The Big Question — Where Will Energy Storage Have the Greatest Impact: Residential, C&I, or Utility? Why?

Energy storage is poised to make a huge impact on the global renewable energy industry and, similar to solar, geothermal and bioenergy, the technology can be applied at the residential level, commercial and industrial (C&I) level and at utility-scale. We want to know where the industry sees energy storage making the greatest impact and why. Read the responses below to hear from experts across the energy storage value chain explain on which segment of the market will energy storage have the greatest impact: residential, C&I, or utility and why?

Joe Spease, CEO, WindSoHy

It will be with utilities. The reason is cost/pricing. Bulk-scale energy storage (> 100MW), like Compressed Air Energy Storage (CAES) is very cheap and efficient. When combined with wind power at night to charge the CAES compressors, CAES produces electricity at prices below the costs of coal and gas power. This low price will enable the unlimited development of wind and solar power. For this reason, energy storage at utility scale will have the greatest impact on the energy industry.

energy storageMalcolm S. Metcalfe, CTO, Enbala Power Networks

A site with storage and smart inverters may be capable of providing a number of key services that will support BOTH the customer and the utility. Some of these are:

  • Backup power and peak demand management for the customer
  • Peak demand reduction for the utility
  • Local distribution voltage management for the utility
  • Provision of reserve and flexibility capacity for the utility

The actual location at an industrial, commercial or residential site may not be so important as the characteristics of the load and intermittent generation that are connected nearby. In the case of voltage management, utilities find themselves using old substation equipment (LTCs) to manage reactive power, and this is not optimal. Reactive power delivered to a customer causes real power losses in distribution, so the best place to locate devices that can supply or absorb reactive power to manage local voltages is as close as possible to any source that causes this need. It could be an industrial site, or at the other end, it could be a residential site with large vehicle chargers.

This is a technology with potential real value for the future. Getting the best economic value from the storage will require that it be used to meet as many needs as possible, and with new technology in communications, optimization, and control, it should be fully capable of delivering an outstanding service that will improve power quality for everyone, while reducing costs at the same time.

energy storageLewis Wilde, Marketing & IT Coordinator, SOLFEX

Commercial scale battery storage will be appealing for corporations looking to increase self-consumption of their solar photovoltaic systems. Storing energy for self-consumption has its own obvious benefits such as cutting energy costs during peak operational times or at night, and helping to reduce any potential carbon levies. Battery storage could also act as a backup in the event of grid failure, which in a manufacturing scenario could be catastrophic. The cost of implementing these systems is easily justified in such situations and this is where battery storage will be most beneficial.   

However, there is still something to be said for self-consumption in domestic households. Allowing PV systems that would otherwise only be useful during the day to power your home during peak times at night, and increased reliability in areas with grid stability issues are both strong points for residential battery storage and an attractive feature to system owners.

energy storageGreg Wolfson, Senior Director Storage Product Line, Enphase Energy

Residential storage is where the sweet spot is, because homeowners increasingly want a sense of control over their energy while utilities need those distributed energy sources to help — not hurt — grid stability. Distributed storage resources at the end of distribution feeders are far more effective in improving power quality than deployed centrally at the substation.

While traditional residential storage markets were for off-grid or backup use, we see strongest initial growth in grid-tied residential markets where homeowners want solar yet are already being asked to cooperate with limits on exporting power: areas such as Hawaii and some areas in Australia. Energy storage is a need to have, not a nice to have, for new solar homeowners in those markets. 

Currently, C+I and utility scale lead in terms of MWh installed, but the resi market, where there needs to be real-time interactions between highly localized demand, supply, and storage (with the intelligence going down to predictive weather and individual appliance control), will lead in the innovation of intelligent, integrated energy storage systems. The challenge will be creating solutions that completely integrate the production and consumption with the control and optimization so that homeowners can fully leverage their system and benefit from all of the use cases for storage.

energy storageScott A. Cameron, Business Development Manager, Precision Inc.

I believe the greatest impact for Energy Storage with be with Residential. The reason being that that the energy market will see the biggest impact, growth and volumes to support the smart storage in microgrids in support of the new technology globally.

Think back to the PC revolution, the Telecom revolution (Internet), and Cellular Phone Markets. This is definitely the next revolution or milestone for our power market in direct support of the smart grid market. I have been lucky enough to have been involved with all the previous technology advancements and know of the volumes associated with each that were higher than most pioneers had ever believed possible.  I can remember during my FAE days working on and receiving my first Purchase Order for Smart Meter project before anyone had heard the term; it was for 800,000 units!  When I asked about the volume the energy provided, they laughed and said this is only for a beta site in South Florida.

Think about the microgrids needed to support residential homes and small business that will be soon required.

energy storageMarianne Boust, Principal Analyst, Energy Storage, IHS Markit

Because energy storage has so many benefits, the answer will vary depending on the region. Globally IHS Markit predicts that half of future additions in the next decade will take place behind the meter. This trend is part of a major shift towards decentralized power generation, with individuals and businesses producing their own energy as equipment costs fall.

In developed countries, households will lead the way and we expect strong residential growth in Australia, Japan and Germany owing to high retail electricity prices, favorable legislation and incentives. This will have implications on the utilities’ business models and we’re already seeing the impact in Australia where local utilities have started offering solar and batteries solutions.

In developing economies where grid reliability is uncertain and load shedding occur daily, we anticipate that businesses and industrials will turn to hybrid diesel-storage and solar solutions. The role of utility-side of meter energy storage is currently driven by ancillary services but is uncertain in the long-term. For this segment to become mainstream it will require changes in power market designs to create a level playing field with gas, demand response and transmission. The role of gas-fired power plants, dictated by gas prices and utilization rates, will also determine the ultimate cost-competitiveness of batteries.

energy storageHarumi McClure, President/COO, Tabuchi Electric

Energy storage will have the biggest impact on the residential sector, which could in turn transform the utility sector. Nowhere is this more apparent than in Arizona, where residential customers are facing mandatory demand charges for the first time and are concerned about resulting higher electricity costs. Residential storage offers customers a clear pathway to reducing or avoiding demand charges and similar fees.

As greater numbers of cost-conscious residential customers seek out energy storage, utilities are primed to join in and reap their own benefits. Grid-friendly residential storage solutions (especially when paired with DERs) provide flexibility and control to utilities that allow for grid stabilization and peak shaving, which is beneficial to both parties.

Recent data shows that residential solar is the fastest-growing category by number of installations. Even a modest share of residential adopters opting for grid-friendly storage would lay the foundation for a more flexible and resilient grid and a more effective and efficient utilities. Meanwhile rate structures and policies on distributed energy will continue to change as utilities work to stabilize the grid. These changes will make residential storage more attractive, which will lead to wider adoption and increase accompanying benefits for the utility segment.

energy storageLior Handelsman, VP of Marketing & Product Strategy and Founder, SolarEdge

Storage technology is particularly important to residential PV systems as energy production does not typically match consumption. Combined PV and storage solutions allow homeowners to shift excess energy produced to the time of use. By placing energy production and storage at the same location as the load, a decentralized model of mini-power stations is created. This model can offer utilities many more possibilities than the traditional network in which power generation is built on large, single-source energy production that requires costly transmission. This could unlock solar energy’s grid parity potential and provide a more dynamic grid with minimal outages.

With that being said, storage solutions for C&I is still at its infancy and there are many opportunities yet to be seen. Potential C&I applications include addressing demand response, reducing peak demand, and providing emergency backup power. As natural disasters escalate due to climate change and grid instability increases due to the growing energy demand, power outages are on the rise, which cause severe business disruptions. Storage can also provide significant cost savings for businesses to avoid peaks in consumption that are particularly costly.

The greatest impact will be if these different sectors leverage PV plus storage systems in an interconnected manner.

energy storageChris Thompson, Grid Power Business Unit Manager, Eaton

Energy storage is positioned to have the greatest impact on the utility segment. In this segment, sophisticated customers are able to layer many functional abilities that are unique to this technology.  For example, utility scale energy storage can defer expensive T&D upgrades, provide ramp rate control and frequency regulation services, manage load and generation profiles and regulate voltage and power flows at the distribution level. This wide range of applications generates real value and benefits the grid in multiple ways. 

Utility-scale projects are also better able to manage the risks associated with the design and operation of these types of plants with high energy density.  Like solar, we also find that the per-unit costs are significantly lower at the utility scale.  So when you factor in the three key attributes of functional usage of energy storage, risk management, and cost of deployment, utility scale projects enjoy the most benefit.

energy storageJeremy Bedine, Managing Director, Bedine Consulting

Energy storage will have the greatest impact on the utility sector. First storage will transform how utilities manage frequency regulation and ancillary services on the grid. This will improve stability of our transmission system and it will fundamentally shift how power generators manage their generation portfolio. Instantaneously deployable stored power will reduce utilities’ reliance on spinning reserve and allow much of the inefficient and environmentally questionable non-spinning reserve to retire. Second, it will significantly change the grid’s carbon footprint and stabilize the price of electricity. By eliminating the need to curtail generation from resources like wind and solar, and eliminating frequency issues from intermittency, storage removes the main obstacles to expanded renewable generation. Since LMP is tied to the marginal-cost dispatch model, RE generation will shift the supply curve to the right, stabilizing the cost of energy and ensuring long term energy security.

energy storageBrian Perruse, VP, AES Energy Storage

Similar to digital data storage, which supports a variety of tasks from web streaming on smartphones to enterprise computing in large data centers, energy storage will have a significant impact across the entire electric grid.

 As a recognized alternative to traditional infrastructure investments (i.e, peaking power plants, transmission lines, distribution network upgrades), progressive utilities and utility commissions agree that energy storage can compete against these other investments without subsidies. And as more planning processes are allowing companies to offer both in-front-of and behind-the-meter solutions, I believe we’ll see both the utility and C&I markets scale rapidly. Modular solutions that scale and operate at any size, from 100 kW to over 100 MW, are key to enabling economies of scale and providing a proven track record that utilities can trust, while making the grid smarter and stronger by increasing the number of visible, controllable sources. 

Residential energy storage will likely be the last segment to develop. To be a viable market, utility rates will have to include demand charge and time of use rates at the residential level, business models must evolve to reduce acquisition costs, and homeowners will have to see the value of a standalone system in addition to the large battery housed in their electric vehicle. 

energy storageNeil Placer, Placer Consulting Services

When considering future trends, especially in such a transient and interconnected world, utilizing a ten-year window approach is useful. In other words, look five years back to predict five years forward. Given this approach, I believe the future direction of storage (i.e., expected cost declines, market segment growth opportunities, and preferred technology options) can most adequately be defined by using solar PV as a proxy. Solar PV also creates a market pull for future storage adoption, a type of market forerunner, which solar PV itself never had. If you viewed this relationship as a word picture, solar PV would be the lead cyclist that drafts a lower resistance path for energy storage. As energy storage matures, both technologies will work in tandem to utilize energy more intelligently (e.g., intermittency with load balancing) resulting in an increased pace of complimentary market adoption.

I believe storage, like solar, will first be deployed were it is most cost-effective, which usually means at a bulk or utility-scale. However, given battery storage’s inherent limitation to transfer large amounts of instantaneous energy, a natural market begins to open in the mid-size C&I space. Eventually, as the cost differential between mid-size and small-scale projects decrease and the general public becomes more energy savvy, more activity will occur at the residential scale.

energy storageElaine Greig, Director, The Renewables Consulting Group

The answer is clearly utilities, though many people might not see this. The reason is because storage at all levels, whether residential, commercial and industrial, or directly utility connected, affects utility power flows.  All are part of an important change to how utility systems will be operated, from largely passive to much more active networks.  Whilst the most visible impact is undoubtedly the most widespread, that is, residential, just because you don’t see it, doesn’t reduce how fundamental the impact of this ongoing change is going to be to utility systems.

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