As a replacement for natural gas peaker plants, solar-plus-storage is already transforming the power sector. And it is starting to transform the residential solar business, because customers facing new time-based rates and new needs for resilience are demanding storage with their solar installations.

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"...2018 was just the year of planning. 2019 will be the year of deployment."

Chris Rauscher

Policy and Storage Market Director, Sunrun

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Utilities are reporting rapid growth in the sector. While only 1% of Southern California Edison's (SCE) customers use storage, the utility saw a 197% increase in 2017 and a 341% increase in 2018, Senior Communications Advisor Julia Roether told Utility Dive in an email.

Installations of solar-plus-storage systems are now 10% of leading national installer Sunrun's business and grew faster than solar-only installations in 2018, according to its Q3 2018 earnings report. "But 2018 was just the year of planning," Sunrun Policy and Storage Market Director Chris Rauscher told Utility Dive. "2019 will be the year of deployment."

Five-year forecasts reinforce Rauscher's enthusiasm, but installers and utilities from Hawaii to New England told Utility Dive that barriers remain, citing concerns that demand is outpacing manufacturers' ability to deliver batteries and utilities' ability to process interconnections. But smart devices may help utilities overcome some of these barriers.

Growth in solar + storage

Storage deployment numbers from Q3 2018 saw 2013's 0.5 MW installed residential storage capacity rise to about 80 MW last year, confirming strong five year growth.

The U.S. deployed 61.3 MW of storage overall during Q3, a 44% increase over Q3 2017, according to S&P Global Market Intelligence.

And the pipeline of orders predicts annual additions of approximately 660 MW in 2019, 1,700 MW in 2020 and over 3,850 MW by 2023, putting 6,400 MW of natural gas capacity at risk in the U.S. by 2027, according to S&P Global.

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"Time-of-use rates and new state-level mandates and rebates seem to be preparing the way for a mini-golden age of storage and solar-plus-storage."

Karl Rabago

Energy and Climate Center Executive Director, Pace

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The market’s value is expected to double from 2018 to 2019, reaching $4.5 billion by 2023, according to the most recent Wood Mackenzie/Energy Storage Association update. Behind the meter (BTM) storage made up over 60% of last year's Q3 additions, driven largely by demand for solar-plus-storage, with California accounting for 58%, followed by Hawaii and Arizona, the WoodMac report found.

"Time-of-use rates and new state-level mandates and rebates seem to be preparing the way for a mini golden age of storage and solar-plus-storage," Pace Energy and Climate Center Executive Director Karl Rabago told Utility Dive.

Individual markets tell the same story.

The most recent Hawaiian Electric Companies (HECO) utility-scale solicitation resulted in seven solar-plus-storage contracts for 262 MW of solar capacity and 1,048 MWh of storage, the utility's "largest and lowest cost" renewables procurement.

Adding storage may increase a project's upfront cost, but the higher cost is justified by the increased value the project delivers for the system in reliability and flexibility, HECO Senior VP for Planning and Technology Colton Ching told Utility Dive.

"Over the past year, 60% to 70% of permitted rooftop PV systems in Hawaii have storage, and it is climbing," ProVision Solar President Marco Mangelsdorf told Utility Dive. The number of permitted rooftop PV systems with battery storage on Oahu grew from 40 in 2016 to 1,763 in 2018, he said.

At the other end of the country, the Solar Massachusetts Renewable Target (SMART) program is expected to drive storage growth from 0.9 MW in 2017 to 54 MW this year, WoodMac reported.

Installations that include storage by ReVision Energy, which operates in Maine, New Hampshire and Massachusetts, have grown from 1% in 2016 to about 10% in 2018, ReVision President Fortunat Mueller told Utility Dive.

And SCE projects "residential and commercial energy storage will grow by 49% over the next two years," Roether said.

Applications of storage

The four broad applications for residential storage are, "time-of-use shifting, resilience and backup; self-consumption; and grid and wholesale market services," WoodMac reported.

Time-of-use (TOU) and other time varying rate structures are under development in Arizona, Colorado, Minnesota and New Hampshire, among other states. As those rate structures continue to be adopted, "the economic case for adding storage to solar will become stronger," WoodMac added.

California requires TOU rates for all new solar owners and they will be mandatory for most customers by 2020. Approximately 20% to 25% of installer PetersenDean's California customers installed storage with solar in 2018, VP for Consumer Sales Operations Tim Ramage told Utility Dive.

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"If the grid goes down, solar-plus-storage is an insurance policy against being in the dark."

Marco Mangelsdorf

President, ProVision Solar

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Self-consumption has become important in Hawaii because compensation for exported off-peak generation is less than the retail rates, Mangelsdorf said. The only way to integrate the forecasted tripling of distributed solar by 2045 "is to have enormous storage growth so solar generation is exported only during peak demand, when the grid needs it."

Rooftop solar was originally "imposed" on Hawaii's utilities through state regulations, but now utilities are seeing the benefits of BTM solar-plus-storage as a way to maintain grid reliability and quality "at a reasonable cost," said Mangelsdorf.

Storage has led to a shift in utilities' focus on distributed resources "from their cost to their value" by helping them cost-effectively lower peak demand, said Rauscher.

Resilience, is also driving solar-plus-storage growth in places that have seen extreme weather-driven power outages. Storage is like "electricity insurance," ProVision's Mangelsdorf said. "If the grid goes down, solar-plus-storage is an insurance policy against being in the dark."

Throughout the Northeast, utilities are offering or proposing "bring your own battery" programs, said Rauscher. Private sector providers of solar-plus-storage systems will sell to customers, delivering the benefits of lower bills and resilience to customers and the benefits of cost-effective, reliable power to utilities.

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"...the jury is still out on growth in 2019."

Marco Mangelsdorf

President, ProVision Solar

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California's utilities have been "exploring" the use of the grid services application "for demand response, ancillary services, and local capacity," WoodMac reported. SCE's 262 MW Preferred Resources Pilot program includes extensive storage capacity. Other utilities are beginning to consider storage as non-wires alternatives to grid upgrades.

But solar-plus-storage will not continue growing without overcoming remaining barriers.

Barriers to growth

Constraints on battery supply slowed storage growth last year, but those restrictions are expected to ease halfway through 2019, WoodMac Storage Analyst Mitalee Gupta emailed Utility Dive.

Plans to create a 2018 revenue stream by addressing Hawaii's over 82,000 rooftop PV systems without storage went awry because "Tesla was not able to meet demand for Powerwalls," Mangelsdorf said. ProVision continues to expect months-long delays in installations "which means the jury is still out on growth in 2019."

About 85% of PetersenDean's Hawaii installations now include storage "but getting batteries from Tesla is a problem," Ramage agreed.

The impact of the supply constraint has been "largely felt on the energy products," Tesla CTO JB Straubel acknowledged in the company's most recent earnings call.

The big challenge, which may face installers across the country for some time, is complexities in solar-plus-storage interconnections.

Interconnection delays, which can be six to twelve months for a large system, are "a major issue in California," Brad Heavner, the California Solar-plus-storage Association Policy Director, told Utility Dive.

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"Solar-plus-storage interconnections are taking months instead of the days that solar-only systems take."

Jeanine Cotter

Cofounder, Luminalt

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Streamlining the interconnection process may take time because of a dispute between installers and utilities over how to evaluate the grid impact of the solar-plus-storage system, Heavner said.

"Solar-plus-storage interconnections are taking months instead of the days that solar-only systems take," said Jeanine Cotter, cofounder of solar installer Luminalt.

Standards released January 7 will begin to ease delays in California, but a final resolution may not come for another year, Heavner said.

At high levels of penetration, storage and smart inverters can support grid stability, but "the caveat is that interconnection and metering issues are resolved through time-consuming regulatory processes," Rauscher said. A better solution is for utilities to develop protocols for using digital technologies "to obtain and verify the system data they need."

New national rules from the Federal Energy Regulatory Commission and standards from the Institute of Electrical and Electronics Engineers are landmarks, Interstate Renewable Energy Council Policy Director Sara Baldwin told Utility Dive. But "state commissions must be proactive in addressing interconnection standards and only a few are."

In Nevada, a recent regulatory settlement between utilities and developers clarified that a technical review should be "based on real operational characteristics," she said. But in Massachusetts, "explicit interconnection rules" are necessary because the "sheer volume" of solar-plus-storage applications through the SMART program "is putting a lot of pressure on the interconnection process."

The SMART program "does not require developers to specify how they will use the systems" for which they file applications, National Grid Director of Energy and Environmental Policy Timothy Roughan told Utility Dive. "Because of that uncertainty, we have no choice but to protect our system by basing the review on the maximum output of the solar and the battery together."

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Interconnection is "a linchpin to distributed energy resources' growth and providers must prioritize it as part of the core business model and market growth strategy."

Sara Baldwin

Policy Director, Interstate Renewable Energy Council

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"Assuming the impact is the total output of the two results in more time intensive and costly reviews and more costly projects," Baldwin said. "Nevada also clarified that the impact to be reviewed is the peak net capacity, which is determined by the inverter and is less than the total of the two."

These are not "insurmountable complications and we are working through them," Roughan said. "We have proposed operational characteristics for interconnection agreements that would minimize processing time and costs, but the developers have so far not been amenable."

Interconnection is "a linchpin to distributed energy resources' growth and providers must prioritize it as part of the core business model and market growth strategy," Baldwin said.

Smart devices could, if combined with solar and storage, resolve these barriers and help utilities, their customers and private providers reap the benefits

The missing piece

The full impact of storage on the solar business will come with the incorporation of smart devices to manage customer loads, both installers and utility executives agreed.

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"Solar only goes so far, solar-plus-storage goes much farther and solar-plus-storage plus smart devices goes even farther."

Fortunat Mueller

President, ReVision

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Storage is a gamechanger, Rauscher said. It is becoming "a unified proposition to meet customer needs and goals and, at some point, we will stop talking about individual technologies and start talking about how to help customers manage their energy and costs."

"Controllable devices at the grid edge are potential grid assets," said Mueller. "Solar only goes so far, solar-plus-storage goes much farther and solar-plus-storage plus smart devices goes even farther."

Companies that offer solar-plus-storage "now see themselves as energy solutions providers" and that "broadens the value they offer," HECO's Ching agreed.

With the growing penetrations of variable distributed generation on so many systems, "the load management piece is what has been missing and it is where the future is," National Grid's Roughan said. "Managing customer load is where the solar-plus-storage players who will be successful are moving. The ones who stay with solar-only will be left behind."