The market for commercial-sized battery installations is set to grow in the US, with a number of case studies demonstrating that the financials for PV plus storage on a large scale can add up.
GTM Research has released a report setting out a number of uses for battery storage for commercial electricity consumers. The cleantech market analysts believe that 700 MW of commercial storage will be installed in the US by 2020. MJ Shiao, the Director of Solar Research at GTM, said that while the commercial storage market will remain relatively modest, given that GTM forecast between 5.5 GW and 6 GW of PV installations in the US in 2014, use cases are emerging in which the finances for commercial storage installations stack up.
“Part of the issue with the growth of storage markets globally is that there are different use cases for it, it makes sense to install storage for different reasons, and that is part of the promise of storage because there are these different applications,” said Shiao. “Saying that, it’s also pretty difficult to balance them and to make the project economics work as of right now.”
GTM Research identified a number of use cases for commercial storage in its “Distribute Energy Storage 2014” report.
One such use case is reducing peak demand. US commercial electricity customers currently often pay a kWh rate, but also a charge based up peak usage. in this case, a PV array can be effective in reducing kWh consumption, but a peak may still exist.
“It’s really difficult for PV, as it exists today, to really reduce that peak demand because you just can’t bank on it,” said Shiao. “It will work when the sun is out, but what happens when that demand happens when the system is down or in the worst case scenario, or even just when it doesn’t coincide with the solar peak?”
A battery storage is an effective solution to this, allowing PV electricity to be stored and discharged at times of peak demand, when air conditioning or large machinery is switched on. Even without a PV array, battery storage can also help avoid a peak by drawing electricity from the grid at times of low demand. With time-of-day pricing, this proposition is further enhanced.
A second and rapidly emerging use case identified for commercial storage in the US, is in frequency control. The US Federal Energy Regulatory Commission has introduced a mandate to regional grid operators to provide frequency regulation on a local level – through a market mechanism. Large battery installations will be able to bid into this market.
The regulatory mandate is for 450 MW of “dynamic, fast responding resources” to provide frequency regulation. Prices for this service range from US$13.75 to $38.75/MWh.
Batteries are ideally suited to provide this service, over and above fossil fuel generators, in that a battery can respond to demand far quicker than ramping up a diesel, gas or coal generation source. GTM Research’s MJ Shiao says that this mandate will drive distributed battery storage on a commercial, with or without PV.
“Power electronics are going to be much quicker to react than a fossil fuel plant,” said Shiao, “so with batteries and storage and power electronics, you can just react to those changes more quickly.”
GTM Research points to lead-acid and lithium-ion technology as being the mature technologies most likely to be deployed to serve the emerging commercial storage market in the US.
The third use case GTM Research points to in its report, is in areas with high levels of PV penetration. In the US this means states such as Hawaii, southern New Jersey and California. Here the analysts point to the capacity for storage to “smooth” PV grid feed in.
Requirements for PV plus storage in some parts of Australia are already in place. Horizon Power, for one, now requires storage to be coupled with PV installations in some of its grids in rural and regional Western Australia. While this has lead to a severe deterioration in the economics of a PV installation, it does at least recognise the role storage can play in support in the grid in areas of high PV penetration.
Shiao explained: “If you have a storage as well and you can design it correctly, you can make a 1 MW PV system, seem more like a 500 kW PV system to the utility. It requires a lot of engineering but there is a possible use case when penetration gets to certain levels.”
Another use case for storage that GTM envisages, is as a hedge against future electricity price increases and changes to regulations pertaining to PV development. Debate as to the future of net metering are underway in a number of states around the US and increases to fixed charges on electricity bills also clearly on the horizon.
“Consider PV with storage, you’ve made this initial capital investment and now you exactly what your electricity is going to cost and what you’re going to be offsetting in terms of your electricity bill and you don’t have to worry as much about net metering issues and a move towards more fixed charges instead of the variable charges on your electricity bill,” said Shiao.
In Australia, fixed costs are already on the rise. Fixed charges for grid connection have already been ramped up in Queensland and it is no stretch to consider it will be one of the findings of the electricity market review launched in Western Australia last week.
A final driver, that was brought into focus in the US in the aftermath of Hurricane Sandy, is security of electricity supply. Parts of New York and New Jersey were left without power after Sandy, which increased awareness about the grid electricity may be able to be replied on, particularly as climate change potentially increases the frequency of severe storm events.
“It’s always a sort of side benefit that gets talked about when people have installed storage,” said Shiao, “or it adds to storage being a justifiable economic decision.”
Security of supply was one of the earliest business cases for battery storage to emerge internationally, beyond off grid applications, and it is also a major driver of development in Japan, in the wake of the Fukushima disaster and electricity supply shortfalls in the country.