by Julian Spector
November 16, 2017

Sunrun posted positive quarterly earnings last week, making a profit and growing market share in a healthy way. 

That alone is notable for the turbulent residential solar sector. But there are two other important stories in the numbers.

First, Sunrun likely surpassed SolarCity as a leader in third-party residential PV financing. SolarCity is losing market share as it gets slowly digested into the belly of Tesla. 

The installer also had big news for storage nerds as well.

The "attachment rate," which measures the share of solar customers who opt for a storage add-on, doubled for Sunrun's direct customers in California in Q3. Now more than 10 percent of Californians who get solar from Sunrun are doing it through its BrightBox program, which pairs solar with LG Chem batteries.

In Hawaii, all Sunrun systems come as BrightBox, to comply with the Customer Self-Supply tariff. The only other market where Sunrun offers BrightBox is Arizona, but that just got started in July so there isn't much to report.

The customer base started very small, which makes it easier to double battery installs. Still, with 10 percent of Sunrun's direct customers in California opting for storage, the tech and business model are clearly on a positive trend line.

Sunrun may be the furthest along at weaving storage into its overall business strategy, rather than tacking it on as a premium add-on. CEO Lynn Jurich touts the benefits of battery backup in a hurricane-ravaged world, as well as the future revenue potential of grid services.

The company's business model involves leasing systems that will generate revenue for many years to come. At a corporate level, Sunrun has recognized that including batteries makes a system more valuable. The growing grid services unit is chasing opportunities to monetize this potential, with a notable early deal in the National Grid partnership announced earlier this year.

Meanwhile, SolarCity's grid services mastermind recently left Tesla for an executive role at Advanced Microgrid Solutions. Tesla's battery product remains the most sought after of its kind, but it hasn't demonstrated commensurate leadership in melding storage strategy with solar strategy, or utilizing the network of distributed assets it is starting to accrue.

No. 3 installer Vivint announced a partnership with Mercedes-Benz in May, but it's been pretty quiet since then. There's a big gap between signing an agreement and delivering significant amounts of products to customers.

The U.S. residential storage market remains tiny and the economics haven't arrived in much of the nation. Based on its record so far, Sunrun may well prove to be MVP this year for a very small but growing solar-plus-storage market.

Experts look to storage to mitigate grid disruptions

GTM just wrapped its first Power and Renewables summit in Austin (video stream available to Squares here), combining the power markets expertise of our corporate parent Wood Mackenzie with the renewables insights from GTM Research and MAKE Consulting.

The top-line takeaway, as I reported here, is that renewables are already starting to make themselves felt in the wholesale power markets in the form of more low-price events, and rarer high-price events. That's starting to squeeze out some of the less competitive coal and gas plants.

This suggests a few challenges down the road.

Gas plants are shutting down at a time when capacity is becoming more valuable to balance the fluctuations of wind and solar production. At the same time, the low power prices pressure renewables developers to cut costs in order to stay competitive, leading to a downward spiral in prices. Eventually, that could make it hard to figure out a business case for new renewables.

Luckily, storage can offer an out for both problems, providing flexible capacity and allowing renewables to time-shift generation and avoid curtailment. (Although it will require tens of billions of dollars in investment.)

That said, it was hard to find power industry representatives on the panels or in the audience who sounded particularly bullish on storage. 

The common refrain was that it's something they're scrutinizing, but they just haven't found the right use case yet. They often mention how they've scoped out the arbitrage opportunities, and the economics just don't work because of costly batteries and cheap wholesale prices.

But energy arbitrage represents just a small sliver of what the storage industry proposes to do. Perhaps because the bulk of storage on the grid was designed for arbitrage in the form of pumped hydro storage, energy professionals instinctively place lithium-ion in that framework.

I did hear a Southern Company executive express interest in storage as an add-on to solar plants to capture clipped power. That's the stuff that would otherwise be lost because the inverter can't accommodate everything that's generated at peak moments. NEXTracker designed its solar-plus-storage-tracker product to deal with that problem.

Southern didn't go ahead with it, though. The executive noted that such a change would have complicated the PPA. The plant had a long-term energy contract which didn't provide a clear way to value solar energy stored in batteries for delivery at peak grid demand.

This suggests the need for new model contracts that work through the challenge of retrofitting existing plants to store clipped power.

Is something finally happening with storage in New York?

New York has made very little use of energy storage to meet its Reforming the Energy Vision goals of a cleaner, more efficiently utilized grid. But it has kicked off a new channel for bringing storage projects to fruition.

The REV Connect portal went live in August and allows companies to pitch projects that involve partnering with a New York utility to meet the needs of electricity customers. This fits with REV's mission of gently transitioning the utilities of today into "distribution system platform providers" that work with third parties to install distributed grid assets.

So far, 40 submissions have come through the portal, spanning behind-the-meter storage and other grid resources, said Dan Bradley, a managing director for energy at Navigant, which built and operates the service on behalf of New York.

Navigant works with the companies on their proposals to make sure they meet the requirements, and to optimize the odds of attracting a utility partner.

"Unlike any other channel, we have a transparent process and you get immediate feedback," he said. "You've got a pretty low barrier to entry to try a new idea."

This doesn't really stand in for the kind of storage rate design that is still under development but not yet implemented. The portal is intended to field ideas for demo projects and new business models, but there's no guarantee that a utility will choose to implement even the REV-iest of proposals.

For companies with a fleshed-out business elsewhere in the U.S., this may feel a bit infantilizing.

But REV Connect does offer a more sophisticated way to channel third-party interest in grid innovation into a form that utilities could actually use. And for those third parties, it offers a low-risk chance to try out an experimental business model and see if it generates interest.

ESA storage roadmap

The Energy Storage Association wants to see 35 gigawatts deployed by 2025. That's a massive increase from what we have now, so the group released a new document outlining how the U.S. could feasibly achieve that objective.

The report predicts Hawaii and the Southwest will maintain their leadership with a total of 12.4 gigawatts, while the Northeast rises to prominence with 10.2 gigawatts.

ESA CEO Kelly Speakes-Backman told me this regional breakdown helps identify target states that could have strong adoption of storage and serve as examples for other states.

Instead of trying to support storage policies everywhere at once, advocates can focus on markets with a higher chance of success. California's rapid uptake of storage has already paved the way for policy to be imported to other states.

Much of the work will be unsexy and procedural: ensuring regulators and policymakers have access to up-to-date storage pricing data; conducting impact studies so legislators see what value storage could provide to their constituents; and weaving storage into utilities' long-range planning.

A utility can do a lot when it’s serving the city of Austin

Did you know Austin, Texas has an energy storage target?

It adopted one in its long-term climate change and energy plan back in December 2014. That puts it ahead of New York City, which I hailed as the first of its kind last year. The Texas capital is chasing at least 10 megawatts of electrical storage by 2025 and 30 megawatts of thermal storage by 2027. The city already has about 15 megawatts of thermal storage across a few district heating networks.

Municipal utility Austin Energy will base its game plan for storage adoption on a Department of Energy funded project underway currently. The SHINES project links up distributed solar generation with storage at residential, commercial and utility scale.

Austin Energy wants to test a variety of business models, so it's trying residential storage with third-party control, utility control and autonomous dispatch; commercial storage with third-party control and autonomous dispatch; and direct utility control at grid scale. Software from Doosan optimizes the whole network, and storage participants include LG Chem, Samsung, Younicos and Stem.

"SHINES is about increasing distributed solar generation onto the grid that can be dispatched at any time of day or night to meet customer needs, while we’re also ensuring reliability at the lowest cost possible," said Karl Popham, who oversees the project at Austin Energy.

Part of the reason the utility can move so quickly on storage is that it's fully integrated, so it can monetize storage across generation, transmission, distribution and customer-facing business groups, and doesn't have to play definitional games with it.

Another enabler is the governance structure: Austin Energy answers to the city council, which Popham described as "extremely proactive" on matters of clean energy. The council set a target of 65 percent renewable energy by 2027; when you factor in nuclear power, the utility will provide 85 percent carbon-free electricity by then.

Even more ambitious, the city aims for zero net emissions by 2050, meaning housing and transportation also need to clean up. Those policy directives empower the utility to chase innovative models, like using electric school buses as grid assets.