The historically tiny residential energy storage segment won big in Q1 2018, according to the latest deployment data.
Utility-scale projects, the usual workhorse of the energy storage industry, dropped massively compared to last year’s Q1, when the Aliso Canyon procurements came online and set a record for energy capacity. What saved the quarter from historically low performance turned out to be the aggregate growth of all the little systems popping up in customers' homes.
"Residential storage has been growing in popularity and prominence," said Brett Simon, senior analyst at GTM Research. "It’s getting cheaper. Folks are more aware of it and are asking for it. Solar installers are doubling down on it as a new business model."
Residential deployments beat commercial deployments, 15.9 megawatts to 11.7 megawatts, according to the latest Energy Storage Monitor from GTM Research and the Energy Storage Association. Even more impressively, home batteries rivaled utility-scale deployments, which only clocked in at 16 megawatts.
That’s an unprecedented and jolting development that is worth emphasizing.
Ever since GTM Research began tracking storage deployments in 2013, residential batteries appeared as the faintest of slivers on the industrywide bar graph, nonzero but totally insubstantial.
Now, for the first time, the smattering of a few kilowatts here and there has nearly overtaken the giants of grid-scale mega-projects. That's a result both of the mega-projects not showing up this quarter and the micro-projects swarming into action.
Dialing into the numbers, it’s clear that California and Hawaii drove this newfound strength with state-level growth that merits no less than the technical designation: "bonkers."
California’s resi sector rose 3,833 percent year-over-year in terms of megawatts, 4,324 percent in terms of megawatt-hours. The fact that energy capacity grew more reflects that these systems are sizing up to hold more duration.
Those two states accounted for 74 percent of the home systems deployed.
Notably, there wasn't any extreme, one-off event driving the surge in residential deployments in the way that the Aliso Canyon procurements did for big projects a year ago. That means that the forces that produced this quarter's outcome — transitions away from solar net metering, new business models with low upfront costs, newfound interest in resilience — will likely continue through the year.
In fact, the first two quarters of storage installations tend to be smaller than the last two, based on how the industry has operated historically. Such a large opening quarter hints at an even bigger second half.
"The residential market this year is going to be over five times the size of the market last year, in megawatt terms," Simon said.
The future looks even brighter, thanks to the California Energy Commission’s newly passed solar PV mandate for new homes starting in 2020. GTM Research calculates that this policy will cause a 26 percent upside in its base-case residential storage projection for 2020 onward.
Bigger doesn't always mean better
Meanwhile, the utterly California-dominated commercial sector continued its zig-zaggy volatility, dropping 53 percent from its record high last quarter. California giveth and California taketh away.
The nature of utility-scale construction lends itself to even more lumpiness in its quarterly swings.
Last quarter, only five projects hit the wires. That said, they managed to deliver the third-highest energy capacity of any quarter, because each new project delivered 4-hour duration.
The only two quarters with more energy deployed included the Aliso Canyon rollout, when Southern California delivered a massive, fast-tracked procurement to deal with a regional gas constraint.
Though quarterly deployments dropped compared to last year, the pipeline for front-of-the-meter storage increased 76 percent in a year, from 9,217 megawatts to 16,196 megawatts.
Overall, the industry is on track to deliver 557 megawatts this year, and GTM expects the annual deployments will hit 3,688 megawatts in 2023, the final year of its projection. That’s up 12 percent or 909 megawatts from the projection last quarter, due to promising developments since that time.
Miscellaneous signs o’ the times:
- California has officially pulled ahead of PJM as the largest cumulative storage market. This actually happened before the last quarterly report, but hasn’t gotten a ton of play. PJM kicked off the utility-scale storage industry, but its frequency regulation market has essentially stopped growing. Thus, the baton has passed to California, where a much wider menu of services and market products promise more robust long-term growth. (In the apples-to-apples comparison of just utility-scale, PJM still leads by 100 megawatts.)
- All of the utility-scale projects in Q1 had 4-hour duration. So long frequency reg, with your short-duration systems.
- Front-of-the-meter battery deployments happened in Florida and Arizona. Texas and California, which led the previous quarter, didn't show up this time.
- In the weeds but indicative of a broader trend, the researchers added two new states to the roster that they track quarterly: Colorado and Nevada. Both had promising new policy developments and utility activities to presage a more active storage market in the years ahead.
Download the free executive summary of the U.S. Energy Storage Monitor here.