On the first day of May, storage companies across California grabbed ribbons and danced around a pole while collecting money for electrical self-generation.
This delightful tradition comes courtesy of the state's newly upgraded Self-Generation Incentive Program, easily the largest direct incentive for behind-the-meter energy storage in the country. The scale here is breathtaking: Of a total budget of $567 million through 2019, 79 percent must go to storage. That breaks down to $57 million for small residential systems under 10 kilowatts, and $391 million for systems larger than that.
Recall that the total available in Maryland's recently passed five-year investment tax credit will be $3.7 million. California's nearly $450 million slated to go toward behind-the-meter storage will dwarf anything we've seen in this market segment so far.
In fact, it dwarfs the market itself: The U.S. behind-the-meter segment generated roughly $79 million last year (the whole storage market was about $320 million). In storage-adjusted terms, SGIP falls somewhere between the '49 gold rush and Facebook's IPO.
"SGIP has proven invaluable for building the behind-the-meter storage market in California to date," said Brett Simon, our resident expert on the subject at GTM Research. "The new program will similarly provide a boon to the burgeoning market, as the incentive addresses one of storage's biggest challenges to date: cost."
Beyond the sheer scale of it, the area to watch is who actually pockets this money.
The program has drawn its share of controversy for how it gave out funds in previous iterations. There was the case of Stem mysteriously snagging the first 56 applications of a 2016 solicitation (it later volunteered to cancel half the awarded funds), and questions arose about the net effect on carbon emissions, as several hundred million SGIP dollars went to gas-powered fuel cells from Bloom Energy.
Those issues prompted the revamp to structurally privilege storage over other distributed energy technologies -- "wind turbines, waste heat to power technologies, pressure reduction turbines, internal combustion engines, microturbines, gas turbines, fuel cells."
If recent storage RFPs are any guide, these funds will be oversubscribed. In a business still fighting to bring prices down for customers, winning or not winning the rebate makes a difference.
"Players able to secure funding will certainly have an edge over the competition, particularly in the residential segment, where building a bankable business case is more challenging today compared to the C&I segment," Simon noted. "Having an incentive to call upon also helps bring financiers to the table, as a reliable source of funds helps mitigate some project risk."
Keep an eye out for shadow-boxing between the pure-play storage vendors and the solar-plus-storage titans. As Eric Wesoff reported, if a program step is oversubscribed, a project enters a lottery system that includes preferences related to location (such as Southern California Edison's West L.A. Local Reliability Area), as well as giving storage-plus-solar priority over storage-only projects.
That sounds like system that will favor a Tesla or Sunrun over a Stem or AMS, which will rankle the storage-only companies that assumed this program was for them. Then again, the goal is "self-generation," and a battery can't do that alone.
Science can wait for Perry
If you're reading an energy storage column, chances are you already have an appreciation for the role of federal research funds in igniting this industry.
You might also be interested to hear of a surprising turn of events I uncovered at the Department of Energy. The DOE was scheduled to announce a new round of Small Business Innovation Research grants Monday. Instead of telling the eager applicants yes or no, the department told them it won't approve any awards until Secretary Rick Perry has a chance "to be briefed on research projects that will take place under his administration."
This raises concerns of fair play: These small companies took ample time to apply for the highly competitive grant, the government said they would know by Monday if their projects were approved, and when the day rolled around, they were told to hang loose for an unknown period of time, for reasons wholly unrelated to the merits of the applications or the financial situation of the department.
That's one way to celebrate National Small Business Week.
This sort of behavior -- slow-walking the disbursement of research funds without advance notice or justification -- has happened before in the Perry DOE. The question now is whether it's becoming the norm.
See you in Scottsdale
Turning to sunnier topics, there's still time to join the GTM team for our 10th annual Solar Summit in Scottsdale, Arizona. The event will examine the world through a solar lens, but that conversation has increasingly converged with the storage conversation.
I'll be leading a live version of Storage+ focused on behind-the-meter solar-plus-storage. We've got founder and CEO Farid Dibachi of JLM Energy, Sharp Electronics' Carl Mansfield and Strategen Consulting's Lon Huber, who are conducting innovative work in the technology, financing and policy dimensions of S+S.
Daniel Finn-Foley of GTM Research will lead a panel with AES Energy Storage and Arizona Public Service on unlocking grid-scale storage. Those two companies worked together to deploy two 2-megawatt batteries to balance the 1,600 rooftop solar systems installed for APS' Solar Partner program. Dan tells me this project is "a signpost of how seriously utilities are looking at storage across the U.S."
Also, don't miss his research presentation on deployments, forecasts and market drivers in the front-of-meter market. All of this will take place in perhaps the only clean energy event venue modeled after the Moorish palace of Alhambra. Not to be missed.
N-E-C you in Massachusetts
NEC Energy Solutions has had a big year. Riding high from its award-winning deployment in Sterling, Massachusetts last year -- which single-handedly bumped the state onto the top three utility-scale storage deployments for the quarter -- the company has locked down 100 megawatts in new contracts around the world since the start of 2017.
Its century-old Japanese parent company, NEC Corporation, took notice, and sent over a new leader. Hiro Ezawa has taken over as CEO of the Westborough, Massachusetts-based subsidiary. His mission: grow the company to gigawatts of deployed storage.
Ezawa explained in an email that he plans to leverage resources from the parent corporation -- like financing, legal and global sales expertise -- to scale NEC ES. "We are working on strengthening options for our customers with product warranties, performance guaranties and vendor financing," he added.
He wants to focus initially on the California, Massachusetts and U.K. markets, with an eye toward India and China as well.
This marks an evolution for the 150-person NEC ES, which spun out of ill-fated A123's stationary storage practice. The strategy plays off the company's dualistic nature: leverage the flexibility of the small tech startup, backed by the balance sheet, name recognition and global reach of a massive corporation. Consumer trust plays a crucial role in closing deals, and NEC ES appears poised to capitalize on its blue-chip connections.
Stem grows in the Big Apple
There had been murmurs of Stem looking eastward, and now the C&I storage provider is going in.
The company will install 14 megawatt-hours of storage with 20 companies across 80 locations in New York (it's more efficient to contract with customers that have several locations).
The Empire State has emerged as a leading commercial storage market, as I described here, ranking as the No. 2 individual state in cumulative deployments for that category. That said, it only had 2.3 megawatts as of Q4 2016, so an additional 14 will make for gobs of growth.
That's not to say Stem is going in unassisted. The company is leveraging some programs from the New York State Energy Research and Development Authority. The company also has a previously announced contract with Consolidated Edison to use storage in the non-wires alternatives BQDM program.
So, New York is still an early market building up steam with the help of state programs, but then again, so is California.
The blockchain/battery mashup we've been waiting for?
Blockchain, as we know, has garnered a cool factor commensurate with The Strokes circa spring 2001. Now, the buzzy decentralized payment mechanism is taking an actionable form in a project by Sonnen and German power grid operator TenneT.
Germany needs help to reduce its currently massive renewable curtailments. Sonnen has been developing a decentralized network of home storage systems that it can leverage for broader grid balancing. But before those batteries can be fully integrated into broader grid operations, there needs to be a simple way to transparently track and pay for all the little transactions.
"The blockchain technology is what makes mass simultaneous exchange between all these parties possible in the first place, and is thus the missing link to a decentralized, completely CO2-free energy future,” said Philipp Schröder, Sonnen's managing director and chief sales and marketing officer.
As for how that will actually look in practice, it's still hard to say. But the companies are working with IBM on the blockchain development, so there's some heft behind the effort. This could really be it.