US: Commercial storage to be economically attractive in 19 states by 2021, finds GTM report


The steady price declines in battery technology will make commercial storage solutions economically attractive in 19 U.S. states by 2021, finds a new report published today by GTM Research.

The report, titled The Economics of Commercial Energy Storage in the U.S., analyzed rate structures across 51 power utilities across the country to determine opportunities for demand charge management for customers keen on adopting energy storage systems at commercial and industrial scale (C&I).

As of today, just seven U.S. states offer rate structures that currently make commercial storage financially attractive based on an internal rate of return (IRR) for one-hour and two-hour storage systems sized to meet the power demands of typical C&I customers.

To achieve favorable economics for C&I storage, demand-charge rates should be around $15/kW per month. With today’s storage system prices – somewhere between $400 to $500/kWh – only a handful of states currently have in place sufficient incentive and high retail electricity rates to make storage at this scale viable economically.

However, as storage costs continue to fall, driven by technological advances in the production of litihium-ion batteries in particular, by 2021 GTM Research estimates that 19 state utilities will offer tariffs that can nurture demand charges as low as $11/kW per month. In 17 states, large commercial customers will have an IRR of 5% or higher, while in 14 states the IRR will be deemed "attractive" for small- to medium-sized systems.

GTM’s report also posits an "aggressive cost reduction" case, whereby storage costs fall by 15% a year for the next five years. In this scenario, as many as 26 states – more than half of the country – could offer economically attractive commercial storage by 2021.

Commercial storage deployment in the U.S. has grown fourteenfold between 2013 and 2015, the report added, making it the fastest-growing storage segment in the country, albeit from a small base. The bulk of C&I storage installed in the U.S. is for the provision of demand-charge-related bill savings.

"In this report, we wanted to provide an outlook for demand-charge-based economics of commercial storage, treating storage as a one-trick pony," said Ravi Manghani, GTM Research’s director of energy storage and lead author of the report. "In reality, policy and market structures are evolving to help storage owners capitalize on other value streams as well. Effectively, this analysis should be viewed as the floor for commercial storage potential. The results establishing attractive economics in over a third of the states by 2021 is a promising sign for the future of commercial storage in the U.S."

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