The storage industry grew precipitously in 2019, racking up wins to be proud of and hard lessons to ponder.
Now that year's behind us, and a new year is dawning. As individual people plot out their resolutions, the storage industry, too, could benefit from defining its aspirations. This year, the U.S. market is set to triple in size, dwarfing all the previous success the industry has won.
As the ambition grows, here are three resolutions to pursue to expand into new geographies, create stronger foundations for distributed energy business models and show leadership in a moment of crisis.
Study the value of storage in every state
For all the new states joining the storage market, many more remain untouched by this technology. A simple way to bring them into the fold is to propose a value-of-storage study, whereby an independent researcher quantifies all the good things that energy storage could provide.
These studies laid the foundation for supportive policies in many emerging state markets, because they track the gap between that theoretical value and the compensation available under current market rules. Massachusetts and New York conducted these studies and used them to create deployment targets and temporary incentives to get the market off the ground. The uptake of deployments in those states shows that this approach succeeded.
Virginia conducted a storage study, and the newly Democratic legislature could use that to enact storage targets or policies in 2020. Maryland's 2018 storage study declined to calculate a value for the local grid. Instead, the state is studying the more granular topic of how particular storage ownership models deliver value; the results are due in 2026.
But far more states lack this kind of public analysis, and that represents a missed opportunity. 2020 should be the year the industry pushes for storage studies in the most promising states that haven't yet done them.
This should involve allies like environmental advocates (because storage could reduce emissions) and ratepayer advocates (because it could save customers money compared to questionable gas investments). And in regulated markets, the utilities themselves could benefit by rate-basing capital investments in storage. Georgia Power and Florida Power & Light have figured this out and proposed initial projects; why not assess just how big the opportunity is?
Of course, if the analysis finds that storage is too expensive to provide much return on investment, states needn't pursue it. But whenever people take the time to think it through, they tend to find uses where storage cuts costs relative to conventional grid upgrades. The hardest part is sitting down and thinking about it.
Clarify where the customer fits into virtual power plants
In 2019, companies proved there is demand for capacity contracts that aggregate home battery systems. In 2020, companies will have to ramp up deliveries, and that's a good time to clarify how exactly the customer fits into the situation.
Customers have a funny dual role in these plans. On the one hand, distributed energy empowers customers by giving them unprecedented control over their own power consumption. Now, millions of people can produce and store their own electricity, ensuring self-sufficiency even when the utility network fails.
On the other hand, aggregators seem intent on erasing the customer's agency as much as possible. The aggregator contracts for capacity or grid services and calls on batteries as it chooses, sharing revenues as it chooses. There's a nominal capacity saved onsite for emergency backup, but otherwise the customer is expected to hand over the keys to this company, becoming merely a host vessel for their asset.
That's not hyperbolic language; this is literally what residential storage companies are doing. Sonnen's 600-unit Soleil Lofts apartment complex features a storage system in every household. But the residents have no way to interact with the batteries sitting in their living rooms — they are dispatched by outside forces, for whatever those forces deem valuable. Sunrun proposes a similar program: It will dispatch batteries on behalf of its customers, making sure grid services don't interrupt other customer needs.
Is this a breakthrough in customer empowerment — or a scheme that lets tech companies borrow land from people to install grid assets on the cheap?
The long-term success of this model will rely on customers feeling good about the arrangement. Many people, lacking the expertise to play the wholesale markets themselves, probably will happily hand over the keys to an energy company to operate the batteries for maximum benefit. But certain elements deserve clear articulation.
One is revenue-sharing. Companies should be transparent with their customers about what revenue the residential systems generate, how much the aggregator pockets and how much trickles back to the host customer. There also needs to be clear recourse if the aggregator's operations interfere with customer needs, by depleting a battery before it switches to backup mode or degrading it with frequent cycling to the point that its capacity deteriorates.
These sorts of banal logistical matters have garnered less airtime than the high-level benefits of a "prosumer" society that taps private investments in homes and businesses to shut down dirty peaker plants. But as the industry approaches execution mode, these topics will be crucial to the longevity of the business model.
Actually deliver on wildfire backup needs
The stakes really couldn't be higher for this one. Millions of people in California, the biggest energy storage market, stand to lose power again when next year's wildfire season rolls in. Storage could save the day — if it can deliver.
State institutions are betting that it can. The California Public Utilities Commission has proposed allocating an extra $513 million to significantly subsidize the cost of storage for people in the fire zones that have low incomes, serious medical needs or have suffered from repeat outages. If approved, this could spur a massive burst of deployments ahead of next fall.
But there's a big gap between making funds available and ensuring people actually make use of them. State grid policy is wonky, arcane stuff; reaching low-income families and medically vulnerable households will take effort and possibly an extensive ground game. A free battery system doesn't help if you don't know you're eligible.
After reaching this new population, the storage technology has to actually perform. And that's not a given. As we've covered in a few different articles, the typical home battery won't back up an entire house for long at typical levels of consumption; most homes will either need a few batteries in parallel or they'll have to select critical loads to back up. Either option requires some caveats that consumers will need to understand in order to avoid frustration.
The capacity limitation of typical batteries similarly poses risk in terms of critical medical needs. If California is directing funds to batteries to provide resiliency for medical-needs households, it's crucial that the batteries deliver sufficient power to keep those medical devices humming. And yet storage companies tend to shy away from guaranteeing that batteries can play that role, which is more challenging than merely keeping the lights on.
At a broader scale, PG&E recently declared its intention to build 20 microgrids at substations in fire country to back up whole communities during shutoffs. The procurement would install more microgrid capacity than the whole U.S. built in 2019, and it calls for a September deadline, which would be a truly astonishing turnaround.
There are many reasons to doubt this vision will come to fruition entirely, but now it's on the storage industry to propose projects so that diesel and gas generators don't dominate the proceeding. PG&E wants four to five days of off-grid power delivery, which would be very difficult for a lithium-ion battery to deliver.
Is this an opening for unconventional storage technologies? Or can an appropriately sized solar and storage system minimize use of fossil generators, saving them only for the most prolonged outages?
At the residential, commercial and utility scales, storage has an unprecedented opportunity to prove it can help the grid amid a collapse in confidence in the old way of business. Now it's on the industry to execute on this opportunity, to avoid embarrassing mistakes and refrain from promising more than the technology is ready to deliver.
Energy storage is no panacea, but it can help a lot more than it has so far — and this is the year to prove it.