The energy storage market really began to heat up in 2014, but 2015 promises a faster pace and bigger scale, according to Ravi Manghani, senior energy storage analyst with GTM Research. Here's what to keep an eye on in this year.
California’s energy storage roadmap
Everyone is watching the deals brought on by California’s AB 2514, which called for 1.3 gigawatts of energy storage. This year will see a lot of action around the bidding process to procure that capacity, but it will still be a while before those bids turn into deployments.
Keep an eye on California and its energy storage roadmap, which was released in December. The document calls for high-, medium- and low-priority items for the California Public Utility Commission and Independent System Operator to consider.
Among the highest priorities are examining opportunities for storage to defer or displace distribution upgrades; clarifying wholesale rate treatment and net energy tariffs; clarifying existing transmission and distribution interconnection processes; and evaluating the potential for a streamlined or "fast track" distribution interconnection process for storage resources.
Also in California, keep an eye on San Diego Gas & Electric’s energy storage procurement as part of its local capacity requirement RFO. It won’t be as big as Southern California Edison’s, but storage could come in at far more than the minimum 25 megawatts. Manghani says the figure could easily be double or triple that.
Last fall, Oncor released a proposal to spend more than $5 billion to put 5 gigawatts of energy storage on the Texas grid. Oncor is saying it can be done without an increased cost to customers, according to the Dallas Morning News.
It’s not just the details of the plan that are worth popping some popcorn over, but also the drama that could unfold as Oncor lobbies to be heard while this year’s legislature is in session. The Dallas Morning News is also reporting that generators -- including Oncor’s own parent company, Energy Future Holdings -- are lining up in opposition because of the generating assets they own.
“We expect there to be quite a debate amongst interest groups in the state about how best to leverage storage as a resource on the system, what ownership models take best advantage of new technologies, and the role that Oncor and grid operators play in the system,” said Matt Roberts, executive director of the Energy Storage Association.
The 5 gigawatts might dwarf the 1.3 gigawatts set out by California’s AB 3514, but if the measure doesn’t see the light of day in the state legislature, it will have to wait the two years until the governing body convenes again, which means a first-round deployment date of 2018 could be a pipe dream. Oncor, however, is optimistic.
“Oncor intended to start a discussion on energy storage and these discussions have already begun,” said Don Clevenger, SVP of strategic planning at Oncor. “We are confident that Texas will remain a leader on energy issues including storage.”
If Oncor gets shut out by the legislature, there is still another source of hope for energy storage in Texas, albeit at a smaller scale. Grid operator ERCOT is in the process of re-imagining its ancillary services, developing a model under which faster, more diverse resources are compensated at a higher rate.
Just exactly what that rate will be, or how it will be calculated, is still up in the air. This should become more clear this spring when a full cost-benefit analysis is released. If the board approves the changes next summer, the new rules would be implemented three years later.
There’s already been a rush of solar-plus-storage relationships, but that’s just the beginning. SunPower teamed up with KB Homes, Enphase is working with Lennar Homes and Vivint Solar on a pilot in Hawaii, SolarCity is working on solar-plus-storage for Wal-Mart, and Extended Stay America has chosen Stem to install storage at many of its hotels in California.
“The next phase of growth on behind-the-meter energy storage will rely on such organizational partnerships,” said Manghani. “We expect to see many more similar partnerships in the very near future.” This year will also see creative partnerships that go beyond the most obvious pairing of solar and storage. Home builders, HVAC dealers and even retail energy companies and others could add in storage to their offerings if the market is right.
Deals and partnerships will come at a faster pace and larger scale than 2014, said Manghani. But the young market will also continue to see M&A activity -- as well as the possibilities of additional bankruptcies.
Storage for peaking capacity
In September, Arizona Public Service and the state's Residential Utility Consumer Office jointly filed a settlement that, if approved, would require APS to evaluate storage, efficiency, renewables and demand response as a potential alternative to building or upgrading conventional power plants between 2015 and 2021. Energy storage would have to make up 10 percent of capacity under the proposal.
“The fact that any final decision would include 10 percent storage capacity is going to continue to demonstrate energy storage’s ability to reduce and offset peak demand -- generating immense savings for the grid, and a reduction in costly infrastructure and underutilized peaker plants,” said ESA's Roberts.
Although Arizona is the first state to include storage as part of the solution for new peaking capacity, Roberts added that the U.S. Energy Information Administration predicts 40 gigawatts of peaker plants in the coming years, “which marks a major opportunity for storage throughout the system.”
Discussions about the mix and role of capacity resources are also happening in the territory of the largest electric grid operator in the U.S., PJM. Although there has been debate about what the changes mean for utility-scale renewables, the final proposal for the new market structure could be a win for storage and “will undoubtedly impact other markets as well,” said Roberts.
The Federal Energy Regulatory Commission will take up the proposal this spring.