The U.S. energy storage industry delivered record deployments in 2018, driven by a strong fourth quarter for utility-scale projects.
But the new achievement for the young industry pales compared to what’s to come: an expected doubling in 2019, followed by a tripling in 2020. Such growth will propel energy storage out of pilot-scale projects and into grid planning conversations around the country.
Battery installations for 2018 totaled 311 megawatts and 777 megawatt-hours, according to the new Energy Storage Monitor released by energy research firm Wood Mackenzie and the Energy Storage Association, with data from Q4 and 2018 as a whole.
Smaller-scale batteries in residential and commercial sites had collectively outperformed the utility-scale segment for the previous four quarters in terms of megawatts deployed. Q4 broke that losing streak and made up for an otherwise low-output year for the large-format batteries.
Utility-scale set the quarterly record for megawatt-hours deployed, beating the record set by the rapid-fire Aliso Canyon procurement, which fast-tracked batteries for capacity in Southern California after a massive natural-gas leak.
The fact that this record happened in the course of business as usual, rather than a special circumstance like Aliso Canyon, signals that the industry is diversifying and maturing, said Daniel Finn-Foley, senior storage analyst at WoodMac and an author of the report.
“This isn’t a fluke quarter; this is the natural evolution we’ve been looking at the market developing toward, and now it’s finally happening,” Finn-Foley said in an interview.
Though California and the PJM market still dominate in terms of cumulative installed storage capacity, the quarter’s new builds revealed a growing geographical scope of activity. Large-scale projects with a variety of business models came online in Hawaii, California, Texas, Minnesota and Colorado, Finn-Foley noted.
Small batteries get bigger
The buzzy residential storage market ended the year with some mixed signals.
Yes, it delivered more megawatts than commercial or utility-scale in Q1 and Q2. And 2018 overall improved on 2017 by 350 percent in megawatt terms, with nearly 15,000 home storage systems installed.
But, the residential segment’s six-quarter streak of successive deployment records came to a halt in Q3, and Q4 dipped lower from there. The Energy Storage Monitor authors cite product availability constraints as a key limiting factor. Even Tesla, the popular favorite for home battery systems, has had trouble delivering in a timely manner, and only a handful of other companies have gained much market exposure.
The commercial segment has alternated between hot and cold quarters. Q4, however, came in hot, with a record 30.5 megawatts and 78.2 megawatt-hours. That performance lifted the annual commercial market in megawatts to 53 percent growth over 2017.
Policy support opens new markets
The biggest landmark on the policy horizon is still FERC Order 841, which directs the regional wholesale market operators to clarify how storage can participate in the markets based on its unique attributes, like the ability to both charge and discharge.
The independent system operators and regional transmission operators filed their plans late last year, and final implementation should arrive by the end of 2019. There are still some big questions to answer, Finn-Foley said, such as how to manage storage participating in both retail and wholesale markets.
He cautioned that the arrival of 841 probably won’t create any brand new, single-use business opportunities. Instead, it offers better definition for a range of use cases that developers have already tried out in early markets.
“You now have more confidence in entering new markets,” he said. “You’re not going to get pure-play capacity or pure-play arbitrage. You get more opportunities to layer value now.”
State-level policy updates in Massachusetts, New York and New Hampshire promise a more exciting market in the Northeast.
Utility plans have also expanded the market outlook, even in the last few months.
In February, Puerto Rico’s new utility plan called for major uptake of storage, to the tune of 440 to 900 megawatts in the first four years. Days later, Arizona Public Service revealed it will install 850 megawatts of storage by 2025, a vast ramp-up from its earlier uses of the technology.
In January, Hawaiian Electric Company asked regulators to approve a barrage of power purchase agreements that would add 1,048 megawatts to the island grid.
“This is all about recognizing value, and utilities are on the bleeding edge of recognizing storage’s value right now,” Finn-Foley said. “When they do look at it, guess what happens? They pick it.”
These and other factors bumped WoodMac’s cumulative five-year energy storage forecast up 9 percent since last quarter, he noted.
You can download the free Energy Storage Monitor Year in Review executive summary here.