S&C Electric Company is in the thick of the battle for the grid-scale energy storage market. It's an emerging multi-billion-dollar market, and much of the territory is still up for grabs.

Do competitors need to be small, agile specialists like software-intensive integrators Greensmith or Stem? Or is the vertical integration of firms like leaders S&C or AES (a la SolarCity in solar) the optimum way to approach this emerging market? Is being a battery maker the best way to get to market? And how long until energy storage is a material part of the energy picture?

S&C Electric Company has been building grid scale energy storage since 2006, uses five different battery chemistries and has a number of industry partners. But make no mistake -- this is a vertically integrated company.

In the battery value chain consisting of:

  • Battery and battery container
  • Power electronics/inverters
  • Switching and protection
  • Software control
  • Systems studies
  • EPC

S&C does everything except the battery and battery container. S&C sees competition in power electronics, systems and EPC work from ABB, AES, Black & Veatch and Eaton. Greensmith, Stem and Green Charge compete with S&C on the software and system integration side of the business.

GTM spoke with the energy storage people at S&C yesterday, who were enthusiastic about a 6-megawatt/10-megawatt-hour "capacity relief" energy storage project in the U.K. that was "being commissioned as we speak," according to Troy Miller, business development manager at S&C.

Tim Qualheim, VP of strategic solutions at S&C, sees the growth of the energy storage market poised for the "hook in the hockey stick" driven by "storage on feeder circuits over the next two to three years."

"If you look at the utility system today and believe in the duck curve...the peak is getting higher compared to the [daytime] demand," he said, adding that the demand at peak is going to grow. "With storage on distribution feeders, the first value is reliability. If something goes out, storage kicks in and keeps the feeder energized. Storage can put out reactive power so you don't have to put capacitors out there." He continued, "The third driver is capital deferral. If my demand peak continues to rise, I'm going to reach capacity on the feeder. I'm going to have to upgrade my feeder -- a 600-amp feeder being upgraded to 900 amps. With storage, I can charge at night and discharge during the day and I don't have to upgrade my feeder. If I don't have that peak, I don't have to build peaker plants -- and that's huge."

If the price of batteries "comes down by half," according to Miller, utilities can embed the technology throughout their system: "It can justify itself."

So, how likely is that kind of price drop?

According to Miller, "The holy grail is less than $250 per kilowatt-hour at scale." Currently, the price for lithium-ion in very large-scale applications is being quoted at $500 per kilowatt-hour, according to S&C. Miller points out that the price of lithium-ion batteries from some "aggressive" suppliers has already dropped 50 percent over two years. Tesla's factory, officially slated for construction at a site in Nevada as of today, will be a factor in the price of this battery chemistry.

S&C, like AES, sees lithium-ion as the current technology winner, although it is also working with aqueous ion, zinc-air, flow batteries and sodium-based batteries. Miller sees lithium-ion as versatile and able to meet all power applications and most energy applications. Lithium-ion can "cross the boundary from power to energy that many other technologies can't." The company has looked at flywheels and ultracaps for short-duration frequency applications, as well as ultracap-battery hybrids.

So S&C sees a path to an economically convincing price for battery storage. But the regulatory situation has to work for storage -- and right now it's not completely aligned with the science.

S&C was active in the recent NEMA drive to provide an actual policy-framework wish list for manufacturers of electrical gear and smart grid equipment, "hoping to influence the creation of a new national energy strategy, with an emphasis on storage." (The industry's consolidated list of recommendations, "Modernizing America's Electric Grid," was released as a submission for the DOE's Quadrennial Energy Review.)

A transformation of the power grid demands a national energy road map, NEMA representatives said.

"That is why an overarching strategy for the country does make sense," said John Estey, executive chairman of S&C, speaking at a media briefing. "We've got to figure out what kind of generation fleet we want [and figure out] how we want to manage this stuff. Having a big-picture look at it would be very useful. It is something that is desperately lacking at this moment."

The NEMA recommendations on energy storage include:

  • Incentives for construction of microgrids and energy storage systems
  • Accelerated depreciation for smart grid technologies, taking the depreciation period down to five years
  • Creation of a national infrastructure bank to reduce private-sector financing costs for grid modernization investments

"The whole electrification of society right now is bottlenecked due to storage. As soon as we have improved storage, you'll see lots of innovation and development accelerate," said Daryl Dulaney, CEO of Siemens Industry's infrastructure and cities sector.

"Storage is actually close to economically sound today if you add up all the various benefit streams that can flow from it," Estey said in the statement. "The pesky part of it is that those benefit streams flow to different people. [...] So regulation needs to deal with the fact that if society wants these things, we have to find another way to pay for it than exists today. We have a regulatory scheme that has not caught up with the technology."

"Who should own the storage?" Dulaney continued. "And how should we pay for it? No regulatory body in this country can answer that question today. They're worried about it. But nobody can answer that question."

A recent rundown of some of the competition in the energy storage space follows:

In March, energy storage market leader AES launched its Advancion business line, which is integrating lithium-ion systems from LG Chem and other as-yet-undisclosed partners, in hopes of replacing gas-fired peaker plants for grid capacity services. It has also built its own Storage Operating System software to manage the storage system.

AES isn't the only company proposing the use of lithium-ion batteries to meet this need. A123 Energy Solutions, the grid-scale arm of lithium-ion battery manufacturer A123 bought out of bankruptcy by China's Wanxiang and sold for $100 million to Japan's NEC in March, has launched a long-duration storage system that it has deployed in Spain and Japan.

Greensmith is a startup software developer and system integrator that has attracted investment, personnel and a growing roster of turnkey energy storage projects. The company just announced that batteries from Aquion (based on an aqueous sodium-ion chemistry), ViZn (zinc redox flow batteries) and two established lithium-ion battery suppliers have been added to the eight battery types already deployed in its systems. Since its 2006 founding, Greensmith has deployed 30 battery energy systems for eighteen different customers, nine of them utilities, and is aiming to have 23 megawatts of systems under management by year’s end. 

Startups like Younicos, GELI and 1Energy are also looking to develop a software operating system for the energy storage ecosystem. Another system integrator, Solar Grid Storage, has five 250-kilowatt projects operating within the PJM Interconnection, according to the DOE's global energy storage database. Younicos works with multiple battery partners, including lithium-ion batteries from Samsung for its 1-megawatt battery park modules that link solar panels, electric vehicle chargers and frequency regulation service. It’s also deep into longer-term energy storage, using sodium-sulfur batteries in Berlin and on the island of Graciosa in the Azores, and deploying CellCube vanadium-redox flow batteries from Germany’s Gildemeister. Younicos bought Xtreme in April, picking up its 60-plus megawatts of working projects and gaining a foothold in the U.S. energy storage market in the process.

Vertically integrated companies like S&C, AES and A123 develop their own integration software. Battery vendors such as Saft, Panasonic, Samsung, LG Chem, Aquion, Ambri are also positioning themselves for the growth and evolution of this market.

A number of companies are pursuing storage projects on the customer side of the meter, including Convergent Energy + Power, Arista Power and Demand Energy. Stem, a batteries-for-buildings startup, has launched a $5 million fund with Clean Fleet Investors to boost installations of its own building energy storage systems. Former EV maker Coda also offers a no-money-down energy storage play, this one financed internally by Fortress Investment Group (FIG), the multi-billion-dollar investment firm that picked up Coda’s assets for $25 million in June. Green Charge Networks, a startup deploying energy storage equipment for commercial customers, raised $56 million from K Road DG to expand its no-money-down energy storage program. Founded in 2009, Green Charge’s GreenStation has been installed by 7-Eleven, Walgreens, Levi's Stadium, UPS and school campuses.  

GTM Research predicts the U.S. market for distributed energy storage will grow at a 34 percent cumulative annual growth rate to reach 720 megawatts by 2020, driven largely by the demand charge business case, but also boosted by solar integration needs.