenge for big utilities behind-the-meter, whereas those that operate in-front-of-the-meter (such as large-scale installation used by utilities for a variety of on-grid applications) will see opportunities for flexible deployment and cost reduction increase, said the report.

“Cheap(er) storage will be even more disruptive to ‘business as usual’ because different combinations of storage and solar will likely be able to arbitrage any variable rate design that utilities create,” the report adds, pointing to how net metering and FITs have served as powerful incentives to install solar panels over the past few years.

The success of these schemes forced utilities to then design rates that reduced the incentive to install solar. By moving to time-of-use pricing structures and implementing demand charges, utilities were able to wrest back some financial control against solar customers.

The growth of storage, however, moves the goalposts once more and allows customers to shift solar generation away from exports to cover more of their power needs, meaning that many continue to reap almost full retail value for their solar generation.

One outcome seen in advanced storage markets such as Hawaii and Australia is solar+storage customers managing their energy needs for about 80-90% of the time, but staying connected to the grid in order to have that 24/7 access. This trend is likely to be seen soon in U.S. states of Arizona, California, Nevada and New York.

“Many utility executives and industry experts thought the risk of load loss was overblown in the context of solar,” said the report. “The combination of solar plus storage, however, makes it much more difficult to defend against.”

Faced with these market forces, McKinsey’s researchers recommend that utilities radically change their grid-system planning approaches by investing in more intelligent software and analytics to ensure the highest priority needs on the grid are addressed more efficiently.
Source:PV-Magazine. Reproduced with permission  

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  • john

    With payback of 25% for solar only the use of storage has to be viable especially for those large users of power with a large footprint as in shopping centers.

    • JeffJL

      From where do you get your 25% figure from?

      • john

        A 5 kw system will produce at least 8000 kWh of power for a year.
        With decent angle north in this area 7000 at lower latitudes.
        Here is the important aspect cost of power $0.28
        In the light commercial business situation they use most power 9 to 5.
        So of that output at 21.9 kWh per day it is worth $6.35
        The year outcome is $2317
        However we have to discount that to a lower figure say $1800
        The system costs $5250
        So you can see that is why it is 25% return
        If some power is not used and exported at 8c per kWh then this adds to the outcome.
        When the cost of power is very high it is a No brainer to use PV.

        • MaxG

          Numbers sound OK, except, when you export your retrun will be lower; you can’t (ac)count twice by saying you make 28Cents on the generated energy and get 6 Cents. When you export you get effectively 22 Cents less, hence your return goes down.
          However, it is still a great return 🙂

    • Willagmahaney


      before I saw the draft which said $4937 , I didnt believe …that…my best friend was like they say really bringing home money part-time from there labWage. . there friends cousin has done this for only 7 months and by now took care of the mortgage on their apartment and bought a great Audi Quattro . visit http://GlobalFinancialJobsCash33WagePlanetGetPay$97Hour §§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§§

  • Brunel

    $230/kWh? Mr Musk tweeted U$250/kWh.

    I doubt the $230/kWh claim.

  • Drake Anderson

    Show me a steel mill using Batteries.
    Show me a steel mill using Natural Gas.
    Then show me who is business after 7 years??