by Shayle Kann
October 19, 2015

Shayle Kann and the GTM Research analyst team give GTM Squared members insight into our internal discussion and debate on the latest business developments across solar, grid, and energy storage markets in this monthly column.

Shayle Kann Senior Vice President, Research: Last week, GTM sent a contingent of analysts and reporters to San Diego for Energy Storage North America, one of the two big energy storage conferences in the U.S. This was my second year at the show, and clearly the level of interest in energy storage has shot upward. But let's talk about what we saw, heard and learned at the conference.

Ravi Manghani, I know you heard some impressively low price quotes for energy storage projects. Can you give a sense of where pricing is heading, and how realistic you think those numbers are?

Ravi Manghani Senior Analyst, Energy Storage: Storage system prices have seen a huge step-down in the last few months. The consensus view among storage developers and installers is that storage prices are down about 20 percent in the last two quarters alone.

Some system prices, particularly in relation to PG&E's recent RFP, are suspected to be under $400 per kilowatt-hour. It should be noted that these systems will get deployed sometime in 2018 or later. So it's not like storage procurements of these systems have to happen anytime soon. But it provides a window into where prices could head in next 18 to 24 months.

Brett Simon Analyst, Energy Storage: I'll echo Ravi Manghani in saying that I heard similar price trends when on the show floor. Developers seemed confident that we'll see prices drop significantly in the near future, some saying as much as 50 percent within the next few years.

A common thread was that more utilities are investigating and procuring energy storage to provide grid services. The battery vendors I talked to also discussed aggressive pricing across a range of technologies, including lithium-ion and flow batteries (for more on flow batteries, read GTM Squared’s flow battery reference).

Interest in the Hawaiian market was another common theme among storage developers and installers at the show. A significant number of conversations I had included a discussion of planned projects in Hawaii, or plans to enter that market within the near future. Displacing expensive diesel-generated electricity and smoothing solar output were frequently cited as drivers for the Hawaiian storage market's growing viability. Some developers also mentioned upcoming projects on other island nations, such as the Dominican Republic, for similar reasons.

Did either of you hear similar interest in Hawaii or other island markets? And are there any other states (aside from the obvious like California) about which you heard increased interest at ESNA?

Shayle Kann Senior Vice President, Research: Great question. I moderated a panel with the CEO of Sonnenbatterie, who expressed great excitement about Hawaii's new NEM rules, which were approved two weeks ago. They offer a self-consumption option (which basically requires storage) and a grid-supply option, which may still benefit from storage to minimize export.

So, will Hawaii be the first U.S. state with a meaningfully sized residential energy storage market?

Brett Simon Analyst, Energy Storage: It seems likely Hawaii's residential storage market will be significant within the next few years. Currently, Hawaii is behind only California in residential deployments, but most of this difference is attributable to California's Self-Generation Incentive Program (SGIP). With the new net energy metering (NEM) rules, along with rapidly falling storage system prices and high electricity prices, behind-the-meter storage in Hawaii will become even more economically attractive.

Ravi Manghani Senior Analyst, Energy Storage: Yes, I would agree that changes in NEM rules will see growth in Hawaii's residential solar-plus-storage market. A few of the downstream folks I talked to at ESNA said they were ready to ship their storage products as early as November, and have allocated their resources to that market. It should be noted, however, that the existing NEM customers, and the ones who can file their applications prior to the proposed October 21 deadline, will not see any changes to their NEM tariffs. This would only apply to new solar customers.

Coming back to Brett Simon’s question about other storage markets, Texas was definitely right up on top of the lists of many developers, as evidenced by AES' announcement that it will develop a 20-megawatt storage facility in Oncor territory. Oncor commissioned a value-of-storage report last year that made a case for ownership of storage assets by T&D players in the state. Texas' legislature did not take up any bills on that topic in the 2015 legislative session, but that didn't stop Oncor from collaborating with AES on the 20-megawatt project.

I heard Texas being brought up as a market of interest in many other discussions. Developers are staying busy in Texas, despite pending regulatory and legislative reforms. Some are targeting municipalities and co-ops, such as Austin Energy's 1.5-megawatt procurement award to 1Energy Systems and Tesla.

Shayle Kann, did you have any interesting conversations focused on value streams?

Shayle Kann Senior Vice President, Research: Like you (and mixing metaphors), I would have been a rich man if I had a nickel for every mention of "value streams" at the conference. But I got the sense that much of the conversation was still theoretical.

The storage industry, and even utilities, are well aware of the many potential value streams that energy storage can provide (I think RMI counted 13 of them). But in reality, the vast majority of near-term projects are taking advantage of, at most, two or three of them. Which, I suppose, you can look at in a couple ways. On one hand, the market is pretty limited today due primarily to regulatory barriers.

On the other hand, it's growing quite fast despite that, and you can only imagine how fast the storage market could accelerate as new value streams are opened up.


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