One of solar’s biggest criticisms, and one of the most legitimate, is that the sun is only in view for less than half of the day. This is understandably a real problem if renewables are to become a serious threat to the traditional energy industry and usher in a new paradigm. While solar itself has the potential to be highly disruptive to existing business models around the world, what has an even greater impact is one of the complementary technologies in the 21st century energy equation: Energy Storage, most commonly in the form of batteries.
Batteries have been falling in cost at an accelerating pace for over a decade, much like solar panels. It allows for energy to be stored, whether it be from a gas generator, a natural gas peaker plant, nuclear facilities, solar, wind, or even from a bicycle tied to a motor, to be used at a later time. This has unbelievable economic value if it can be deployed at any scale. The current grid situation is a massive orchestra of generation sources all perfectly timed to provide electricity exactly when it is demanded and controlled by a central entity (utilities). The grid is often described as the most complex system humanity has ever created. It gets even more complicated with each aspect of it’s functions. Each of these generation sources, for example natural gas plants which is the bulk of New England’s generation, need significant periods of time to ramp up their production in order to meet demand, so it’s not enough to meet demand as it happens, it actually needs to be before it’s demanded. Sometimes these sources have routine and sometimes emergency maintenance so the lost generation has to come from somewhere else instead. Add on to this solar and wind which, while predictable, is distributed over many homes and properties within the state and their generation is intermittent, which forces the utility to perform a delicate balancing act. If the utility ramps up their peaker plants while there’s suddenly an influx of solar and wind energy, then there is over generation and therefore wasted money.
There are clearly many problems within this system of production on demand. This lays out an extremely strong business case for energy storage as it provides more than one way to monetize the stored energy. They can be used to store excess generation, increasing profitability of existing assets. They can be used to reduce the strain on existing assets during the morning and evening peaks when everyone wakes up or gets home from work and starts using their kitchens and lights. They can be used for demand response as batteries can release their energy within milliseconds as opposed to having peaker plants take half an hour to ramp up. And they can be used for solar self consumption in the middle of the night, lowering the marginal cost of electricity consumption. Batteries can be installed for utilities within months compared to years for new peaker plants, and are practically plug and play for residential use. They can also be set up in very rural areas, which in some cases can be massively less expensive than grid interconnection costs.
Currently, the large initial capital investment for battery systems is what is holding mass adoption back. According to Tony Seba, an instructor at Stanford University and lecturer on economic disruptions, battery costs have fallen by about 16% in 2014 year over year, and has risen to about 20% in 2016. The demand for use cases such as electric cars and utility scale storage have accelerated the cost declines. We don’t know when or if this acceleration has an upper limit, but a 20% cost decline year over year is akin to the solar industry and has no reason to stop or slow any time soon. Massachusetts however has decided not to wait as the economic benefits of energy storage is worth setting up incentives. Starting in 2018, the SMART program is set to begin which will pay out for every kWh stored by your residential battery system. The amount of pay out will depend on the ratio of storage capacity to solar installed, but the payouts themselves are quite generous. Beacon Solar will begin proposing SMART program proposals as 2017 winds down, but we are very excited for this program as it is one of the best incentive programs in America for energy storage that we have seen.
An electrified energy system is something that has been a long time coming and it’s just within view but given the benefits and the increasingly attractive cost it is only a matter of time. Homeowners will be able to feel better about their energy habits and will be able to conduct their lives more efficiently and at a low marginal cost. We at Beacon Solar couldn’t be more excited to be part of it.