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by Emma Foehringer Merchant
October 12, 2020

This story is the second installment in a GTM Squared series considering what the solar industry will look like in 2030. Read the first piece, on bifacial PV technology, here.

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Annual global energy storage deployments are expected to shoot up from 11 gigawatt-hours in 2020 to 164 gigawatt-hours in 2030, reaching a cumulative 741 gigawatt-hours in that year. A great majority of that is expected to be tied to solar.

“Solar and storage is huge and is going to be huge,” said Dan Finn-Foley, head of energy storage research at Wood Mackenzie, which developed the forecast. “These technologies are made for each other.”

Building large-scale solar projects with the optionality to later add storage — if it’s not included right off the bat — is already regular practice in the U.S. solar industry. In the next decade, Finn-Foley and developers anticipate storage will become a near-constant companion for large-scale solar.

The case for storage is less clear-cut for residential applications; the market may depend on state-level incentives and the success of virtual power plants, which are becoming more common. But with more states laying out plans for zero-carbon electricity, and solar-storage companies such as Sunrun and SunPower increasingly thinking about the potential for aggregated resources, solar paired with storage is expected to be the norm as the next decade begins.

In the U.S., at least, "solar-plus-storage is the solution to most of the problems that are going to be confronting the electric grid over the next 10 years," Finn-Foley said.

The solar developer view

In the large-scale storage market, price declines have been the key to unlocking installations. In the last decade, prices have fallen by 85 percent, according to WoodMac.

Those drops are expected to continue over the next several years, albeit at less dramatic rates. WoodMac analysts expect declines of up to 10 percent in the next two years and then 5 to 6 percent in the few years following. Finn-Foley noted, however, that storage has repeatedly beat expectations when it comes to price cuts.  

Ongoing price declines will spread storage beyond its existing geographies; it’s already common for solar developers working in states such as Texas or California to include storage or leave space for its later addition.

Solar — unlike wind — has traditionally been paired with storage because of its predictability. Consistent and predictable sunrise and sunset times allow storage resources to charge and discharge at expected intervals. When paired, the two are effectively baseload systems, said Finn-Foley.

For that reason, and because a great deal of solar is being built in places where renewable variability is impacting electricity, solar developers are increasingly tacking storage onto solar projects. Clearway, a developer of community solar and large-scale wind and solar in the U.S., has a 2.5-gigawatt storage pipeline for the next few years. Daniel Dedrick, Clearway’s director of systems integration, told Greentech Media the developer is likely already building its last solar-only project in California.

While the prevailing four-hour-duration lithium-ion technology “has been very adequate,” Dedrick expects longer-duration storage technologies to take root in the coming decade, while storage proliferates beyond early-adopting states.

Capital Dynamics, an infrastructure investment firm and one of the largest owners of solar in the United States, will build new standalone solar only in geographies where solar penetration is relatively low, like the upper Midwest. And as solar makes up a larger portion of electricity in the coming years, storage will end up in those places too.

“In the long run, as solar washes over the United States, storage follows along behind,” said John Breckenridge, Capital Dynamics’ head of clean energy infrastructure. “The areas where that has happened earlier and more deeply [is where] storage is making sense now.”

In 2030, the U.S. and China will lead storage deployments, accounting for about two-thirds of the market. Other countries in the so-called APAC region, such as Australia, Japan and South Korea, will account for much of the remainder.

While WoodMac expects storage’s 66 percent compound annual growth rate to halve in the coming decade, global CAGR will still exceed 30 percent through 2030. The majority of that growth will go to front-of-the-meter batteries. Although developers like Clearway are increasingly eyeing the possibility for standalone storage, much of their capacity will be paired with solar.

Even standalone storage will be complementing renewables in electricity markets. “The amount of energy storage that solar’s explosive growth demands is going to be larger than the amount of storage that’s actually directly paired with solar resources,” said Finn-Foley.

The residential X-factor

Unlike large-scale storage, home storage applications are almost always paired with solar. In the U.S., even as residential solar-plus-storage has gained traction, those products are most popular in just a few geographies.

For many customers, minimal state incentives mean that adding storage to a home solar installation comes at a premium. Apart from Hawaii, a state where incentives have helped some installers reach storage attachment rates of over 90 percent, demand has been strongest in regions where power outages and natural disasters make the equipment worth the cost.

“The X-factor is resiliency,” said WoodMac’s Finn-Foley.

California and Florida are the classic examples. California’s Self-Generation Incentive Program encourages homeowners to add storage to solar systems, but the state’s ubiquitous wildfires and associated power shutoffs have been a key demand driver. Climate change is expected to cause natural disasters to become more intense and widespread.

Russ Minick, chief marketing officer at electric backup generator company Generac, is already seeing the geographic boundaries for storage deployment widen.

“Like everything else in 2020, it’s been a really tough power-outage environment all around the country,” Minick told GTM. He pointed to budding storage markets in Texas, Nevada and Arizona as an indication that homeowners are increasingly seeking out solar-plus systems.

Generac began selling solar and storage products about a year ago, seeing a growth opportunity on top of its traditional bread and butter: gas-fired backup products. This fall, Generac bet on another growing area of clean energy, virtual power plants, acquiring DER software platform Enbala Power Networks.  

“The grid itself is undergoing a major revolution right now,” said Minick, citing the growth of VPPs.

A recent Federal Energy Regulatory Commission ruling, dubbed Order 2222, enshrines those changes at the federal level, allowing distributed energy resources, when aggregated, to participate in wholesale markets. Local rules are still in the works, but for companies pursuing VPPs, including Sunrun, SunPower and now Generac, aggregated distributed assets are a key element of what they envision residential solar-plus-storage will look like in 2030. Pooling and selectively dispatching those resources allows more flexibility in meeting load, while potentially offering customers revenue for owning batteries.

The generator business is booming, but Generac expects a future where customers will ask for solar-and-storage more and more. Outside of VPPs, time-of-use rates and changes to net metering, already underway in some states, will encourage homeowners to invest in storage.

Beyond the U.S., Japan and Australia (where VPPs and natural disasters also play a role in demand) will lead residential solar-plus-storage through 2025, according to WoodMac. In Europe, WoodMac forecasts increasing installations as well as the region pushes toward its decarbonization goals.

The three phases of market evolution

Storage is no longer nascent, but it hasn’t yet reached its full potential. When combined with solar, analysts and members of the industry expect the technology to significantly alter how energy markets function. First, markets will have to create clearer rules on solar-plus-storage participation. The next 10 years will be integral in laying out those regulations.

“Storage is a unique resource, and it still takes a lot of work for a utility to correctly model it, for a wholesale market to allow it to participate, to design policies to encourage it to recognize its full value,” said Finn-Foley.

Finn-Foley breaks updates to the energy market into three phases: adaptation, transition and then transformation.

Currently, storage is in the adaptation phase, where the market is adjusting to the implications of what could be a momentous shift.

The transition will mean broader changes across the market, whereas transformation comprises “seismic events” spurred by a change in system or technology — think smartphones or the advent of electricity.

Because the full value of storage remains untapped, it will take time to unlock the transformation. Whether that period arrives by 2030 is up to how quickly regulators, policymakers and technology can adapt.

Either way, Generac’s Minick sees solar and storage making “an aggressive march across the planet by 2030.”

That opinion is echoed by many solar developers. “Storage is a need-driven situation,” said Clearway’s Dedrick. “These issues will be worked out as the need continues to grow and there are more and more renewables deployed.”