Energy storage deployments are growing rapidly, propelled by regulatory action, improving economics and utility moves to include the resource in their long-term planning.
A total of 41.8 MW of energy storage projects were deployed in the third quarter, marking a 46% year-over-year increase from third quarter 2016, according to the latest Energy Storage Monitor from GTM Research and the Energy Storage Association.
There were also 10% more energy storage deployments in the third quarter than in the second quarter, which saw a total of 38.2 MW deployed, the report said.
Utility-scale projects lead
Utility-scale projects led the market in the third quarter, with a single 30 MW storage project in Texas accounting for about two-thirds of the quarter’s total. That also resulted in behind-the-meter installations taking a smaller share of the market, 26%, in the third quarter, compared with 42% in the second quarter.
In terms of duration, deployments dropped quarter over quarter as many utility scale projects had discharge durations of less than one hour. There were 42.5 MWh of energy storage projects deployed in the third quarter, a 5% increase year-over-year, but a 17% decline compared with the second quarter.
The Texas project put the Lone Star state at the top of the list for utility-scale deployments for the quarter. California topped the list for the non-residential market with 6.5 MW of deployments, and for the residential market with 1.87 MW of deployments. Hawaii ranked second in residential deployments in the quarter with 1.21 MW of projects and was third in non-residential deployments with 5 kW.
GTM expects a total of 295 MW of energy storage to be deployed in 2017, a 28% increase from the 231 MW deployed in 2016.
Looking further out, the report sees the energy storage market growing nine-fold between 2017 and 2022, with the behind-the-meter market, both residential and non-residential, accounting for up to half of the market by 2021. In dollar terms, the report estimates the energy storage market will be worth $3.1 billion by 2022. The authors expect energy storage deployments to cross the 1 GW per year mark in 2019, bolstered by improved economics and procurement programs.
According to Bloomberg New Energy Finance, prices for lithium-ion battery packs have fallen 24% from 2016 levels.
Regulatory and policy initiatives are also likely to drive market growth. Utilities across the country are increasingly including energy storage in their integrated resource plans (IRPs).
“Energy storage is increasingly acknowledged in utilities’ long-term resource planning across the country,” Ravi Manghani, GTM Research’s director of energy storage, said in a statement. “Many utilities that hadn’t considered energy storage in IRPs a year or two ago are now explicitly modeling hundreds of megawatts of storage into their resource stacks.”
The GTM-ESA report identifies 17 states that include energy storage in either their resource planning or in rate cases.
Among recent actions, the Utilities and Transportation Commission in Washington told investor-owned utilities in the state to consider energy storage in future IRPs.
In Oregon, Portland General Electric responded to the state’s energy storage mandate by saying it intends to spend between $50 million and $100 million to install about 39 MW of energy storage.
In New Mexico, Public Service Company of New Mexico has issued a request for proposals for 456 MW of resources, including renewable energy and battery storage. The resources, identified in the utility’s 2017-2036 IRP, will help fill the gap left when the coal-fired San Juan plant closes at the end of 2022.
New Mexico’s IRP is also notable because the state made changes in the methodology it uses to calculate needs that better capture the benefits that energy storage can provide. Rather than using a simple cost to replace a gas-fired turbine, New Mexico created a metric to value flexibility that is based on sudden changes in supply and demand and found that in some scenarios batteries are more cost effective than a gas turbine.
Arizona Public Service has also been expanding its use of energy storage and has proposed a new tariff program that encourages the adoption of non-residential storage that can help shave peak demand.
In Florida, the Jacksonville Electric Authority approved a storage incentive as part of its new net metering compensation program.
Also in Florida, Duke Energy Florida reached a settlement over the cancellation of its Levy nuclear project that calls for 700 MW of solar, 50 MW of battery storage and 500 electric vehicle charging stations that will be built over four years. In North Carolina, Duke said it plans to invest $30 million on two battery storage systems that would be the first the utility’s regulated arm has undertaken.
And Hawaii, which has been frequently mentioned as a good market for energy storage because of its high rooftop solar penetration, could be poised for an increase in energy storage projects now that Hawaiian Electric Companies’ plan on how it intends to implement the state’s 100%-by 2045 renewable portfolio standard has been accepted. Hawaiian Electric also released its updated grid modernization plan, which makes frequent reference to energy storage.
In New York, Gov. Andrew Cuomo (D) in late November signed a bill setting up an “energy storage deployment program” in the state. The final form of the law will not be known until a chapter amendment is passed in the next legislative session, but it is likely to make New York the fourth state to have some form of energy storage target.
The New York ISO is also looking at how its system could adopt more storage as a way of helping integrate more renewable resources into its grid.
Massachusetts, which preceded New York in the adoption of an energy storage target, is now exploring an issue that could have an effect on the energy storage market in the state.
The state’s Department of Public Utilities is looking into the eligibility of energy storage systems to participate in net metering programs and how such a program might fit with ISO-New England’s Forward Capacity Market.
On the federal front, the GTM-ESA report noted that four bills were introduced in the Senate in the fall that could advance energy storage, including another attempt to secure a tax credit for energy storage and multiple efforts to increase resiliency after the 2017 hurricane season.
Meanwhile, the Federal Energy Regulatory Commission is in the midst of a rulemaking process that is examining energy storage and distributed energy resources (RM16-23-000).
Given FERC’s heavy schedule as it tries to work off a backlog of cases that built up during the months the agency did not have a quorum, it is unlikely that the commission could issue a rulemaking on energy storage before next spring.