In the past, residential solar-plus-storage has been dominated by consumers determined to assert independence from the grid, even if it costs them.
GTM Research energy storage analyst Brett Simon calls those customers “emotion-motivated early adopters” in his new report on the economics of residential solar-plus-storage. Simon writes that decision-making processes for these customers “largely flow from emotion, rather than a rational economic decision.”
Because few clear economic cases for choosing solar-plus-storage systems over solar alone exist, those customers have largely dominated the market.
But according to the new data from GTM Research, that’s changing.
“It’s safe to say that in the future the economic case for residential solar-plus-storage will be better than it is today,” said Simon. “I don’t think that’s a crazy pronouncement.”
Declines in energy storage costs and changes in utility rate design have widened the economic point of entry for solar-plus-storage in some markets. However, economic viability is reliant on utility policies that range widely.
“In some cases solar-plus-storage is nearing competitiveness with solar-only, while in others, solar-plus-storage remains far from economical,” writes Simon in the report.
In some states, altered net metering programs mean lower returns for exported energy. Simon notes that some utilities have done away with compensation altogether. Other changes, like time-of-use rates and demand charges, make battery storage for self-consumption more attractive as well.
Massachusetts is one such state undergoing rate changes. In the next year, the state will transition from its Solar Renewable Energy Credit II program, a net metering program, to the Solar Massachusetts Renewable Target program. SMART will offer incentives between 2.5 cents per kilowatt-hour and 7.6 cents per kilowatt-hour for solar-plus-storage systems.
The state also ranked sixth in the nation for solar capacity through Q3 2017, according to data from GTM Research and the Solar Energy Industries Association. GTM Research projects Massachusetts will also be among the top 10 states in residential solar in its post-Section 201 revised forecast. All of those circumstances make the Massachusetts market ripe for storage applications.
Models run on two of the state’s utilities -- Eversource and National Grid -- within the SMART program demonstrate a solar-plus-storage market on the cusp of competitiveness. Overall, Simon said the numbers represent a positive economic case for solar-plus-storage. The technology combination offers a net benefit in both utility territories.
In the case of Eversource, which offers compensation of $0.34 per kilowatt-hour, solar paired with storage isn't yet at parity with solar alone. But the gap is closing. Eversource's territory covers 140 towns throughout Massachusetts.
National Grid, which offers compensation of $0.31, shrinks that gap, with a net present value (NPV) difference of less than $300. That difference may be enough to encourage a customer to add storage. National Grid's territory includes municipalities throughout the state, including a good portion of central Massachusetts.
The rate of return in Eversource's territory lags just 2 percentage points behind a solar-only installation. Those numbers push considerations past the emotional, according to Simon.
In National Grid's territory, the return is just 0.3 percent lower for solar-plus-storage systems, making batteries very compelling for homeowners.
Simon said the difference between payback timelines for Massachusetts solar-plus-storage systems compared to solar-only systems is negligible. Eversource customers can pay back a solar system in 4.8 years and a system with storage in 5.1 years. The National Grid gap is smaller, with 5.2 years for solar only and 5.3 for solar-plus-storage.
“Anecdotally, conversations I’ve had with solar installers that offer storage tend to suggest that if customers are thinking about economics -- which not all of them are -- they won’t consider solar-plus-storage if the payback is not less than 10 years,” said Simon.
Economic conditions can shift quickly. A recent rate change from Eversource slightly adjusted the economics after GTM Research published its report in February. But even in that case, Simon said, solar-plus-storage’s NPV remains positive.
“Though residential solar-plus-storage does not yet rule the castle of economic viability in Massachusetts, it’s battering the gates,” Simon writes in the report. “In 2018, the storage market in Massachusetts is poised to take off.”
That’s not the case with all state markets, though. The report also analyzes NPV and returns for solar-plus-storage in Hawaii, California and Arizona. While the case for California "is quite rosy for solar-plus-storage,” according to Simon, the situation in Arizona makes solar-plus-storage a difficult sell.
Arizona Public Service has instituted residential demand charges and time-of-use rates that, Simon writes, “are abysmal for solar-plus-storage.” That's because relatively flat residential load makes demand charges less lucrative for utilities.
Not many utilities are likely considering how to support solar-plus-storage because they’re more focused on a classic motivator: revenue.
“There’s probably quite a few utilities that aren’t even thinking about whether or not their customers use storage, because it’s such a small part of the market,” said Simon. ”It’s still an open question of what the utility of the future is going to look like.”
Simon pointed to Green Mountain Power in Vermont -- which offers Tesla Powerwalls to customers and can leverage those systems in the case of an outage or to reduce peak load -- as an example of innovative storage-positive utility models.
While not many of those examples exist now, Simon said, “there are utilities that are exploring storage as another avenue to add value and make some revenue themselves as a new business line.”