The What, Why and How of Energy Storage
By John Serron | January 5, 2022
Read Time: 6 Minutes
The U.S. energy storage market is growing at a rapid rate. In 2020, the market surpassed $1.5 billion and is expected to become an $8.9 billion annual market by 2026. With this significant growth, it’s important that contractors understand what energy storage is, why it’s important, what problems it’s solving, and what opportunities there are to leverage energy storage.
What is energy storage?
In the transition to a clean, modern energy system, energy storage plays a crucial role as both a stable support for variable renewables like solar and wind and a “smart integrator” of diverse assets.
At customer sites, energy storage is the central hub that unifies solar, electric vehicle (EV) charging and other components of a smart energy strategy and leverages them for maximum benefit. At larger transmission- and distribution-connected systems, energy storage maximizes ROI for renewable energy projects by injecting stored energy into the grid when it’s most valuable and earning wholesale market revenues.
Why is energy storage important, and what problems could it solve for the grid, society, and our economy?
Energy storage is playing a critical role in achieving global decarbonization. On the grid, at homes and with businesses, storage can help solve the challenge of intermittent renewable generation so that clean energy is available when it’s needed. Storage can also enable buildings to act as fully flexible grid resources, making up for shortfalls in onsite generation and providing grid services when devices can’t. By enabling greater control over how power is pulled from the grid, energy storage also helps businesses and residential users to reduce their energy costs and minimize their carbon footprint.
Building a massive grid that instantaneously balances supply and demand while providing power to millions has been called the greatest engineering feat of the 20th century. Powering a fully decarbonized economy with artificial intelligence (AI)-driven renewables and energy storage might prove to be the greatest achievement of the 21st.
What are the different programs and incentives to help fund energy storage?
There are varying state and federal programs to help pay for energy storage. State programs that incentivize the deployment of renewable energy and storage include California’s Self-Generation Incentive Program (SGIP), Hawaii’s Battery Bonus Program, the Solar Massachusetts Renewable Target (SMART) program, New York’s Value of Distributed Energy Resources (VDER) tariff, and more. These programs typically either pay for a portion of the battery based on a set rate or compensate owners for energy they sell back to the grid in demand response programs.
Currently, energy storage is only eligible for a federal investment tax credit (ITC) when it is paired with solar and the storage system is charged by the solar. Right now, Congress is considering a standalone storage ITC as part of the Budget Reconciliation bill, which includes a 30% standalone storage ITC through 2031. A standalone storage ITC (or simply a storage ITC) would make investments in standalone storage systems ITC-eligible and likely stimulate additional investment in energy storage projects. Without this ITC, global energy storage deployments nearly tripled in 2021 compared to 2020, reaching 12 GW / 28 GWh, according to a new report from analyst firm Wood Mackenzie. With this ITC, the firm predicts that a 30% storage ITC would increase U.S.-wide energy storage deployments by 20% or more.
What do the different programs, tax credits and tariffs mean for commercial and industrial companies? And why is storage such a booming opportunity for EPCs and project developers?
For commercial and industrial companies, the value that energy storage delivers from utility bill savings and energy market participation is augmented by the different incentive programs, tax credits and tariffs. Those who deploy standalone storage or solar plus storage benefit from the attractive economics. Storage also enables them to achieve other benefits such as avoiding power outages, reducing greenhouse gas (GHG) emissions, demonstrating sustainability and environmental, social, and governance (ESG) leadership.
For project developers and EPCs, programs, tax credits and tariffs help improve the rate of return on their systems.
How does storage make solar more valuable?
By adding storage to your solar project, you can save excess solar energy for when electricity costs are highest. Solar energy production typically peaks in the middle of the day, when the sun is brightest and energy costs are lowest. Businesses that rely on solar energy alone are thus still exposed to high demand charges or peak time-of-use costs that often occur later in the afternoon or evening when solar energy production drops. Storage can discharge stored solar energy during peak times when solar production is low. This substantially increases total project savings, increasing the value of your solar asset.
Energy storage also helps future-proof solar projects against changing electricity rates. As a flexible, software-controlled asset, storage can adapt with changing rate structures to ensure your energy consumption, solar production and battery storage are optimized to reduce costs.
Altogether, solar plus storage delivers a comprehensive energy strategy for businesses looking to gain a competitive advantage, manage risk and build on sustainability goals. Optimizing your energy infrastructure with solar plus storage benefits your business in five key ways:
- Increases Profitability - Solar plus storage accomplishes this by delivering more energy savings than solar production alone. Having the flexibility to control the timing of solar energy consumption allows businesses to extract more value from the solar energy they produce.
- Sustainable and Reputable - Energy storage allows you to consume solar energy even when the sun isn’t shining. That means that businesses can rely less on fossil fuels and traditional power plants in the evening when solar energy production tapers down. This further drives your sustainability performance metrics while elevating your brand’s value.
- Helps Mitigate Risk - Deploying solar plus storage helps limit exposure to price variability by allowing you to be flexible with your energy assets. This can enhance your business resiliency and give you control over your energy destiny by helping to control unknown variables from changing rates and policies.
- Drives Operational Efficiency - With solar plus storage, you can cut down on energy waste while gaining the flexibility to use energy on your business’s operating schedule, freeing resources and staff to focus on your core business objectives.
- Improves Energy Resilience - Solar plus storage can be deployed as a microgrid, keeping the lights on and operations running, even when the utility grid goes out.
How can companies get started with energy storage as part of their solar solution?
Energy storage can be purchased alongside solar energy or as a standalone battery. If a project developer, EPC or electrical contractor is looking to offer energy storage, the first thing they can do is increase their familiarity with energy storage enough to feel comfortable discussing it with their customers. Stem, Inc. offers a training curriculum called Stem University that can help individuals of Stem Partners become energy storage experts.
When it comes to modeling energy storage projects, Wesco customers can work with their representatives to provide customer utility bill information, and Stem’s account teams will coordinate to evaluate each project.
Together, Wesco and Stem, Inc. provide solutions and equipment for behind-the-meter (BTM) and front-of-meter (FTM) energy storage projects. Learn more about how Wesco's solar plus storage solutions can improve your project execution.
ABOUT THE AUTHOR
John Serron is Stem, Inc.’s Distribution Program Manager, creating the fundamental strategies, processes and programmatic aspects of Stem’s Channel Partner Program since 2019.