by Julian Spector
December 15, 2017

Ain't no party like a storage party.

I didn't have time to fact-check that lede, but it feels right after two days of exuberant storage industry congregation here in San Francisco. GTM's third annual Energy Storage Summit drew more than 600 people, but the chatter in the auditorium and the hallways told the real story: People are excited about this industry.

And this year provided plenty of tangible steps forward to reflect upon. The panel discussions had more projects and larger projects to analyze; there was less "here's a guess at how the future will look" and more "here's what we're doing now."

Of course, the storage industry has barely gotten started. A few big names have produced multiple grid-scale projects, but there's a growing class of newcomers taking the first step, knowing they have to tackle the learning curve for a new industry.

Dan Berwick, who leads the new storage practice at commercial- and utility-scale developer Borrego Solar, told me he's trying to "tune out the froth" and gain experience building projects.

"It's going to happen, especially in California, Massachusetts and New York," he said of the storage market. The key is to do the work now to be ready in five years, when the market will have grown nine times larger, by GTM Research's estimation. As a privately held company, Borrego has some leeway to invest now in a segment that's small but growing.

Berwick's team is tackling a 1-megawatt/2-megawatt-hour project for National Grid in Massachusetts, slated to be completed in January. Another one of the same size is going to a rock quarry in Santa Rosa to help control the site's spiky loads.

The U.S. arm of global energy company EDF launched its own foray into behind-the-meter storage. The company already boasts 316 megawatts and 824 megawatt-hours of storage worldwide. Much of that is large-scale, like the storage accompaniments to France's nuclear power fleet.

Last week, EDF Renewable Energy nabbed a 10-megawatt/40-megawatt-hour behind-the-meter contract for PG&E.

One might wonder why such a large company would bother with smaller distributed storage on customer sites when it could chase more massive deals.

This looks like a longer term-play. GTM Research predicts the behind-the-meter segment will compose half the U.S. storage market by 2022. EDF has decided that behind-the-meter will occupy a lucrative enough position in the future market that it wants to gain the skills and experience to lead when that happens.

If the company continues down this road, it will bring the expertise of an actual utility (the parent company runs France's grid) to virtual power plant operation. That would put it into competition with the likes of Stem and AMS, while scoping out a new revenue stream that American utilities have scarcely begun to consider.

Five years isn't that long. Energy corporates have to weigh whether the benefits of learning the market now outweigh the costs of doing business before there's much money to be made.

The Bay State battery bonanza

Massachusetts threw more money into the ring last week -- $20 million to be exact, spread across 26 projects amounting to 85 megawatt-hours. The state actually doubled the original funding commitment based on the response from applicants.

The awardees included several municipal utilities, which stand to save money on the demand charges they pay for systemwide consumption, and several hospitals. But there were some familiar industry names in the list that made the trek from California:

  • Advanced Microgrid Solutions got $645,000 for commercial projects in Brockton and Leicester
  • Tesla took $1,074,000 for a hotel and casino in Everett, plus $1,250,000 for residential installations on Nantucket
  • Sunrun received $561,000 for residential sites
  • Stem together with utility Constellation won $1,250,000 for commercial storage in the greater Boston area

It's clear that even the market leaders in residential and commercial storage rely on grant money to break into new markets, in the absence of the market and policy reforms they say would allow them to earn money for the services they provide.

California kicked off the storage industry with an ambitious target, and now claims the tax dollars from the above companies and others. I still haven't found an industry observer who thinks that Massachusetts' 200 megawatt-hour target is potent enough to drive the market in a meaningful way.

Instead, it looks like grants will provide the early boost. The one-time funding announced last week is supposed to produce nearly half the capacity called for in the target. Another boost comes from the Solar Massachusetts Renewable Target (SMART) program, which pays an adder for solar systems that pair storage. Throw a federal Investment Tax Credit on top of that and you have a party.

It's early to call this a proper market, but it is a state that will take a couple dozen storage projects on-line in the coming year or two, and that's well ahead of most states.

Fluence is happening

The joint venture between AES Energy Storage and Siemens will officially kick off in the new year. We'd been waiting to hear when the paperwork went through since the concept debuted in July.

Still no word on how the new entity will divvy up leadership roles between the talent at the two partner companies, but we do know it will have offices in Washington, D.C. and Germany to start with. 

Fluence fits right in with the trend of large international energy companies tapping into American storage talent. The twist here is that AES Energy Storage already belonged to a large global power provider, so it didn't need to be acquired.

Instead, AES and Siemens will split the ownership 50-50, under the theory that the business will perform better as a standalone, storage-obsessed company than as one small cog in a massive corporate apparatus. This hasn't really been tried before in this industry, so it will be a case study for other large competitors to watch.

Microgrid movement

It's not quite time for a standalone microgrid conference (keep going, just a few more years!), but that crowd makes a strong showing at Storage Summit.

This year's string of natural disasters "changed the concept [of resilience] in people's minds," said Troy Miller, director of grid solutions at S&C Electric Company. That company's microgrid business grew out of its grid equipment expertise, including smart switches. 

Whereas previous hurricane seasons typically featured one really bad storm, this year sent three in a row crashing into the U.S., all well televised. He expects to see heightened microgrid development for the sake of grid resilience in Florida, Texas and New England next year.

"Go Electric" might sound like a command uttered to a recalcitrant diesel car, but it's also the name of a scrappy startup that's gaining steam in the military microgrid space. It began with three people in Indiana in 2011 and has swelled to 27 employees with several contracts underway, said President and CEO Lisa Laughner.

The company builds a microgrid controller inside a battery cabinet, which each microgrid component plugs into. The IP produces seamless islanding by sensing an outage coming down the wires and flipping the switch before any of the devices notice. 

Unusually, Go Electric sizes its microgrids to peak load, so they don't call upon the site to shed non-critical loads in backup mode.

The company completed an initial 3.5-megawatt microgrid for Camp Smith in Hawaii in February 2016. That showing helped the startup secure additional projects at Fort Custer, Tooele Army Depot and a mobile application that can be lifted by four soldiers to serve as a microgrid hub in the field.

Meanwhile, Go Electric also plans to tap into the commercial storage market, offering a combination of resilient backup power with bill reductions. 

I also ran across a brand-new microgrid venture called Ageto, launched by two former members of Spirae.

Where S&C offers full stack services, from controls to manufacturing the pieces, Ageto specializes in "bespoke controls." The founders licensed commercially available ClearSCADA and built a microgrid suite on top of that service. With just two employees and virtually no overhead, they hope to nimbly design and deliver controls on remote islands and off-grid electrification to start with.

Microgrid services are notoriously difficult to make money on, because they defy easy standardization. At least there's enough air in this sector for large, medium-sized and tiny companies to experiment in search of a profitable niche.