by Julian Spector
April 02, 2019

If we’ve learned anything from the storage sector, it’s that just because a market segment is tiny now doesn’t mean it won’t be big in a few years.

Residential batteries posted 350 percent growth in megawatt terms last year, after achieving just a few hundred installs a quarter in very recent memory. The overall grid storage sector wasn't much to talk about three years ago, but now, after another record year, it's on track to double and then triple over the next two years.

But there’s a whole class of storage device that gets left out of that tally: thermal.

Converting electricity to thermal energy and storing it offers great benefits to both grid operation and greenhouse emissions reductions. In many regions, air-conditioning load drives peak demand; time-shifting that load through cold energy storage lowers the cost of electricity and reduces the need for new gas plant construction, while reducing generation during more carbon-intensive hours.

Unlike grid batteries, thermal storage needs to be located at customer sites if it’s going to help at all; blowing cold air at a substation doesn’t keep people comfortable somewhere else. So this week, we’re going to dial into the commercial and industrial space, to see how U.S. market leaders are growing and expanding the market.

We’ll set aside a related class of technologies: thermal storage that returns electricity to the grid. That category includes molten salts at solar thermal plants, the Google X spinoff Project Malta, Israeli startup Brenmiller Energy, and others. The market opportunities and sales conversations there have little in common with convincing a corporate energy manager to put an ice block in the basement.

Which is hard to do, as discussed in earlier coverage, even though thermal storage technology has been proven in the field for decades. To grow the small sector, thermal storage providers must home in on useful price signals, win over utilities, break through the limitations of public awareness and streamline the physical requirements for deployment. 

"It's a story of unrealized potential," said Mike Hopkins, one of the sector's more prominent evangelists, who led Ice Energy for six years until his retirement last fall. "It is...a uniquely cost-effective storage technology, but it's something you still need to sell," above and beyond the task of pitching conventional energy storage.

Find the market signals

To have a market, thermal storage has to get paid.

An economically minded business needn’t bother shifting AC load to off-peak hours if it doesn’t have to pay more for peak power than off-peak. In most markets, rate design still doesn’t expose customers to the actual costs of power production at a given time of day.

First on the wish list for thermal storage, then, would be time-sensitive commercial electricity pricing. Time-of-use (TOU) rates, like those California is adopting, step in the right direction by creating a delta between peak and off-peak hours (as do demand charges, but real-time pricing remains the ideal).

That said, thermal storage companies interviewed for this article said that enough markets have TOU or demand charges for commercial customers to create a market opportunity. It's not an accident that Ice Energy and Axiom Exergy are based in California and won their first major contracts there. Viking Cold Solutions and Calmac are headquartered elsewhere but maintain an active presence in the state.

Break into utility procurements

In the absence of a time-sensitive rate design, there’s a workaround: sell to utilities, which can capture more of the system values than a single customer. If a utility knows it will have trouble delivering peak load to a certain circuit, it can pay third parties to make that more expensive problem go away.

Ice Energy made utility deals more central to its sales strategy, starting with a 20+ megawatt contract for Southern California Edison as part of the 2014 Local Capacity Requirement procurement. Ice Energy installed the first 1.9-megawatt tranche of that commitment in February.

The contract guarantees demand reduction in specific areas. That allows Ice Energy to go out and find commercial customers willing to host an Ice Bear on their HVAC system, free of charge. The customer gets 20 years of bill savings, while Ice Energy gets paid by the utility, which gets the demand reductions it's looking for.

Ice Energy also won a 5-megawatt contract with the municipal utility in Riverside, California, as well as a 210-unit contract to decrease peak summer load on Nantucket, and a 0.5-megawatt deal with Massachusetts utility Eversource on the mainland, said COO Marcel Christians.

Viking Cold Solutions, which produces thermal sink devices to maintain low temperatures in freezing storage units, has also made inroads with utilities. It’s installing 1.5 megawatts for Eversource in a demand-reduction program, and built a system at the San Diego Food Bank with funding from San Diego Gas & Electric's emerging technology program.

But Viking Cold doesn't just chase utility contracts.

"We’ve been able to double our growth in revenue year-over-year in the years I've been here," said Collin Coker, VP of sales and marketing. "Within the next 24 months, we should have an installation in almost every TOU or demand-based market in the U.S."

Axiom delivers thermal storage for grocery store refrigeration, primarily as a bill management play, but it graduated into using those devices for grid services as of March. The company teamed up with aggregator Leap to add Refrigeration Battery units at several Whole Foods stores into a portfolio of flexible loads that bids into California's Demand Response Auction Mechanism.

"Today, it's a nice add-on that makes a project more attractive," said Amrit Robbins, CEO and co-founder of Axiom. In other words, grid-services revenue sweetens the deal by monetizing additional value, but bill savings still drive the project economics.

These companies have found places where they can make a business case with today's power market dynamics, even if ideal time-based price signals haven't materialized everywhere. If rising renewable penetrations push markets to put more value on flexibility, thermal storage would see a definite upside.

"The more renewables, the more you need storage, the more creative people will have to be," Hopkins said.

Expand public awareness

The leaders of these companies didn't seem too concerned about the electric rates and tariff policy. The consensus pick for biggest hurdle was making sure people know what their product even is and does.

"If you wanted to be a solar company, you didn't have to go around and explain to people what solar is," Hopkins noted. "[Thermal energy storage] is a more complicated product to sell."

Battery storage also performs more tasks and entails more operational complexity than solar, but the battery sector has taken off and seen an infusion of market entrants and investment, while the thermal side stays limited to a handful of companies.

"I’ve struggled to understand why the adoption hasn’t been faster," said Coker, of Viking Cold.

"Our biggest challenge historically has been convincing folks there's a problem," Axiom's Robbins said.

If a company gets a hefty electricity bill, the natural impulse is to use less electricity. But that misunderstands the role that time of consumption plays in those bills, if demand charges are at play. That temporal awareness is crucial to the thermal storage sales pitch.

One way to raise awareness around what thermal storage can do is to join forces with the conventional battery industry, said Mark MacCracken, president of Calmac. That company, acquired by Trane in 2017, delivers large tanks of ice storage for major facilities like Bank of America Tower and Rockefeller Center in New York City.

"We think that we're going to be able to amplify the channel by going with the buzz and showing them how we can help them dramatically on the pricing," MacCracken said. "You should use thermal batteries for thermal loads and electrical batteries for electrical loads."

Batteries are significantly more expensive per unit of load reduction than thermal storage, he continued. Sizing thermal for a building's cooling load and using batteries to tackle remaining electrical demand offers better project economics than storing electrons to run a compressor to cool the building during a hot afternoon.

The company is working on a large project currently that combines battery and thermal storage, MacCracken said, but this combination is still quite rare.

Simply building thermal storage systems so potential customers can see them in action makes a big difference, Coker noted. Viking Cold Solutions has systems operating in 33 different locations, and is expanding internationally to Mexico, Canada and Australia.

The company installed at food banks in San Diego and Boston, in part to demonstrate the technology in a highly visible community center, he said. The San Diego facility uses onsite solar power to charge up the thermal so that the facility doesn't need to draw from the grid during the evening peak; that demonstrates the usefulness of the technology for battling the infamous "duck curve."

Find the right space

For commercial customers, every unit of space has a clear economic value. Filling square feet with saltwater tanks removes that space from customer parking or corporate activity.

Viking tackles this by inserting its thermal cells into the racking above cold storage. Nothing is using that space, but the customer still pays to refrigerate it.

For Axiom, this challenge guides the kinds of pitches the company makes. Its basic Refrigeration Battery occupies two 20-foot containers: one for the tank; one for the "heart and brains" of the system. Cramming those into a tightly packed urban store is "virtually impossible," Robbins noted, so he focuses on suburban stores that have plenty of space.

Axiom has also found that its controls software can eke out bill savings even in the absence of a refrigeration battery, Robbins said. He plans to launch a software-only product later this year, to deliver active power management for buildings with large thermal loads but which don't necessarily need or have space for a thermal battery.

Ice Energy also designed its product to be minimally intrusive.

"We don't take up any space that would be in commercial use," said Christians. "The...vast majority of our commercial units go on a roof."

Calmac's devices have the largest footprint, but MacCracken said space usage doesn't pose a major concern. His rule of thumb is that thermal storage will occupy 0.25 percent of a building's square footage, about what a water heater takes up in a typical home.

At Goldman Sachs, for instance, Calmac's tanks took up 5,700 square feet, a notable amount but tiny relative to the building's total of 2.2 million square feet. Depending on the site, the tanks can be buried outside or located on the roof.

The bigger challenge, MacCracken added, is a common expectation he encounters that an upgrade isn't worth doing unless it delivers a three-year payback.

"We’ve taken a lot of the engineering difficulty out of the problem now, but if you try to say it's got to be three years and under, that's a pretty high bar," he said.

Four- to seven-year paybacks are readily achievable for a retrofit, he said. New builds, where the structure is designed with thermal storage in mind, make it possible without additional cost.

Just like with rooftop solar and home batteries, the most efficient mode of delivery would be during original design and construction, rather than trying to add it in after the fact.