Until recently, the biggest impediment to broad renewable energy adoption has been the inability to transmit and store it. For the first time in the history of the electric grid, technology advances in the lithium-ion battery space are now addressing transmission and storage challenges at a distributed level.
Now, it’s technically feasible, and economically reasonable, for consumers to produce, store, and control their own energy with home solar and batteries. Improvements in the regulatory landscape, backed by consumer choice for cleaner, lower cost, and more reliable energy, are changing the outlook for solar energy in the United States.
The Need for Change
Over the last 15 years, electricity rates have continued to rise, and power outages across the United States have become more common. In fact, the United States suffers from the highest number of power outages in the developed world, and we are only seeing those stats continue to climb. The country’s aging grid infrastructure cannot keep up with an increasingly plugged-in population. Due to improvements in energy efficiency, demand for electricity has remained flat since 2010.
However, the Edison Electric Institute estimates that utilities will need to spend as much as $2 trillion by 2030 in infrastructure updates. These costs will be passed on to the consumer, meaning that everybody who pays a power bill — especially low-income households — will be cost-burdened by these upgrades.
While increasing rates and a desire for reliable electric power has spurred growing interest in renewable energy, it is becoming apparent that related technologies are offering more than just cheaper power. For some, this is a desire for cleaner, more sustainable energy. For others, reliable power to protect their families through a hurricane is top of mind. Yet others are interested in the batteries for the ability to store low cost energy, in an effort to avoid Time-Of-Use electric “surge pricing” and to delay or eliminate the installation of new power plants in the community.
On-site produced and stored electricity offers more than a singular value; rather, it establishes a completely new energy system built around the consumer with control, optionality, and savings never before accessible to home owners.
Technology Enables a Better Choice
Consumers want more control over their technology in terms of price, quality and reliability. According to a Deloitte survey released in May 2018, “Resources 2018 Study – Businesses Drive, Households Strive,” U.S. businesses are taking the lead in renewable energy adoption.
Survey results revealed that on-site electricity generation is on the rise because distributed resources are increasingly being viewed as both feasible and cost-effective. Of the companies surveyed, 59 percent now generate part of their electricity supply on site, with 13 percent using renewables, 13 percent using co-generation and 10% using battery storage.
Andrew Slaughter, executive director, Deloitte Center for Energy Solutions, Deloitte Services LP believes this trend will continue, introducing transformative technology with the goal of reducing reliance on fossil fuels.
“The electric utility sector’s transformation will likely be one of decentralization, digitalization, and decarbonization driven by business and residential consumer demand for a cleaner, more resilient, secure and affordable energy supply.”
The stance businesses are now taking reflects a change in attitude in the general population. Statistics show 68 percent of residential consumers say they are concerned about climate change and their personal carbon footprint. Perhaps even more intriguing is the fact that 49 percent of those who do not have solar panels on their primary residence said they would be more interested in rooftop solar if they could combine the panels with a home battery storage unit.
This shift indicates a greater willingness on the part of the general public to use renewables. Technology in the battery storage space, as well as an increase in electric vehicle demand, recently turned the corner, driving down the price of high quality lithium-ion storage to a point where it is now economically feasible. Market researchers forecast a surge in the acceleration towards renewable technology. This comes as the cost of installed solar panels is predicted to decline 61 percent and the cost of batteries to decline 49 percent over the next 10 years. The next step is for companies to immediately leverage home solar’s existing growth spurt, combined with new advancements in battery technology, to make solar and battery products ubiquitous for homeowners and businesses.
Legislation Expedites Change
The widespread adoption of customer-sited batteries also offers opportunities for grid services through aggregation. This includes additional value streams such as peak shaving or capacity. However, policy restrictions create significant barriers to capitalizing on these values, as a narrow set of rules are standing in the way of mass adoption that can benefit the market, both for individual customers and the grid as a whole.
The Federal Energy Regulatory Commission (FERC) has taken steps to change that. In February 2018, FERC voted to remove barriers that made it difficult for energy storage resources to participate in the capacity, energy and ancillary services markets operated by regional transmission organizations (RTOs) and independent system operators (ISOs). The primary objective of this decision is to encourage competition and promote greater efficiency in the nation’s electric wholesale markets.
Furthermore, in a Notice of Proposed Rulemaking in November 2016, FERC officially recognized that market rules designed for traditional generation resources were creating barriers to entry for emerging technologies like electric storage. The final rule, passed in 2018, helped remove barriers by requiring each regional grid operator to revise tariffs to create a participation model that provides market rules that recognize the physical and operational characteristics of electric storage resources.
The participation model ensures that battery storage is not only able to participate, but is also valued along the same terms as existing market rules. In the model a battery is eligible to provide all capacity, energy and ancillary services that it is technically capable of providing. By enabling eligibility, a battery can be dispatched, and can meet the wholesale market clearing price as both a seller and buyer in accordance with existing market rules.
This ruling clarifies the value of storage, opening the door for storage technologies that integrate renewable power into the grid energy portfolio. Storage system providers are optimistic that the new rules will enable more rapid growth for storage capacity and will enable broader applications for battery technology.
Partnering to Provide Solutions
The use of solar power in the United States is quickly expanding. With the introduction of technologies that simplify the move to solar power, and the removal of barriers to pairing solar with battery storage, the number of people who adopt clean energy is slated to grow rapidly.
Sunrun Inc., a provider of residential solar electricity headquartered in San Francisco, CA, has recognized that making home solar easier and more appealing for people is integral to increasing the number of solar power users. Using this outlook of solar as a simple, reliable, and affordable service, Sunrun has grown their customer base to over 200,000 customers and emerged as a leader in the home solar industry.
While Sunrun reached scale with solar alone, the company realized that the biggest impediment to broad scale adoption of home solar was the addition of affordable storage. Without storage capability, the cost of additional energy during times when solar power is unavailable can vary considerably. Predictability and reliability have been historical barriers impeding the move to solar energy.
Home storage has been on the cusp of widespread adoption in the United States for several years. However, solar energy providers are experts on solar energy and familiar with customer needs, not necessarily energy storage technology. That missing link created a chasm that companies such as Sunrun could best span through a partnership with a storage provider. For the business case to make sense, the company needed to have a trusted name, an affordable product, and a level of performance and reliability that would encourage potential customers to place their confidence in it.
To achieve this, Sunrun selected LG Chem as its partner due to its advanced technology, strong home brand, and ultimately, because of the success the company had achieved in leading the automotive and ESS (Energy Storage System) industry through similar transitions. As the most outstanding ESS manufacturer in North America, LG Chem received the Brad Roberts Award at the Energy Storage Association’s 27th Annual Conference and Expo. LG Chem is the first Korean business to win this award, clearly cementing LG Chem as a worldwide leader in the battery space. Through their past products, LG Chem had gone through development on rigorous use cases beyond home energy storage. Batteries used in electric vehicles had proven their viability contending with more exacting conditions – constant vibration and varying temperatures – than those they would be subjected to in domestic solar storage applications.
The companies worked together to find the best way to unite solar energy experience with battery storage expertise, eventually creating a holistic solar battery storage service that delivers clean, safe, renewable energy, optimizes savings, and provides energy during grid outages. The result was that the combination of LG Chem’s unique battery knowledge and Sunrun’s leading position in home solar, allowed the two to bring battery storage first to market for homeowners in 2016.
The solar power purchase agreement model, which allows home owners to go solar for $0 down and get the benefits of solar-as-a-service, was leveraged to support the addition of battery storage. This new unique model became Sunrun’s Brightbox home solar and battery offering for homeowners, which uses LG Chem’s RESU10H battery pack and solar modules from a variety of suppliers. The company owns and maintains the battery and the solar energy systems, eliminating the need to worry about financing, maintenance, and battery replacement, and provides the equipment along with the commitment to deliver affordable and reliable energy at a lower price than the current utility providers. Sunrun also maintains the system for life of service, which normally is 20 years. Now, in 2018, Brightbox is available in eight markets: California, Hawaii, Florida, Arizona, Massachusetts, New York, Florida and Puerto Rico.
Storage capability not only appeals to homeowners, but also helps the broader community by reducing surge pricing on the grid and saving energy for the entire community. With the newly released California mandate that requires all new home construction by 2020 to be paired with solar, it is expected that solar plus storage and other renewable technologies will be adopted in abundance. Companies such as LG Chem and Sunrun are leading the way in enabling this wave of consumer energy choice never before thought possible.
Co-author Christopher (Chris) Moris is the director of Solar + Storage & Advanced Products at Sunrun, where he founded and leads Sunrun’s Advanced Products efforts starting with the design and launch of the BrightBox solar + storage product offering.