by Julian Spector
May 29, 2020

The corporate earnings season is wrapping up, and it sure was a weird one.

All the attention shifted to how COVID-19 and ensuing lockdowns were crushing business, but that all kicked in at the very end of the quarter that was actually getting reported. The numbers came from a distant past, while all the questions pertained to a radically different present.

Understandably, the details of a company’s energy storage progress failed to claim top billing in the context of economic collapse and the struggle for survival. So I’m taking this week’s column to catch us up on what we learned, storage-wise, about the publicly traded leaders of the clean energy sector.

Who sold batteries better? 

As a new arrival on earnings reports, energy storage lacks consistent metrics across the industry. But residential solar companies are coalescing around reporting attachment rate — the percentage of solar customers that add batteries — as a meaningful metric for the health of their storage business.

The trend keeps bumping up, with especially high concentrations in Northern California.

  • Tesla: 40 percent of home solar customers add Powerwalls. This quarterly earnings report was the first time I’d seen this company name an attachment rate.

  • Sunrun: Previously reported 20 percent attachment rate nationally for its direct (in-house) installation business. But CEO Lynn Jurich said that in April, in the San Francisco Bay Area, 60 percent of direct customers added batteries. Those customers are staring down the possibility of stay-at-home orders extending into the fire season, at which point utility PG&E is likely to shut off power for extended periods of time. Not fun.

  • Sunnova: 30 percent attachment rate, up from 24 percent in Q4 2019. Sunnova finances deals carried out by a network of local installers. 

  • SunPower: 30 percent attachment rate for commercial solar. The company’s branded residential storage product launches in Q2.

  • Vivint Solar: ???. The No. 2 home solar installer did not include battery details in its metrics or its investor call. That’s a shift from the March earnings call, when CEO David Bywater admitted to being “behind on storage.” He promised that in 2020, Vivint would reach double-digit-percentage attachment rates in places where it offers batteries, but that was before coronavirus scrambled everything.

With these numbers, batteries have clearly entered the mainstream for the biggest U.S. rooftop solar companies. Everyone says that batteries still cost too much and have plenty more cost declines in their future, but they’re now part of a third or more of the deals these companies are making.

“More customers are interested in resilience than ever before, while declining storage prices and incentives make the option more within reach,” said Brett Simon, who tracks behind-the-meter storage at Wood Mackenzie. “Plus, in markets like California and Hawaii, solar-plus-storage has been attractive for the residential segment for a couple of years now and thus can be pitched as an economically viable option, not just a backup solution.”

Notably, the storage uptake trend holds true for the national installers like Tesla and Sunrun, and also for the companies that supply a network of local installers, such as SunPower and Sunnova. 

That suggests it’s not just big national brands that have the wherewithal to stock battery systems and train sales reps in how to pitch them; the local folks are doing it too. That said, Sunrun always cites storage rates for its direct installation business, not the independent installers it finances, implying that the in-house numbers are more impressive.

As for why Tesla leads in its overall attachment rate, remember that its solar sales volume tanked after switching from a sales model to an online shopping model. The only people buying Tesla solar are the ones specifically seeking Tesla-branded solar, and therefore they are likely to be attuned to Tesla’s other brands. It helps that the Powerwall is still the most recognizable name in home storage.

Upselling with storage allows solar companies to increase the value of each deal and differentiate services in a competitive industry, so it makes sense that companies want to tout their progress to investors.

Virtual power plant economics

Sunrun calculates the value-add of batteries not just in terms of customer payments but also future revenue from grid services contracts. The plan is to install batteries, then win capacity contracts or other bilateral deals to put that aggregated capacity to work. This strategy banks on market rules allowing for these resources to participate, but Sunrun’s already clinched deals in New England and California.

What we didn’t know was what kind of dollar sign the company ascribes to this line of business. Now we do: Jurich claimed $50 million of grid services deals either contracted or in late-stage development.

Development pipelines, late-stage or otherwise, are slippery things, so we’ll wait for the final confirmation. But eight-figure revenue for a nascent business line is nothing to sneeze at, especially when the costs of doing business are largely accounted for in the initial installation. Grid services take a piece of equipment that, in theory, already turned a profit for the company, and creates a new stream of profit with the help of a little software.

That assumes Sunrun is able to dispatch its batteries with sufficient accuracy to fulfill its obligations, without impeding its customers’ use of the batteries in the process. Some grid software startups spend all their time thinking about this problem; Sunrun installs and finances solar, with a special team dedicated to building its own grid services algorithms. 

Building big batteries

Vistra Energy has become the most dynamic big battery producer to watch among the publicly traded independent power producers. Whereas NRG, when confronted with opposition to building a new gas peaker in coastal California, walked away empty-handed, Vistra proactively turned its legacy generators into battery development opportunities.

Just because it’s a big deal for storage nerds doesn’t mean this necessarily translates into a standout success among Vistra’s other diversified power businesses. But the company foregrounded its battery development as the signature “growth highlight” of the quarter in its earnings release.

At the time, it was simply noting the upgrade of its Oakland peaker replacement from 20 megawatts/80 megawatt-hours to 36.25 megawatts/145 megawatt-hours. Two weeks later, it dropped a much bigger announcement: PG&E contracted for an additional 100 megawatts/400 megawatt-hours of storage at Moss Landing, a power plant that dates back to the 1950s where Vistra is already building the biggest battery in the world.

“Utilizing our existing power plant sites allows us to cost-competitively develop renewable and battery storage assets as we rotate our power generation portfolio toward carbon-free technologies," Vistra President and CEO Curt Morgan said in a statement.

It’s hard to imagine a better encapsulation of the energy transition than that sentence, coming from the leader of a company that bills itself as “the largest competitive power generator in the U.S.” 

Vistra’s full-throated embrace of the antiquated-peaker-to-battery switcheroo poses a question: What are its peers doing?

NRG is not showing any signs of interest in storage, at least as far as quarterly reporting goes. The company is, however, talking up its “long-term carbon emissions goal” several years after ousting CEO David Crane for his aggressive move into clean energy.

AES came early to the notion of adding batteries at its gas plant, back in 2014; it’s building a big one for Southern California Edison at Alamitos right now. The company puts storage front and center in its disclosures, though most of the action is happening at Fluence, the battery supplier that split off as a joint venture with Siemens.

Fluence won 32 megawatts' worth of new projects in 2020, for a backlog of 1.3 gigawatts. AES Distributed Energy, the development unit for storage projects, only constructed 10 megawatts of solar-plus-storage in the first quarter. After seizing the opportunity at Alamitos, the company hasn’t made battery peakers a regular part of its development strategy  yet.