“Energy storage is the only technology that can use energy generated during low cost off-peak periods to serve load during expensive peak periods, thereby improving the overall utilization and economics of the electric grid,” states a recent Massachusetts Energy Storage Initiative report that encourages the wide-scale deployment of energy to meet grid demands.
Recognizing that energy storage can be a valuable component of a diversified energy portfolio, the Baker-Polito Administration launched the $10 million Energy Storage Initiative in May 2015 to evaluate and demonstrate the benefits of deploying energy storage technologies in Massachusetts. The story is much the same across the US.
“Advances to the electric grid must maintain a robust and resilient electricity delivery system, and energy storage can play a significant role in meeting these challenges by improving the operating capabilities of the grid, lowering cost and ensuring high reliability, as well as deferring and reducing infrastructure investments. Additionally, energy storage can be instrumental for emergency preparedness because of its ability to provide backup power as well as grid stabilization services,” explained a U.S. Department of Energy (DoE) Whitepaper on Grid Energy Storage.
While many described 2015 as the banner year for the North American energy storage sector, 2016 is set to be even more momentous. A total of 221 MW of energy storage was deployed in 2015 compared with 65 MW in 2014, according to the Energy Storage Association. Recent projections, however, show the North American storage market reaching above 300 MW by the end of this year.
Despite increasing energy efficiency efforts the demand for energy continues to grow along with economic and population growth. The smart tech, IoT revolution is also creating new forms of energy demand, the need for data centers with stable power supply to deal with a constant flow of big data, for example. Energy storage also shows promise in surprising new markets, like legal marijuana farms, that Greentech Media recently reported could “rival data center energy use.” A new study from EQ Research, entitled ‘A Chronic Problem’ suggests indoor growth operations may already represent as much as 1% of U.S. electricity demand. Currently, data centers represent about 2%.
"Pot-ential" new demand aside, these strong consecutive growth years signify a bright future for energy storage. However, others warn against complacency and remind us how solar power had a similar development trend then ran into face-upfront cost issues, which tempered growth. Learning from solar, the energy storage sector might well standardize similar financial models that have reinvigorated the solar power market. Just last month, for example, SolarCity and Citi created over $347 million in funds to finance solar projects for homeowners and small businesses.
Wide-scale deployment of energy storage systems will face much the same challenge as solar power and many other capital intensive, return on investment, type products did in the past. The key to reaching mainstream markets is to offer financing at a reasonable rate along with the product. For solar rooftop installations, services like Mosaic began offering zero-money-down financing online in a matter of minutes, but no similar system exists for energy storage… until recently that is.
In the summer, Advanced Microgrid Solutions raised $200 million of investment for energy storage project financing, while Stem raised $100 million through a similar initiative. Then, in September, both Tabuchi Electric and Sharp announced significant levels of funding expressly for financing solar-plus-storage systems.
Venture capital funding for no-money-down distributed storage financing is approaching $700 million in 2016, more than triple the last prominent funding wave, in 2014.
"It’s clear that financing is essential to enable a market to grow," said Carl Mansfield, general manager and founder of Sharp’s energy storage division. "Just as with PV, people would find ways to finance it by themselves, but it was really once the turnkey, readily available PPA financing and lease financing appeared, that the market really took off."
These financing programs alone won’t be enough to take energy storage to the mainstream market, however, but such pioneering initiatives along with the changing attitudes of national and local governments mark a shift for the sector. Energy storage no longer has the aura of an “if” or “maybe” technology, instead the energy storage market has begun to think about “how” best to conquer the mass market.
This is good news for the clean energy and smart technology sectors too, as energy storage has long been touted as the missing piece of the puzzle for energy independent smart buildings. If the investment and financing signs are correct then we may not have to wait long to see energy storage become a normal part of our utility, business and home environments.
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