Has Commercial Energy Storage Reached the Tipping Point?

Jesse Remillard, ERS, for Zondits

There are strong signs that commercial, or behind-the-meter, energy storage has turned a corner in regards technical maturity, commercial value, and ultimately, financial credibility. A report issued by Sandia National Laboratories in August says that many sources believe that the commercial energy storage market is currently at the “tipping point,” where the combination of market conditions, technology developments, policy support, and emerging business models have reached a point of self-perpetuating and accelerating market growth.

One of the principal points of the report is that financing will be a cornerstone of future growth in the market. Financing options will emerge as the ability to monetize value streams becomes more clearly defined and understood.

The Sandia report describes two major strategies in its “Roadmap to Accelerate Market Growth”:

  1. Improvements to the market environment by collecting and disseminating technical information, ensuring safe designs, and continued investment in demonstration projects
  2. Improvements to financing viability by developing means to assess risk through development of performance ratings, performance guarantees, and energy service performance contracts

Several other recent research reports indicate large growth by the commercial energy storage market last year and make exciting predictions for near-term growth.

The US Energy Storage Monitor 2015 by GTM Research and the Energy Storage Association found that the US Energy storage market grew by 243% in 2015. This was driven by behind-the-meter residential and commercial deployments, which the report found grew by 405% last year. The vast majority of this growth was concentrated in California, but markets in New Jersey, New York, and Massachusetts are primed for similar growth. Lithium-ion batteries continue to be the most commonly deployed commercial and residential energy storage technology due to their performance, availability, and reliable performance.

On a worldwide scale, Navigant Research has also released a market data report this year, which predicts that global deployments of commercial and industrial energy storage systems will grow from approximately 500 MW in 2016 to 9.1 GW in 2025. Bloomberg New Energy Finance estimates that the energy storage market will be at $250B or more by 2040.

GTM Research released a report  this month documenting the current state of the US energy storage market, which claims that behind-the-meter energy storage will increase from 15% to 50% of the total US energy storage market currently by 2021, with more than a gigawatt of installed capacity. This will be driven by:

  • Improved system economics
  • Net energy metering reform
  • Changes to utility rate structures
  • Increasing viability of demand charge management
  • Increased interest in reliability and resiliency

It is common knowledge that battery costs are dropping, and increased awareness of global warming is driving a shift from fossil fuels to renewable energy sources. This will require significant amounts of energy storage ‒ whether it’s distributed or utility scale ‒ to mitigate renewable energy sources’ intermittency. This is becoming an increasingly obvious fact, motivating governments, utilities, and businesses to invest in battery storage.