Among solar geeks, solar storage has long been an interesting topic of discussion, and one with (at least) a three-pronged value proposition. First, solar energy systems with energy storage can provide electricity back-up to the host in the event of a grid-outage. Second, storage may provide an opportunity to offset energy usage at the customer site, capacity and demand charges. Finally, and perhaps the most exciting, solar-based storage systems can provide frequency regulation to the grid, enabling the grid to operate on the 60 Hz “hum” or “heartbeat” that keeps the grid in sync.
Until now, these value propositions have not outweighed the great cost of battery storage, but market-based factors, business innovations, and technical developments in energy storage and PV technology are making storage more realistic than ever. Indeed, there seem to be a few markets where solar energy storage may be successfully built in the near term. For very different reasons, we expect to see more solar storage projects in California, Hawaii, New York, and the PJM region in the near future.
California is a state with relatively high solar penetration, and legislators have sought to incentivize storage to stabilize the grid. PG&E recently instituted a storage incentive at the rate of $1.62/W, bringing back fond memories of the original California Solar Initiative. We have been in contact with developers whose projects have been killed due to demand charges; these same developers have discussed using battery storage tech as a solution.
Hawaii has a load (pun intended) of grid issues – to the point that grid penetration and saturation have slowed project development. Investor interest has waned except in cases where a developer can show a clear path forward to interconnection. However, utilities are under tremendous pressure to increase renewable penetration, enhance reliability, reduce volatility, and drive down energy costs – and many are seeing storage as a way to do so. Earlier this month, Hawaii Electric Co. (HECO) released a request for proposals (RFP) for 60- 200 MW of storage, and Kauai Island Utility Cooperative launched its own RFP this spring to integrate more solar on the grid and heighten reliability.
In New York, Hurricane Sandy demonstrated the sensitivity of the electrical grid, and pressure has mounted to tackle grid reliability issues. ConEdison has offered incentives for grid storage as part of a 100 MW demand reduction package. And, with New York’s plans to alter the utility model, energy storage could emerge as a new ancillary utility service.
The PJM region also seems to be ripe for solar-based storage, predominantly because it is a mature, well-functioning electricity market where frequency regulation already exists. For example, in response to previous disruptive outages, Maryland offers a specific grant targeted at backup power generation for gas stations.
Geographical market conditions like incentives and grid saturation are not the only reason for increased interest in storage. Investment in and commercialization of products such as smart controllers, batteries, and inverters, along with the business innovations offered by companies like Solar Grid Storage and STEM have provided marketable solar storage solutions that offer more tangible value to solar hosts and investors. While we think that storage adoption is still in its early days, Sol Systems believes that storage is an inherently valuable and complementary partner for solar. Storage unlocks the latent potential of solar electronics to serve as a full contributor to the grid.
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About Sol Systems
Sol Systems is a renewable energy finance firm that provides secure, sustainable investment opportunities to investor clients, and sophisticated project financing solutions to developers. Founded in 2008, Sol Systems focuses on meeting the industry’s most critical solar financing needs, including tax structured investments, capital placement, debt financing, and SREC portfolio management. To date, the company has facilitated financing for thousands of distributed generation solar projects and hundreds of millions in investment on behalf of Fortune 100 corporations, utilities, banks, family offices, and individuals. For more information, please visit www.solsystemscompany.com.