As was the case in the U.S. solar industry five to ten years ago, deployment of grid-tied energy storage is highly uneven from quarter to quarter, with ups and downs driven by large utility-scale projects coming online. During the second quarter of 2015 the completion of a 31.5 MW lithium-ion system in Illinois drove the market to its second-highest quarterly volume to date at 40.7 MW.
However, under these headline numbers other trends are emerging, as GTM Research and the Energy Storage Association’s Q2 U.S. Energy Storage Monitor explores. Over the course of 2014, 65 MW of grid-tied energy storage was deployed in the United States. In the first two quarters of 2015 this has reached 46.5 MW almost 80% of the previous year’s volume.
Including the project in Illinois, most large-scale energy storage projects over the last two and a half years have been in the 13-state PJM Interconnection grid. Report author Ravi Manghani, who serves as GTM Research’s senior energy storage analyst, says that this is largely due to PJM’s implementation of Federal Energy Regulatory Commission rules that favored deployment of energy storage to provide grid services.
This was the also best quarter yet for grid-tied behind-the-meter energy storage in the United States, with 4.9 MW deployed. More than 90% of this was in GTM’s non-residential segment, which includes commercial and industrial (C&I), as well as government and non-profit installations, with a mere 400 kW of residential energy storage.
GTM Research says that much of the non-residential segment was driven by a massive pipeline of projects under California’s Self-Generation Incentive Program (SGIP). Over the last two and a half years California has been the largest market for this segment, with over 10 MW deployed.
Lithium-ion batteries continue to dominate this segment, but Manghani says that there is a minority of other chemistries being deployed at larger scales. In terms of non-lithium-ion based batteries, it is predominantly flow batteries, at least for utility-scale systems, explains Manghani.
GTM Research expects a big growth in behind-the-meter applications over the next few years, which will drive deployment across all segments to more than double annually by 2018. Manghani says this will be driven by multiple factors, including falling prices, limits to net metering policies and implementation of time-of-day charges for more customers.
He also notes that regulators and grid operators are becoming more open to the use of behind-the-meter assets including batteries for supplying grid services, including demand response. When developers are able to stack up multiple services and benefits, this makes for a stronger business case.
However, even without policy changes, Manghani expects growth in certain segments. The bread and butter in the C&I segment, or the non-residential segment, is still demand charge reduction, and that is going to continue to drive a portion of the market, he states.
Especially as there are tariff changes across multiple utilities, and rates on a nominal basis are going up. For those reasons we will continue to see growth in the C&I space, irregardless of other policy changes.