As the utility industry comes to grips with the coming of age of energy storage (see the T&D World April 2018 Energy Storage Supplement), residential storage also is ramping up. According to the latest quarterly update of the U.S. Energy Storage Monitor from GTM Research/ESA, the residential storage increase in the 4th quarter of 2017 was the highest on record and combined behind the meter energy storage for all customer categories accounted for 55% of the additions during 2017.
California and Hawaii lead the country for residential deployments in the 4th quarter, and GTM is predicting a breakout year for storage of all types in 2018. Falling costs and favorable regulatory policies are part of the equation. No doubt, FERC’s hugely significant decision that outlines a path for integrating energy storage resources into the U.S. wholesale markets is a big part of the optimism. However, GTM also suggests that storage may be negatively impacted by the tariffs imposed on solar cells and modules in early 2018.
Despite the solar tariff issue, there are a number of reasons to expect residential storage will continue to break records in 2018. For one, the IRS issued a Private Letter Ruling in March (PLR 201809003) that permitted a customer to take the 30% solar Investment Tax Credit (ITC) for a storage system retrofitted to an existing solar PV system. Previously, residential storage retrofits could not claim the ITC. Consequently, we could see a significant uptick in the demand for retrofit targeted storage systems.
Legislation in a number of states for behind the meter (BTM) storage tax credits supports the case for greater residential storage demand. Finally, when a major industry player decides to enter a particular market, it sends a strong signal that the market has growth potential. Consider the new offering by ABB of a flexible, modular residential storage system. The system consists of the new REACT 2 inverter and a high-voltage lithium ion battery that can be installed in capacities of 4 kWh, 8 kWh and 12 kWh. The system can be installed on both the AC and DC side of an existing or new photovoltaic system and it can be configured to provide backup power in an outage.
Interestingly, other companies have entered the residential energy storage market, presumably to compete with Tesla and its Powerwall offering, for the PV packaged system and PV backup system demand. Mercedes-Benz started a new energy subsidiary last year with a modular home battery pack program that it installed itself and offered to solar companies. In fact, Nissan, Audi and other auto companies with electric vehicle offerings all are attempting to lever their technology to break in to home storage and other markets. Mercedes-Benz has already decided the home storage market is not a good fit for its battery technology and ended its new program in April.
The Tesla Energy division is still going full bore with offerings in home energy storage, commercial and utility scale batteries. The Tesla Powerwall 2 with its latest generation of software has capabilities that include straight storage for backup power, storage of PV power for nighttime or cloudy day use and customizable programing to take advantage of variable energy rates. It will be interesting to see how the ABB, Nissan and Audi home energy storage product lines position to compete with Tesla.
GTM believes the energy storage market will grow 15 times between 2017 and 2023 and by 2022 BTM deployments will make up half the market. While front-of-the-meter and bulk scale energy storage technology continues to amaze and defy what power companies previously thought was possible, residential and BTM energy storage may be the real game changer.