Energy storage proved itself in 2017.
The industry stepped up with two major high-speed deployments to resolve grid emergencies. Utility-scale projects got bigger and longer-lasting. Major international conglomerates bought up storage startups. And all the major solar developers started getting into the game.
Much of the action remained at the pilot stage. But some projects showed that storage economics already make sense without subsidies, grants or other interventions -- in the right circumstances, of course.
GTM will be diving deep on these themes at the Energy Storage Summit in San Francisco December 12-13. In the meantime, here's a roundup of the key developments from 2017.
Storage backs up Southern California grid after record gas leaks
Aliso Canyon just might be the biggest energy storage story ever.
The details are well known in the industry -- not so much outside of it.
Here's the gist: California suffered the worst natural-gas leak in U.S. history, resulting in constraints on gas for peak power generation around L.A. and San Diego; to meet the shortfall, the state deployed 100 megawatts of storage across several sites in a stunning six months.
The episode showed that storage can respond to capacity constraints far more quickly than can traditional power plants, as well as being uniquely suited to slip more easily into populous areas like suburban San Diego and Los Angeles.
That success -- the feared blackouts never materialized over the summer peak season -- puts storage in the toolkit for future grid crises. And it bolsters the case for using distributed batteries to meet local capacity needs, shifting away from reliance on gas plants.
This could only happen because California had already prioritized storage policy and built out a regulatory understanding of the technology. If other states want the flexibility to respond to surprises as quickly as California did, they need to put in the work now.
Solar-plus-storage contracts drive prices to new lows
The year started with a solar-plus-storage record: AES inked a contract for a Kauai project at 11 cents per kilowatt-hour. The facility will combine 28 megawatts of solar photovoltaic capacity with 20 megawatts of 5-hour-duration batteries, producing 11 percent of the island's electricity.
That project managed to outsize an earlier Tesla/SolarCity deal on the island and shave a few cents off the unit price. In May, another project made this one look like an appetizer.
Tucson Electric Power contracted with NextEra Energy Resources to build out a major solar-plus storage project at a 20-year PPA rate below 4.5 cents per kilowatt-hour. The facility will pair 100 megawatts of solar generation with a 30-megawatt/120-megawatt-hour storage system. (That's as big as the AES Escondido system, which was the largest of its kind until Tesla outdid it in Australia.)
That announcement turned heads and set off a flurry of number-crunching, as analysts and rivals tried to unpack how such a low price could be possible. The U.S. federal Investment Tax Credit plays a role, as does NextEra's ability to source equipment at aggressive price points.
Crucially, this is happening in sunny Arizona, where the abundance of solar generation is creating value for dispatchable power. Storage thrives when its flexibility is compensated, and Arizona's regulated utilities can do just that.
Non-wires alternatives start to pencil out on their own
New York authorized its utilities to make money by avoiding more expensive grid upgrades.
Some of these non-wires alternatives utilize batteries, like the Marcus Garvey Apartments microgrid that went up this spring. That project showed that creative regulatory changes and targeted incentives can encourage innovative projects.
More impressive is the storage project that works without such assistance.
Arizona Public Service pulled off this feat with its Punkin Center project, which utilizes a 2-megawatt/8-megawatt-hour battery system from AES to avoid a wires upgrade for a remote desert town.
Load growth there would have required a 20-mile cable upgrade, but APS determined it could fix the issue with a locally sited battery for less than half the upfront cost. This wasn't driven by a regulatory imperative to re-envision the grid or fight climate change; it simply made economic sense.
Leaders from both companies will discuss the project during a fireside chat at the Energy Storage Summit.
Big energy companies bought their way into storage
Legacy energy companies snapped up storage startups throughout the year.
It started with Demand Energy's acquisition by European utility and renewables developer Enel in January. Then the Finnish engine company Wartsila bought Greensmith in May. Scottish mobile power provider Aggreko picked up Younicos in July for $52 million.
Later on, AES signed a joint venture with Siemens to merge their storage practices under the name Fluence.
This continues a trend from last year, in which Engie took a controlling stake in Green Charge and French energy giant Total picked up Saft in the largest battery acquisition ever.
The impact of these acquisitions hasn't fully materialized yet. Once complete, though, the deals promise to expand the storage industry in meaningful ways.
They give once-small companies a major balance sheet to assure customers and financiers they can be trusted with a large contract. They also give storage startups the resources to expand faster than they would otherwise.
Green Charge, Greensmith and Demand Energy have all hinted at international expansion to come, although we haven't seen that materialize just yet. AES explicitly referenced Siemens' sales presence in 160 companies as a motivation for the partnership. That expansion may materialize in the coming year.
It's official: All the biggest solar developers are looking at storage, too
Solar-plus-storage has inspired eager chatter for some time now, but this year companies finally started to follow through on the premise.
The top utility-scale solar installers have either developed storage or are actively pursuing it, GTM reported in June. Many of them have begun bidding hybrid projects, which means we could start seeing a bump in deployments in the next two or three years. Installed and operating projects are still rare.
GTM Research analyst Daniel Finn-Foley will dissect recent solar-plus-storage PPAs with executives from Cypress Creek and Borrego Solar at Energy Storage Summit. Later on, GTM journalist Jeff St. John will lead a debate over whether centralized or distributed storage locations make more sense.
Meanwhile, the residential solar leaders expanded their storage pairings as well.
SolarCity combined with Tesla via a merger. Sunrun pushed ahead with its BrightBox solar-plus-storage package, which now accounts for 10 percent of its direct sales in California. Vivint formed a partnership with Mercedes-Benz Energy to deliver residential batteries, although it's been quiet since.
Storage remains a tiny slice of these installers' businesses, but that's in large part because few markets have compelling economics for it as of yet. By at least getting started, these companies will gain experience before the markets for firmed solar or distributed storage heat up.
Virtual power plants become more of real thing
It's a lot easier to talk about virtual power plants than to build one. This year, though, some sizable real projects gained steam.
Advanced Microgrid Solutions launched the first phase of its flagship deal with Southern California Edison in November. The first batch included 2 megawatts of capacity, but more will phase in over the year to come. After years of pitching the concept of virtual power plants, the company gets to show the goods.
In October, sonnen announced a contract to put its batteries into a development of 2,900 high-performance homes in Arizona. Earlier, Sunrun launched a partnership with National Grid to deliver BrightBox systems in New York, with a goal of aggregating the resources for grid services.
And the drumbeat of smaller pilots continued. Austin is building distributed storage and solar across the city. Sunverge announced small utility pilots with APS, Green Mountain Power and Lakeland Electric, but deployed 250 units with Australian utility AGL.
The hype is likely to outshine the reality for some time, but these early projects build evidence that distributed power resources can be valuable to the grid.
Carmakers and countries commit to electric vehicles
China, the world's largest car market, announced in September that it's researching a ban on internal combustion engines. Such a measure could drastically accelerate the speed of uptake for electric vehicles.
Carmaker Volvo said all its cars would have electric motors starting in 2019 (many of them will still burn gas or diesel as hybrids). General Motors signaled its commitment to a "zero-emissions future" with a roster of new electric offerings, although it stayed shy on how long it would take to realize that vision.
All these promises will need to be backed up by action; pledging a major change in 2040 means nothing without concrete intermediate results. Some commenters think EVs will have taken over by then on the strength of market forces alone.
These promises do amount to a widespread endorsement of EVs over the coming years, and that means more battery production. The EV industry's success fuels the manufacturing scale and cost declines that the stationary storage needs for its own growth.
New York still hasn't figured out how to use storage
New York's Reforming the Energy Vision project is reshaping the grid to support cleaner power and more efficient utilization of resources. Storage sounds like a perfect fit for those goals, but almost no capacity has been deployed in the years since REV got started.
The challenges, detailed here, include unfinished storage tariffs, lack of long-term contracts for capacity, a fire code that keeps New York City mostly off-limits for storage development, and utilities that dragged their feet on deployments long enough to earn an explicit rebuke from regulators.
The year ended with a bang: Five months after the state legislature unanimously passed a bill to create a storage target, Governor Andrew Cuomo decided to sign it into law. That triggers a process of setting an appropriate target and creating government programs to help meet it.
Whether these efforts produce a real market remains to be seen, but the state set itself on track for more storage activity in the coming years.
Storage might beat out a gas peaker plant for the first time
Storage developers have spoken hungrily about their ability to take the place of gas plants for peak power. Now it might actually happen.
NRG's efforts to build the Puente gas plant in Oxnard, California ran into opposition in the final stages of regulatory approval. A coalition of clean energy advocates, environmental justice advocates and the city itself pushed back against the proposal, saying that a gas plant would be an unnecessary expansion of fossil fuel infrastructure when cleaner alternatives exist.
Those arguments had been heard elsewhere, but this time, the grid operator agreed. CAISO studied the local grid needs and determined storage and other distributed assets could do the job of the gas plant. That just left the question of relative cost, which CAISO said could only really be determined by industry bids in a request for offers.
The regulators reviewing the case announced they planned to reject the plant. Then NRG asked for a suspension of the approval process to allow for the RFO, and the regulators granted it.
This story is still developing. It's not yet clear just how competitive the storage bids will be compared to the cost of a gas plant, or how much regulators will weigh the value of clean, flexible resources relative to gas burning infrastructure that would only rarely operate.
The gas plant could still win out, but if it doesn't, this will be the first time storage triumphs in a head-to-head peaker contest.
Tesla promises the world's biggest battery in less than 100 days...and delivers
After betting he could deliver the world's largest battery in 100 days or it would be free, Elon Musk followed through.
The 100-megawatt/129-megawatt-hour facility began testing in South Australia just about when Americans were sitting down for their Thanksgiving feasts. Much like Aliso Canyon, the project showcased the unique speed with which storage can arrive on the grid in response to urgent needs.
When it comes to the flagship projects, Tesla delivers in a big way. Back on the home front, though, the company has had trouble maintaining timely deliveries of batteries to its typical storage customers.
As the company matures, it will need to balance rapid response to emergency opportunities with steady and reliable shipments to customers. It's currently ramping up Gigafactory production to that end, while working out kinks in the manufacturing line for the Model 3.
That's an important step, because grid emergencies like South Australia won't stop coming, and Tesla could be called on again for rapid-response mega-batteries before too long.