Looking back at 2015, it has been an exciting year for energy storage and for the renewable energy industry as a whole. We saw ever-increasing rates of rooftop PV installations, along with other renewable sources, and a concurrent increase in the installation of cutting-edge battery storage and management systems. In some cases, storage by itself has been more popular than ever, particularly in places where weather events can create reliability issues for the local grid.
As we look forward to 2016, we expect to see an even faster adoption of DERs, as both consumers and utilities look to increase the reliability and environmental aspects of the grid. While there are many factors at play, the five things worth watching in 2016 that will have outsized impact on the market.
1. Environmental and economic concerns will combine to accelerate the retirement of coal-fired generation and increase the importance of renewables.
One of the top concerns at the recent Climate Change Conference in Paris was to reduce the contribution of coal-fired electric plants to greenhouse gas emissions. Even before the conference began, the U.K. pledged to close coal-fired generation plants much earlier than previously planned. Both the U.S. and China, two of the largest coal users in the world, are reducing the role of coal in energy production over the coming years in order to meet vital environmental goals.
At the same time as environmental concerns are top of mind, lower cost is driving the increase in use of other energy sources. This is true both for fossil fuels like natural gas, as well as renewables like solar and wind. Between environment and economics, it seems unlikely that we’ll see any reversal of the downward momentum for coal as an energy source in 2016.
However, that doesn’t mean that we'll see an overnight replacement of coal with renewables. In fact, even as China and the U.S. reduce the use of coal-generated electricity, its use could actually increase in India without some significant changes in the political and economic situation there. The good news is that nanogrids and microgrids that combine distributed generation with local energy storage can provide an important and economical alternative, especially in poorer or more isolated communities that are far removed from the grid. This can help not only in India, but around the world in places where it is just too costly or difficult to extend the existing grid.
2. The demand for flexibility from consumers and utilities alike will continue to increase.
One of the most important effects of the widespread use of customer-sited renewable generation and storage is to demonstrate to consumers that there are reliable, safe and environmentally sound alternatives to the traditional electricity market. As consumers examine the potential, they will insist on even more options and flexibility in terms of how their power is generated, stored and managed. They will expect any utility or other entity they deal with to provide this kind of flexibility, while at the same time maintaining a safe and reliable energy supply.
Of course, more flexibility for individual consumers means utilities have to deal with more complexity, while they also face increased challenges to maintain grid reliability. Consumers will want systems that can automatically make the best choices about energy usage and deliver the highest return; utilities will want to be able to manage the power coming onto the grid from these consumers, as well as deal with demand issues and keeping peak costs in check. With those demands and pressures, the role of storage and intelligent management in enabling flexibility and reliability is going to increase dramatically.
3. Legacy NEM will give way to new tariffs that are more closely tied to grid operating costs.
When rooftop solar was still in its infancy -- and systems were far more expensive and less efficient than they are today -- many states created net energy metering (NEM) regulatory structures that provided financial support for homeowners who were early adopters of solar. Those supports did their job and drove the uptake of solar, which in turn helped make the solar industry stronger, even as solar panels became cheaper and better.
Now that solar has become more widespread, there is a new set of issues to face, including the cost of managing and upgrading the grid to accommodate this two-way energy flow, and ensuring that the cost of some consumers going solar doesn’t fall so heavily on the shoulders of other ratepayers.
We’ve already seen this addressed in Hawaii, which retired its old NEM regulations in favor of more market-based tariffs, including some intriguing new options for “self-supply.” The California PUC is also considering new regulations that shift in the same direction. Given that these two states are setting the direction for solar in the rest of the country, we’re likely to see an acceleration of this shift from first-generation NEM tariffs to new approaches.
As these new tariffs are established, they will create an even greater demand for advanced storage options and control technology. For example, taking full advantage of the self-supply tariff in Hawaii is possible only when consumers have intelligent battery storage of significant capacity. Even consumers who want to use a more traditional grid-connection tariff will see a better return on their solar investment using intelligent storage.
4. Smart homes will get smarter; intelligent appliances and home control devices will proliferate.
We’re already seeing second- and third-generation devices for the intelligent home, from thermostats and heating/AC units to water heaters, appliances and lighting. As devices get smarter and easier to use, prices are declining. That sets the stage for greater adoption in 2016, both in existing homes and in new construction.
This is a crucial component for overall reduction in energy consumption and, importantly, for demand management. As homes get smarter, it will place a greater premium on software standards for controlling and managing all those diverse units, both for providing homeowners with flexible control and for giving utilities the ability to manage them automatically to match tariffs or homeowner settings. This will spur the adoption of an industry standard control platform on the utility and device manufacturer side, a platform that also has to work with the home’s energy storage and on-site generation systems. Look for significant movement toward this standardization in 2016.
5. DER and storage will accelerate the development of the energy cloud.
Where we’re really heading with all these changes is toward a transformation of the century-old one-way grid into an “energy cloud” that resembles the IT cloud, offering not just power, but services as well, on demand. This is going to change everything about the industry, from the design of the grid to how it is managed -- and by which entity or entities. This is going to bring a lot of new players into the mix along with existing utilities and generators. The energy cloud will support the flexibility that consumers want and help them manage costs, while also creating new revenue opportunities for all the participants.
Ken Munson is co-founder and CEO of Sunverge Energy.