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Commercial Solar Energy Storage to Overtake Residential and Utility-scale in Next Four Years

The global solar energy storage market could be turned on its head by 2017, with the commercial sector set to overtake residential and utility-scale to become the largest market segment.

A new report from IHS, titled The Role of Energy Storage in the PV Industry, predicts that worldwide installations of photovoltaic (PV) energy storage systems for commercial use will grow to 2.3 GW in 2017, up from just 3.2 MW in 2012. The commercial sector’s share of global PV installations will also jump significantly, from 5 percent in 2012 to 40 percent in 2017, the report said.

“Just last year, commercial was the smallest market for PV storage systems, far behind the residential and utility-scale segments,” said Abigail Ward, PV analyst with IHS. “However, facing rising energy prices and the growing need for backup power supplies, commercial enterprises are turning to PV storage solutions that work in concert with their solar power systems. This will allow commercial to surge past residential and utility to become the largest market for PV storage in just four years.”

The most significant factor that has limited the size of the commercial and industrial PV energy storage market to date is a lack of products geared to the sector. But while PV storage suppliers have traditionally targeted the residential market, Ward said, some are now starting to adapt existing product lines in order to target commercial customers. 

The size of a commercial installation will determine what type of supplier targets it, she explained. Both residential and utility-scale PV storage players can adapt their product lines for commercial use, but the residential suppliers will begin to target the smaller commercial segment while larger storage solutions will work best for industrial customers.

IHS found that awareness of the potentially lucrative commercial market is growing among PV storage suppliers. “Installations in the commercial PV sector potentially can reach the point of payback much more quickly than those in the residential area. This will encourage many PV storage suppliers to enter the business in the coming years,” Ward said.

At the time IHS conducted its research, she noted, “there were no standards and not much understanding of the characteristics and metrics important to the market – for example, the difference between effective and nameplate storage capacity, which many suppliers weren’t able to speak to, or weren’t aware of the difference.”  But IHS has seen this change over the past year, she said:"Whilst there is still a long way to go in the energy storage market in terms of defining standards, there's starting to be a better global understanding."

Energy storage solutions can help reduce the cost of electricity by allowing a business to manage the energy it gets from a solar PV system. Especially in North America, Ward said, in order to relieve pressure on limited electricity grids during times of high energy demand, utilities are increasingly imposing both peak demand charges and time-of-use fees on their commercial customers – some North American utilities have imposed peak demand charges of over US $20/kW. So for commercial customers there is a revenue stream to be gained from an energy storage solution that can avoid peak demand charges, she noted.

Given this, IHS predicts that North America will emerge as the world leader in commercial PV energy storage, with more than 40 percent of global installations in 2017. At present, California’s Self-Generation Incentive Program (SGIP) offers a subsidy to offset the up-front cost of advanced energy storage systems. And California’s Energy Storage Bill AB 2514 requires that investor-owned utilities incorporate energy storage into their electricity networks by 2020.

IHS also identifies Japan and Germany as potential hot markets for commercial-scale PV energy storage. Growing self-consumption of PV energy makes the German market increasingy financially attractive.  

“In Germany,” said Ward, “there are no peak demand charges, but because the PV feed-in tariff is decreasing and electricity rates are increasing, as the difference gets greater self-consumption becomes more attractive."

Another important feature that PV energy storage systems can offer commercial consumers is backup power. In regions with weak and unreliable grids, blackouts can significantly impact commercial operations, resulting in lost revenues. Japan's commercial sector is faced with rolling blackouts, so backup energy is attractive “even though there is no revenue stream for installing it – it’s more of a societal benefit,” Ward said.

In India, another region where blackouts are common, energy storage is already in demand in all applications, she continued, "but the issue in India is economics: the price of systems is quite high.” While India’s off-grid energy storage market, where storage is a necessity, is starting to become active, she said, the grid-connected market is limited at the moment due to system costs.

Lead image: Solar powered parking structure with aerial view, via Shutterstock

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