Ahead of a free webinar from IHS Technology and PV Tech on 12 February 2015, IHS analyst Sam Wilkinson discusses some of key trends shaping the market for energy storage in PV in 2015. Please click here to register for the webinar.
Annual installations of grid-connected PV systems paired with energy storage will grow more than threefold from 2013 to 2015 to reach 775 MW. Growth will occur in all three major market segements – residential, commerical and utility.
The PV industry has undergone immense growth in recent years in terms of capacity deployed. By the end of 2014 over 180GW of PV systems had been installed worldwide—13 times more than the total at the end of 2008. Generating significant amounts of power from renewable sources can create huge economic and environmental benefits. However, solar generation is intermittent and fluctuates in a relatively unpredictable way. The power system is evolving away from the traditional and relatively simple system of one-directional flow—from large-scale conventional generators through transmission and distribution lines to consumers, to an increasingly complex mix of small, distributed generators and consumers at all points in the electricity grid.
This change is bringing about great challenges in balancing supply with demand and, together with the falling cost of PV and the rising cost of electricity from the grid, is driving interest in the solar industry toward energy storage. IHS predicts that 2015 will be the year that PV energy storage systems (PVESS) make an enormous leap toward wide-scale adoption.
Although the trend applies to all three market segments, there are key differences in what will drive the market in each, and which regions will be important.
Germany and Japan will dominate the residential market, but new markets will gain momentum in 2015
Germany and Japan currently dominate the residential PVESS market, accounting for nearly 70% of installations in 2014. The market in both of these countries has been buoyed by subsidies that help to drive the adoption of behind-the-meter energy storage systems.
In Germany, the retail price of electricity (approximately €0.29/kWh) is now much higher than the income generated from the solar feed-in tariff (about €0.12/kWh), which makes it much more attractive to use the electricity generated by a PV system. As a result, there is strong interest in increasing self-consumption by adding batteries to systems. The energy storage subsidy that was launched in 2013 helps to cover some of the upfront costs.
In response to the frequent blackouts caused by the shortage of electricity following the closure of its nuclear power stations, Japan has also launched a subsidy to promote the installation of lithium-ion (Li-ion) batteries in residential and commercial buildings. Batteries installed alongside PV systems provide backup and take advantage of the difference between peak and off-peak electricity prices by charging during off-peak times.
In 2015, installations in Germany and Japan are forecast to fall to less than 60% as other markets begin to gain momentum. In particular, the United Kingdom and Australia are predicted to start deploying residential energy storage in greater volume.
Major opportunity for commercial PV energy storage in the United States
While the same incentives will help Germany and Japan to continue to play huge roles in the commercial PV energy storage market, the United States has a large opportunity in this sector. Strong interest has been generated in the region as a result of so-called ‘peak demand’ charges that make up a large proportion of electricity bills in the commercial sector. These charges are based on peak usage in kilowatts, based on 15- or 30-minute intervals used during the billing period. The potential savings, combined with incentives offered by the Self-Generation Incentive Program (SGIP – California only) and tax credits can make solar and energy storage an extremely attractive proposition to commercial-rate payers in the United States.
Companies like Green Charge Networks, Stem and Coda Energy are also helping to drive this market by offering their systems to end-users with no upfront cost. Each has a slightly different business model, but each locates energy storage at the customer’s building and passes on a proportion of the savings generated, creating an extremely compelling proposition.
This business model will be the primary driver that helps the US market to grow to nearly 80MW of commercial PV energy storage installations in 2015.
Regulations to improve renewable integration to drive major acceleration of utility-scale market in 2015
Besides adding energy storage to behind-the-meter PV systems, there is a growing interest in pairing storage with utility-scale PV systems to assist their integration into the grid. Particularly in areas with high levels of renewable penetration, or on island grids, the impact of fluctuations in the output of large PV systems can pose significant challenges to the grid’s stability.
As a result, a number of regions including Puerto Rico and Hawaii have begun to introduce ramp-rate restrictions, which establish a minimum and a maximum rate at which the output of renewable generators (including PV systems) can change. Adding energy storage to the grid-connection of their plants can control the outputs to meet these restrictions—by charging the battery when the output is increasing too quickly, and by discharging the battery when the output is falling too quickly.
Initially, the introduction of such legislation stalled markets in Puerto Rico. But developers have now had adequate time to digest the impacts of the new requirements and have renegotiated power purchase agreements and system designs to accommodate them.
Although details are not yet finalised and the programme is yet to be finally approved, Japan is also due to make a significant investment in deploying grid-scale energy storage to alleviate many of the issues arising from the installation of the enormous pipeline of utility-scale PV systems that it has approved. Concerns have often been raised that Japan’s grid does not have the capacity to accommodate the high levels of intermittency that its aggressive renewables targets will lead to. IHS estimates that the nearly US$700 million that has been proposed to fund energy storage would support between 250 to 350MW of energy storage capacity, much of which would be sited alongside utility-scale PV systems. This is expected to become a huge driver for the global storage market once the programme is under way.
In 2014 a 9MW PV system with energy storage was installed on the island of La Reunion to help minimise the impact of the growing amount of renewable energy on the grid. A battery was also added to a much larger PV plant in Germany, allowing the output of the plant to be smoothed and the plant to participate in the primary operating reserve market and provide services to the grid.
IHS predicts that such systems will become increasingly common in 2015; and that global utility-scale PV energy storage installations will grow quickly to over 350MW from 50MW in 2014.
The content of this article will be discussed further in a free webinar from IHS Technology and PV-Tech on 12th February 2015. Please click here to register for the webinar.