There’s no doubt that 2014 was a breakout year for grid energystorage-- and if the industry plays its cards right, it could lay the groundwork for a lot more breakout years to come. Over the past twelve months, we’ve seen the creation of some of the first utility contracts for distributed, behind-the-meter battery deployments at a mass scale, many of them linked with rooftop solar. Prices for lithium-ion batteries keep falling, and new technologies are coming in to fill the gaps. And despite some well-publicized flameouts, the industry is moving past pilot stage and making a play for full-scale commercialization.
So what were the biggest energy storage stories of the past year? Here are our top ten picks, starting with the state that set the bar for developments this year -- California. There’s no other place in the world that’s pushing the market in so many different directions. Indeed, the state's 1.3-gigawatts-by-2020 mandate, which seemed bold when passed in 2013, is now being surpassed in the near term by projects from transmission scale to distributed, behind-the-meter solar and EV-linked systems.
1) If we had to pick one California grid storage event of 2014 as the most important, it would be Southern California Edison's Local Capacity Procurement (LCR) for its power-constrained West Los Angeles Basin region. In a big show of support for energy storage as a cost-effective, long-term resource, SCE in November procured 250 megawatts of storage, more than five times its mandated requirement. SCE’s picks also included a broad mix of storage assets, from distributed batteries and ice-making air conditioners, to the world’s biggest lithium-ion battery, and a tight focus on solving very local distribution grid needs, as well as achieving the utility’s long-term goals.
2) California's Self-Generation Inventive Program (SGIP), which provides half or more of the underlying cost of qualifying customer-owned energy storage projects, has played a critical role in boosting multi-megawatt distributed, behind-the-meter battery deployments from big players like Stem, Ice Energy and SolarCity-Tesla. In June, California Gov. Jerry Brown signed into law an extension of the SGIP program, providing about $415 million through 2019 to keep the market rolling -- and to deal with the backlog of projects that haven’t yet been able to access funds.
3) That brings us to the third big event in California energy storage in 2014. In May, the California Public Utilities Commission ruled that the state's big investor-owned utilities had to bring battery-backed solar systems into alignment with the state's net metering regime. The ruling, coming after more than a year of stalled interconnections for homes using batteries alongside solar panels, was a big win for SolarCity and Tesla, as well as for the long list of new contenders in the solar-storage world like OutBack Power and Sunrun, Enphase and Lennar, and many others.
4) California’s movement on battery-backed solar underscores what we believe is 2014's most important global energy storage trend: the solar-plus-storage boom. The concept of balancing solar’s intermittency with backup batteries, long relegated to the off-grid fringes, is starting to emerge as a cost-effective alternative to grid power in certain high-cost markets like Hawaii, or in island grids dependent on diesel power. California’s progress on grid-tied solar-storage systems, along with similar work underway in Japan and Germany, could set the stage for aggregating batteries as utility resources, even as they continue to provide backup power, demand charge management or solar shifting for the buildings they’re connected to. GTM Research’s new report, The Future of Solar-Plus-Storage in the U.S., forecasts that the United States will see 318 megawatts of behind-the-meter solar-plus-storage capacity installed through 2018, surpassing $1 billion by that time.
5) All of this focus on California and environs shouldn’t distract us from another important set of energy storage developments happening on the East Coast, in the form of storm-proof microgrids. Ever since Superstorm Sandy hit, states like New York, New Jersey, Connecticut and Massachusetts launched a set of grid resiliency and distributed energy initiatives in 2014 that could direct hundreds of millions of dollars toward energy storage systems. These batteries and thermal energy storage systems are being matched with backup generators and combined heat and power systems, and in New York, they’re part of a broader effort to redesign the state’s energy regulations and markets to bring distributed energy to the forefront.
6) Almost all the grid-scale energy storage action of the future is reliant on batteries getting a lot cheaper -- which brings us to Tesla Motors and its $5 billion Giga factory. With a Nevada site officially unveiled in September, Tesla is now on the path to invest $5 billion in a plant that will double the global production of lithium-ion batteries by decade’s end -- and while most of those batteries will go to its electric cars, 15 gigawatt-hours per year will be for the stationary energy storage market. In the meantime, Asian competitors (or partners) like Panasonic, LG Chem, NEC/A123 and a host of Chinese contenders are pushing toward the magical price point of $500 per kilowatt-hour for lithium-ion batteries at scale, leading big grid storage players like AES to name it the battery chemistry of choice for the rest of the decade.
7) While lithium-ion may be the mass-market battery of the future, there’s a big need for technologies that can do something lithium-ion struggles to do: cost-effectively store energy for hours at a time. This year saw some significant developments on this front, from early-stage commercial-scale deployments of flow batteries from Imergy, UniEnergy Technologies, CellCube-American Vanadium and ViZn Energy, to funding and development of sodium-ion batteries from Aquion and liquid metal batteries from Ambri. And in a surprise development, European startup Alevo unveiled plans to invest $1 billion in a plant to roll out its inorganic lithium-ion battery chemistry.
8) Battery-based grid storage systems are providing a variety of grid resources today, from fast-acting frequency regulation to renewable integration and demand management. But the big money for grid-scale batteries will come in replacing the natural gas-fired peaker plants now built to operate only a few hundred hours per year. This year saw AES Energy Storage take this concept to the mainstream, with the launch of its Advancion modular energy storage system. In November, its 100-megawatt battery project, being build alongside its natural gas-fired Alamitos Power Center, won a contract with SCE to bring the concept to reality.
9) Let’s not let our annual review of big energy storage stories pass without noting the failures. In January, Xtreme Power declared bankruptcy, after failing to transform itself from a next-generation battery chemistry manufacturer to an energy storage system software developer. Xtreme’s loss was the gain of European startup Younicos, which bought the Texas-based startup’s assets for a song in April. And in February, solar-storage startup Silent Power went out of business after losing its backing from South Korean solar company Hanwha Group. Compressed air energy storage startup LightSail laid off staff in April.
10) Finally, we should note the boring, but crucial, developments that mark the emergence of energy storage as a commercial-scale technology. These include the launch of the Modular Energy Storage Architecture (MESA) standards group in October, the creation of UL standards for energy storage later that month, and continuing work on integrating storage with smart solar inverters and other critical power electronics equipment. Finally, GTM Research has joined with the Energy Storage Association to provide in-depth updates on energy storage markets, policies and technologies -- a good place to turn for keeping up with 2015’s new developments.