In the first quarter of 2015, 5.8 megawatts of energy storage systems were installed across the US, 16% higher than the same period in 2014 - according to a report released by GTM Research and Energy Storage Association last week. The US is forecast to deploy a total of 220 megawatts in 2015, more than three times that of 2014, and growth should continue at an increasing rate thereafter.
Much of the hype, and sales activity, is taking place in the home energy storage market, where firms like Tesla Energy have marketed in-home batteries in the style of consumer electronics. Sleek designs and Apple-esque advertising campaigns have earned the nickname “iBattery”, but have also spurred significant interest.
Initial demand for Tesla’s home batteries surpassed 38,000 queries in the first week, and while that may seem like a great start consider that, even in the best-case scenario, those orders would take more than a year to fill and would amount to a fraction of power generated from a single fossil-fuel power plant. To “fundamentally change the way the world uses energy”, as Musk puts it, the scale must be much, much bigger.
While Musk’s dream of an energy storage system in every home paints the futuristic picture of an off-grid utopia, it does not yet make financial sense for the user, and central grid solar-battery systems remain far more efficient. “The battery-in-every-home idea—not only do I think it doesn’t make economic sense, I don’t think it’s necessary”, said Brian Warshay, an analyst at Bloomberg New Energy Finance (BNEF). “Having a centralised grid is incredibly useful and incredibly efficient”.
Energy storage systems, such as those we are seeing from Tesla and their competitors, are essentially load shifting devices, allowing the user to store excess solar power during the day and then use that stored power in the evening – extending the use of solar power beyond daylight hours.
The problem is that this kind of energy "load shifting" doesn’t save much for most U.S. customers, regardless of the cost of the batteries due to net metering, where electricity can be sold back to the grid. Even in more favourable markets like Germany, the total cost for buying and installing a home battery would have to drop by almost two-thirds before load shifting would be cheaper than running rooftop panels without any batteries, according to analysis by BNEF.
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Continued net metering will weaken the business case for batteries, even where electricity prices are high. The policy of net metering means just 3% of U.S. solar customers will buy batteries, according to Barclays analyst Brian Johnson. Net metering will be even more important to solar when U.S. tax credits are phased out at the end of 2016.
However, commercial and industrial buildings would benefit from significant savings if load shifting, through localised energy storage systems, were to become effective. Many commercial and residential customers who use more significant amounts of power would be able to utilise stored energy during peak-demand times, slashing peak-rates and reducing overall energy bills. They would also reduce vulnerability to supply shortage, which might result in financial losses from reduced operational ability.
Tesla and other energy storage firms are well aware of this situation and are placing a huge focus on commercial and industrial facilities, within the smart building movement. Battery storage systems are going one step further by aggregating batteries into utility scale energy storage systems.
Tesla has announced that the first of its utility-scale Powerpack battery systems will be deployed in Ireland next year, under a new deal with energy storage firm Gaelectric.
The 1MW pilot system will is said to be the first in a series of battery projects designed to help integrate renewable energy sources into the Irish grid. The project in Ireland will reportedly also serve as a launch pad for Tesla to explore opportunities in other European markets.
A statement from the two companies said: “Ireland has many compelling features for the commercialisation of the Tesla Energy product range given its scale and ambitious renewable energy targets and favourable regulatory framework”.
According to figures released in March, renewable sources supplied around 8% of Ireland's total energy demand in 2013. The European nation is also trialling other novel forms of energy storage, including a groundbreaking 20MW hybrid flywheel system.
Upcoming years will no doubt see the widespread deployment of energy storage systems in commercial and industrial smart buildings. While the economic case for home energy storage will only become more compelling with policy changes or if early adoption helps bring down the unit cost significantly. However, only time will tell if utility scale energy storage deployment will flourish and weaken Musk’s “battery in every home” aspirations.