The Shifting Makeup of the Fast-Growing U.S. Energy Storage Market

The U.S. energy storage market continued its rapid expansion in
the third quarter of 2018, and new state storage incentives and
mandates and FERC Order 84 have doubled the country’s pipeline of
projects to a record-setting 33 gigawatts. 

But battery supply constraints, slower than expected progress by
some utilities, and new fire codes in the key market of California
are headwinds facing the industry through this and next year. 

These are some of the key data points from the U.S.
Energy Storage Monitor
 released this week by Wood Mackenzie
Power & Renewables and the Energy Storage Association (ESA),
which reported 61.3 megawatts and 136.3 megawatt-hours of storage
deployed in the third quarter of the year. These are slightly below
the second
quarter’s figures
, but nearly twice the scale of projects
reported from the same quarter last year. 

And the types of projects being deployed has shifted over the
past year as well. For example, the third quarter’s
front-of-meter, utility-scale battery projects were down 14 percent
year-over-year when measured in terms of their megawatt power
ratings. But in terms of megawatt-hours – how long they can
provide their rated power capacity – the projects deployed in the
third quarter were up 178 percent compared to the same quarter last
year. 

This is largely because, unlike the short-duration frequency
regulation projects that have made up the lion’s share of
historical front-of-meter deployments, more recent projects are
starting to tackle longer-duration challenges such as providing
capacity and load shifting. Four-hour systems are becoming the norm
for front-of-meter projects, the report noted. 

In terms of sheer duration of storage deployed, 2018 hasn’t
yet caught up to the records set by the massive Aliso Canyon
procurements in California during late 2016 and early 2017. But a
host of policy and market developments are setting the stage for
faster storage growth, such as Arizona’s continued push into
solar-plus-storage projects, Xcel
Energy’s plan
 for 275 megawatts of batteries to support
nearly 2 gigawatts of wind and solar power, or NV
Energy’s plan
 for 100 megawatts of storage to accompany more
than a gigawatt of new solar. 

As for behind-the-meter deployments, the third quarter’s tally
in residential and commercial systems fell 24 percent from the
second quarter of the year – but it’s still the
second-strongest quarter on record, and the second quarter in a row
that outpaced all 12 months of 2017 in terms of new systems
deployed. Behind-the-meter batteries made up nearly two-thirds of
all megawatt-hours deployed in the third quarter, with California
maintaining its lead in both residential and non-residential
sectors.  

By the end of the year, Wood Mackenzie forecasts that 686
megawatt-hours of energy storage will have been deployed across the
country, with California leading with cumulative deployments of 334
megawatts to date, ahead of second-place PJM with 263 megawatts,
and the rest of the country with 133 megawatts. 

Even so, the report points to surging interest across a variety
of new state markets, from standing opportunities in New York,
Massachusetts, including Missouri, Mississippi, Nebraska, and
Oklahoma. “Developers in markets across the entire country are
seeing the raw economic potential that energy storage can provide,
and they’re trying to get their foot in the door in key
interconnection territories prior to
FERC Order 841
mandated changes going into effect,” said Dan
Finn-Foley, senior energy storage analyst with Wood
Mackenzie. 

While Wood Mackenzie Power & Renewables still projects that
U.S. energy storage will be a $4.5 billion market by 2023, it has
reduced its previous deployment forecasts for that year by about 4
percent, and its forecasts for 2019 and 2020 growth by a more
substantial 21 percent, in light of emerging challenges to the
industry’s growth. 

Some of these are a result of its successes thus far, such as
the battery supply constraints
from Tesla
 and other vendors that have already slowed growth
rates this year and through the first half of 2019 in the
residential sector, with effects trickling into 2020 in the
front-of-the-meter segment given their longer timelines. 

Others are due to policy changes outside the industry’s
control, such as the more stringent fire codes enacted in
California this year that will create challenges for
non-residential behind-the-meter battery installations in the state
that still accounts for nine-tenths of this market. 

 

Source: FS – GreenTech Media
The Shifting Makeup of the Fast-Growing U.S. Energy Storage Market