In pv magazines conversation with startups and established battery and battery-solution suppliers, they seem to be quite bullish about the prospects for behind-the-meter products, whether that is coupled with PV or without. Is that how you see the market developing in 2015?
Looking specifically at the U.S. market, although there are commonalities with the U.S. business cases and international markets, the commercial market has taken off in the last 18 to 24 months largely because of battery and non-battery BoS costs coming down significantly.
The opportunities as they apply to commercial customers have been around peak shaving, particularly in the U.S. Commercial customers typically have two different portions of their bill, the energy portion and the peak demand portion.
So what energy storage can enable is, with not-significant investment in two or even four-to-six hour battery capacity, that the commercial customers demand shaving is pretty significant. Weve seen that with an appropriately designed system, the average commercial customer can reduce his or her electricity bill by 20 to 30%, by shaving off 30%-odd off the peak demand charge.
How big would you say that particular market opportunity is?
In our solar-plus-storage report, published last week, we have some estimates showing growth out from 14 MW [of customer sited solar-plus-storage] in 2015 up to 169 MW in 2018. [Market growth of 295% in 2015, and 219% growth in 2016.]
What about battery systems as backup power, perhaps in areas with less reliable grids or power supply?
Traditionally backup power has been the bigger of the two applications. This has primarily been served by lead acid batteries, which are cheaper when compared to lithium ion.
The question remains, what is the value proposition for backup power? Especially for commercial customers, backup power is an application that is only called upon during times of power outages and there needs to be a business case for a commercial customer to invest in backup power.
As I said, the traditional market for backup power was primarily served by lead acid batteries. Now we are seeing more lithium ion batteries being used, but lithium ion just doesnt supply the same number of hours of backup capacity so what we are seeing is more of dual applications for smaller batteries that can be used for peak-shaving as needed, but also for backup power during outage situations.
There are other types of battery technologies that may be used, such as lead-acid flow, vanadium flow or lithium ion like you said. Am I right in understanding that there are other battery technologies available to supply both backup and peak shaving services?
Absolutely. Lead acid is the incumbent technology and we are seeing flow batteries and some advanced chemistries, from companies like GE [sodium nickel ion] and Aquion Energy [sodium ion], the point being that there are emerging technologies that are better suited for long duration backup power needs than lithium ion.
On that front many emerging technologies are at best in the pre-market stages of development, but what we expect is that as more systems get deployed and tested and they gain the confidence of the financiers, these technologies will pick up They will primarily to serve power needs in remote applications or micro-grid level applications where backup power is one of the key value drivers.
Looking globally, in geographies where power supply might be less stable I am thinking of parts of Africa or in South or Southeast Asia how interesting do you think these markets are for battery providers?
Again we need to think about the present incumbent technologies and how the economics work with respect to them such as in South Asia, Africa or Latin America. In those locations the incumbent technology has been diesel gen sets. Here storage has a great opportunity to either replace or reduce the use of diesel gen sets in these applications. But purely in terms of economics, the costs are not quite there yet and particular with lithium ion that is further down the road purely as a backup solution. But even the emerging technologies that we discussed early, such as advanced lead acid or flow batteries, I think the cost and the commercial readiness is not there yet to see it take off in the next 12 to 18 months.
But once both the cost decreases and the commercial readiness increases with these technologies then it will look very promising. Specifically we see this as being in two years from now, so somewhere around the 2016 to 2018 timeframe. Then a lot of these technologies will be ready to deploy, with the right economics, for backup power needs in developing countries.
What would you say that cost threshold is then, per kilowatt-hour?
That kind threshold, assuming the technology is able to provide four-to-six hours of backup, is around US$500 to $600/kWh.
Ive spoken to at least one provider in Germany that claims its retail cost can be around 330/kWh ($404/kWh) so that sounds pretty attractive.
Well that sounds right around that mark.
What role then will incentives play for storage for captive power supply, with PV arrays?
Japan only a few days ago announced that it might be looking to restrictive uses or curtailment [of PV arrays] by utilities and even the implication that the FIT rates could be reduced [for solar installations] or they may not receive FIT for the 20-year duration without some kind of curtailment or storage capability. So these kinds of signals on one hand create more risk for end customers and may decrease the [solar] installation forecast for the Japanese market, but on the other hand purely looking at it as an opportunity for storage, definitely increases the value that storage can provide in such circumstances.
Looking to Germany we have seen how with a battery incentive program for self consumption being promoted, a strong storage market develop in Germany.
So as these kinds of signals from governments or regulatory agencies emerge, I think the storage value proposition also emerges.