An erratic yet accelerating trend in utility valuation of residential and C&I battery storage for grid services is helping system providers to make stronger value propositions to potential adopters. This trend, the relatively new trend in EV charging, and the continuing trend in time-of-use peak shaving are finally lifting the marginal economics of storage adoption from a questionable future break-even scenario to a bankable money-making decision.
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The near-term inevitability of the residential need for storage to help charge the growing EV fleet will help improve storage economics and thus make it easier to sell, suggests Mukesh Sethi, the Director of Solar and Energy Storage for Panasonic Eco Systems North America.
“EV charging is the next thing people are moving toward in terms of storage, and more people are willing to spend money before gas prices go up further, and before storage prices go up another 20% to 30% a few years from now,” he suggests.
This more economic argument for storage has encouraged more consumer interest, other marketers say.
“Storage can offer a lot of savings benefits during peak periods at night. It’s becoming a good value proposition for customers as utilities move their peak periods further into the evening,” says Joseph Cunningham, the Director of Operations for Arizona-based installer Sunny Energy that installs a lot of SolarEdge systems. “We’ve seen a large increase in the level of customer interest in storage, such that now about 60% of them ask about it.”
VPPs can be a big boost
Perhaps the greatest new boost to storage valuation is coming from the emergence of virtual power plant (VPP) formation. “Over the last 12 months there has been a shift toward more energy savings (credits) for battery storage, and toward money generated through VPP activities,” says Keith Marett, the President of Generac’s Clean Energy Commercial Group. Generac recently placed third among Virtual Plants Platform (VPP) providers in the Guidehouse Insights Leaderboard Report.
“More and more utilities are writing incredible incentives for homeowners to use batteries,” says Marett. “And more utilities are issuing RFPs and going to contract for storage-based grid services than ever before.”
Importantly, this VPP storage valuation trend is not occurring just in California or Hawaii, but across many eastern seaboard states, gulf states, and elsewhere in the country. For example, in Washington, DC, integrated energy storage provider Electriq Power in May announced a partnership with SEDC Solar, aiming to provide solar + storage systems to low and middle income (LMI) homeowners, churches, and to businesses in the region.
State storage programs expand
The combination of federal tax incentive, state incentives and utility incentives are creating a rate of return for storage well ahead of the lifespan of the equipment. “Combined incentives are crossing the break-even point for storage, and when the return on investment is less than eight years, customers seem to be willing to adopt it,” suggests Sethi.
On the state level, Hawaii residential battery installations are forecast to triple by the end of 2026, according to the most recent U.S. Energy Storage Monitor report from the Energy Storage Association and Wood Mackenzie. This is due, in large part, to Hawaii’s now-modern approach to using residential storage for grid services.
However, it may be Connecticut, with its Energy Storage Solutions program to foster LMI adoption of solar and storage, that provides a replicable model for other states to emulate. A year ago, Connecticut Governor Ned Lamont signed a law that established a state goal of deploying 1,000 MW of energy storage by 2030.
Then Connecticut’s Public Utilities Regulatory Authority (PURA) launched its Energy Storage Solutions program in January of this year, with the goal of fostering 580 MW of residential energy storage by 2030. Program participants include Connecticut Green Bank, and utilities Eversource and United Illuminating.
The Energy Storage Solutions program offers upfront incentives of up to $7,500 for residential customers to adopt energy storage, with a threshold of $200 per kWh. Similarly, commercial and industrial customers can tap incentives up to 50% of the cost of storage installation. And LMI communities are eligible for additional benefits.
Connecticut champions LMI market
Within the Energy Storage Solutions program, integrated system provider Generac is planning to provide 1,000 LMI homes with storage over the coming year at no up-front cost, through a new partnership with PosiGen, the LMI leasing specialist. The project then will spread to the remainder of PosiGen’s 4,000 existing customers in the state, as well as to new customers, says Ben Healey, PosiGen’s Chief Commercial Officer.
“Normally, storage is not often a part of the solar value proposition, since it can erode savings,” says Healey. But in Connecticut, Generac will provide both PWRcell battery storage and virtual power plant (VPP) software — its Concerto distributed energy resource control platform — in the project, which drives revenue for both partners primarily through grid services, according to Marett.
While each PosiGen customer home in Connecticut will have its own microgrid, there is no aggregation of those customers as a traditional community solar microgrid structure, with a single C&I off-taker. Instead, Concerto serves as the community DER management platform, serving the utility. “Grid services will provide 80% of the revenue stream for the project, and lease payments make up the rest,” notes Healey.
“The potential for the replication of this project in other jurisdictions is the key takeaway. The Connecticut grid services model can be exported to other territories and be used for financing solar and storage,” says Healey.
PosiGen is currently active in Louisiana, Mississippi, Connecticut, New Jersey, Pennsylvania, New York, and Florida. “Within a year, we expect to be in twice as many states, with a 25% increase of our installed base of 19,000 customers,” says Healey.
PosiGen’s generic approach to solar leasing is to save the residential ratepayer at least $50 a month, rather than offering a small savings percentage that can dwindle. Prior to installing a solar system, the company routinely performs an energy audit of the home and installs energy efficiency equipment — like LEDs and smart thermostats — at no upfront cost to the homeowner.
“We won’t serve a customer if we can’t save them money” says Healey.
Charles W. Thurston is a contributor to Solar Builder.
-- Solar Builder magazine
