by Julian Spector
June 16, 2017

The upstart energy storage industry, though young and small in numbers, is nearing the highest echelons of solardom.

I confirmed this week that all this talk about solar-plus-storage being the "next big thing" coincides with real strategic changes among the nation’s leading solar developers.

I took the list of top 10 companies based on developed and contracted solar capacity and checked out how each one is approaching storage. Eight of 10 either have already installed storage or are actively pursuing it, and the other two declined to comment (SunPower got in touch after the article went live to confirm it has developed commercial scale solar-plus-storage).

Several of those companies were downright enthusiastic about sharing their storage plans. They see storage as a way to sweeten their bids to utility offtakers in high solar penetration regions; the batteries protect solar developers from their own success.

This amounts to a serious transition for the utility-scale solar industry. Storage hasn’t become a major part of the business yet, by any means, but in many cases it now has a dedicated team and resources within the larger company. The integration of storage into corporate strategy marks a crucial step toward more widespread energy storage deployments.

The same week I published that story, GE unveiled its capability to layer battery storage on all of its power plants -- one-third of all generation in the world. A bit more on that below.

The massive projects that these companies produce take several years to complete, so the influx of hybrid power plants won’t hit in a big way until the close of the decade. By then, storage could well be a de facto requirement for major new solar plants coming into renewables-heavy markets.

Speaking of which, the U.S. hit a milestone on the path of renewables expansion. The numbers are in for March, and wind and solar collectively powered 10 percent of the nation’s generation for the month. That’s three points higher than they performed in 2016.

A few extra percentage points of market share for a single month doesn’t mean a whole lot in isolation, but this is significant in its directionality. Watch for how many months this year wind and solar cross the 10 percent line, and then see how they rank for 2017 as a whole.

Since wind and solar dominate new capacity additions, the math points to more of these monthly milestones as time goes on.

The meter that divides us all

In another notable milestone, the GTM Research team released its Energy Storage Monitor report covering Q1, and the utility-scale numbers are just bonkers: 5,040 percent growth on a year-over-year basis.

The success there also emphasizes the difference between the business landscapes behind and in front of the meter.

The BTM segment installed 32 percent fewer megawatts than in Q1 of 2016, and our analysts tie much of this decline to an industry holding pattern ahead of the new Self-Generation Incentive Plan disbursements that started in California in May.

There’s a more fundamental reason for this FTM/BTM dichotomy: economies of scale. As storage analyst Brett Simon pointed out, it’s cheaper to deploy a single 10-megawatt system than to deploy a hundred 100-kilowatt systems, even though they’re functionally equivalent in capacity.

Lithium-ion batteries still cost too much to be widely economical for residential and commercial applications given current options for revenue streams. When the product is useful but too expensive, programs like California's SGIP provide a boost that can get the industry moving; the trick is how quickly companies can kick off and pull in steady revenue regardless of SGIP.

GTM Research expects the behind-the-meter storage to surpass utility-scale in megawatts deployed in 2022, so it may be a few years before we see real traction there.

Hawaii edges out California

California dominates the storage industry almost as thoroughly as it dominates the NBA, so it’s worth recognizing any time another state unseats it.

In Q1, Hawaii took first place among the 196 grid-connected residential storage deployments. The island state put up 342 kilowatts compared to California’s 241.

For all the talk of postcards from the future, Hawaii’s move toward self-supply tariffs hasn’t produced a ton of volume just yet.

Part of that is because HECO reopened another 20 megawatts in the grid-supply program that was capped in September, Simon noted, after a number of applications were canceled. Prospective home solar customers haven’t yet felt the squeeze.

The matchup to watch in the next quarter is whether Hawaii’s self-supply push maintains the lead, or if small storage SGIP rebates drive California back to number one for residential.

PJM pre-eminence peters out precipitously

California rules new capacity additions, but PJM still holds more cumulative capacity since it kicked off grid-scale storage in its frequency regulation market. That’s about to change.

PJM’s utility-scale market share dropped from 53 percent in Q4 2016 to 46 percent in Q1 of this year, according to the ESM.

The PJM RegD market has been filling up, leaving less room for new projects to come in and make money. Meanwhile, California surged ahead with the Aliso Canyon procurements, and storage activity has spread to more states than ever before.

In total storage, California only trails PJM by 19.5 megawatts, which it could easily hit in Q2. California's utility-scale segment trails PJM by 91.7 megawatts, though. That’s sizable, but PJM is treading water as California paddles vigorously forward. PJM has a larger pipeline than California for 2017, but the Golden State has them outgunned by a long shot for the next five years.

Oh, and the market’s about to double in value

There’s a lot of good stuff in the latest ESM, so this nugget didn’t get as much play as it could have: GTM Research predicts the U.S. storage market will earn $618 million this year, nearly doubling the $320 million market of 2016.

The dollar valuation of the market doesn’t even tell the full story, because the price of systems keeps falling alongside lithium-ion prices. Last year, energy storage deployments doubled on a megawatt-hour basis from the year before, and market value in dollars grew by only 9 percent.

Lithium-ion costs continue to fall, but the industry is projected to overcome that this time around. Residential is poised to grow 650 percent in 2017, and that’s the segment that typically charges the highest unit rate for its product. The utility segment will bring home $128 million more than the previous year.

GE: We’ll put batteries on all the plants

Industrial conglomerate GE has expanded its integrated battery pairing to cover all steam and gas generating turbines that it sells, with renewable generators to be added soon.

That’s a surprisingly swift and wide-ranging scale-up of a pilot program that GE only completed a few months ago. The company installed two hybrid battery/gas turbine peaking plants for Southern California Edison.

"Aliso Canyon gave us a tailwind to push this faster. It allowed us to fast-track it," said Eric Gebhardt, vice president of product management at GE Energy Connections, in an interview with Stephen Lacey. "We’ve been really satisfied with the technology."

Who says multibillion-dollar, century-old corporate empires can’t sometimes act nimbly?

Ad astra, Proterra

The stars continue to shine on the bus company that’s really a battery company.

American e-bus maker Proterra locked down $55 million and two marquee partnerships this week, barely six months after a $140 million series E round.

The company brought on BMW’s venture arm, which could open up collaborations between the two companies on shared interests like lightweight composite chassis design and battery pack configuration. The round also includes Al Gore’s Generation Investment Management, one of the most prominent sustainably minded investment firms.

As Colin le Duc, co-head of Growth Equity at Generation, told me: ”Proterra is, on the face of it, selling buses, but the real magic is the battery system.”

In other words, the potential to remake the American transit fleet in its image might be sufficient to merit an investment, but Proterra’s expertise digs deeper. If the EV revolution arrives as is predicted, that in-house battery electric drivetrain knowledge will be good for a lot more than buses.