NewEnergyNews: TODAY’S STUDY: THE RISE OF ENERGY STORAGE

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Gleanings from the web and the world, condensed for convenience, illustrated for enlightenment, arranged for impact...

The challenge now: To make every day Earth Day.

YESTERDAY

  • FRIDAY WORLD HEADLINE-Aussie Farmers Worrying About Climate Change
  • FRIDAY WORLD HEADLINE-The Climate Change Solution At Hand, Part 1
  • FRIDAY WORLD HEADLINE-The Climate Change Solution At Hand, Part 2
  • FRIDAY WORLD HEADLINE-New Energy And Historic Buildings In Europe
  • THE DAY BEFORE

    THINGS-TO-THINK-ABOUT THURSDAY, December 1:

  • TTTA Thursday-First Daughter Ivanka May Fight For Climate
  • TTTA Thursday-Low Profile High Power Ocean Wind Energy
  • TTTA Thursday-A Visionary Solar Power Plant
  • TTTA Thursday-EVs Have A Growth Path
  • THE DAY BEFORE THE DAY BEFORE

  • ORIGINAL REPORTING: How The Clean Power Plan Drove The Utility Power Mix Transition
  • ORIGINAL REPORTING: How Utilities Are Answering The Distributed Energy Resources Challenge
  • ORIGINAL REPORTING: Looking At New Rates To Unlock The Utility Of The Future
  • THE DAY BEFORE THAT

  • TODAY’S STUDY: The Power Potential Of Personal Wind
  • QUICK NEWS, November 29: Climate Change Forces Hard Choices In Alaska; New Energy To Utilities-“Can’t-Beat-Us-So-Join-Us”; Fact-Checking Trump Hot Air On Wind
  • AND THE DAY BEFORE THAT

  • TODAY’S STUDY: Getting More New Energy On The Grid
  • QUICK NEWS, November 28, 2016: Pope Talks Climate Change At Trump; Solar Comes To The Mall; The Big Possibilities Of Backyard Wind
  • THE LAST DAY UP HERE

  • Weekend Video: Why President Trump Can’t Stop New Energy
  • Weekend Video: 7 Things Climate Change Will Mean
  • Weekend Video: Wireless EV Charging Stations
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    Anne B. Butterfield of Daily Camera and Huffington Post, f is an occasional contributor to NewEnergyNews

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    Some of Anne's contributions:

  • Another Tipping Point: US Coal Supply Decline So Real Even West Virginia Concurs (REPORT), November 26, 2013
  • SOLAR FOR ME BUT NOT FOR THEE ~ Xcel's Push to Undermine Rooftop Solar, September 20, 2013
  • NEW BILLS AND NEW BIRDS in Colorado's recent session, May 20, 2013
  • Lies, damned lies and politicians (October 8, 2012)
  • Colorado's Elegant Solution to Fracking (April 23, 2012)
  • Shale Gas: From Geologic Bubble to Economic Bubble (March 15, 2012)
  • Taken for granted no more (February 5, 2012)
  • The Republican clown car circus (January 6, 2012)
  • Twenty-Somethings of Colorado With Skin in the Game (November 22, 2011)
  • Occupy, Xcel, and the Mother of All Cliffs (October 31, 2011)
  • Boulder Can Own Its Power With Distributed Generation (June 7, 2011)
  • The Plunging Cost of Renewables and Boulder's Energy Future (April 19, 2011)
  • Paddling Down the River Denial (January 12, 2011)
  • The Fox (News) That Jumped the Shark (December 16, 2010)
  • Click here for an archive of Butterfield columns

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    Some details about NewEnergyNews and the man behind the curtain: Herman K. Trabish, Agua Dulce, CA., Doctor with my hands, Writer with my head, Student of New Energy and Human Experience with my heart

    email: herman@NewEnergyNews.net

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      A tip of the NewEnergyNews cap to Phillip Garcia for crucial assistance in the design implementation of this site. Thanks, Phillip.

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    Pay a visit to the HARRY BOYKOFF page at Basketball Reference, sponsored by NewEnergyNews and Oil In Their Blood.

  • ---------------
  • WEEKEND VIDEOS, December 3-4:

  • Trump Truth And Climate Change
  • The Daily Show Talks Pipeline Politics
  • Beyond Polar Bears – The Real Science Of Climate Change

    Monday, September 28, 2015

    TODAY’S STUDY: THE RISE OF ENERGY STORAGE

    North America Renewable Energy Brief; Energy Storage Charges Up – Summer 2015

    September 2015 (Cohn & Reznick Capital Markets Securities)

    Primed For Growth

    Nearly every market report out there points to the same conclusion: Energy storage is poised for significant growth in the US. According to GTM Research and the Energy Storage Association in their US Energy Storage Monitor (released in March 2015), 220 MW of storage capacity will be installed in the US this year. This is three times the 62 MW installed in 2014. By 2019, the report forecasts that more than 860 MW will be brought online annually, and that the market will be worth around $1.5 billion.

    Every industry executive interviewed for North America Renewable Energy Brief agrees that storage is ready to go mainstream. “The market is ready for storage”, confirms David Fennema, Managing Director, M&A/Environment, CohnReznick Capital Markets Securities. “This industry has evolved very quickly from a venturetype driven business to a commercially and industrially driven sector. This year will witness a huge breakout for storage. It is no longer a matter of if, but when.”

    From financing and technology limitations to incentives and regulatory frameworks, this report highlights the main challenges the storage market must overcome to realize its potential. By examining some of the markets where it has already made inroads, along with interviews with leading experts in the storage industry, this report also looks at how these challenges can be addressed.

    Conventional wisdom suggests that the storage industry is not homogenous. There are a wide variety of available storage technologies and business models. The size of storage infrastructure varies significantly between residential installations and commercial gridscale infrastructure. The applications of storage are diverse – from frequency regulation to backup power. The regulatory frameworks for storage differ between states and the motivations behind building storage capacity are very different throughout the country.

    As a result, the most pressing questions facing the storage industry today, such as how will projects be financed, can only be answered with respect to specific geographic markets and storage applications on the customer or utility side of the meter. A single answer to this question simply does not exist…

    Addressing The Funding Challenge

    One of the greatest challenges to energy storage realizing its full potential is financing development. For large-scale projects, project finance structures might be a viable option. This is especially true in markets like California where the three investor-owned utilities’ energy storage agreements indicate contracts will include a financeable tolling component. However, even if the contract structure is palatable for banks, financing will not be forthcoming unless the banks can become comfortable with the technology risk.

    The limited track record of energy storage technology means equipment providers need to provide robust, long-term warranties to attract debt and equity investors. In addition, these warranties must be backed by large balance sheets in the wake of multiple bankruptcies among major battery manufacturers in recent years.

    “There are at least ten different versions of how storage providers are structuring agreements with customers, and this diversity applies to both small and utility scale projects,” explains Fennema. “There won’t be a straightforward model that everyone will use to finance projects as there is with tax equity for renewable energy projects. One option is project financing. But, to secure this, projects will need to demonstrate that they have three critical components in place – stable cash flow, strong guarantees on storage technology performance, and strong credit on the back end of the agreement.”

    Even if banks become comfortable with lending to utility-scale energy storage projects, it is unlikely that project finance structures will be suitable for financing commercial and industrial behind the meter storage infrastructure. Given the high upfront cost of storage, the critical challenge is how to locate and access financing structures that reduce the initial cost to the consumer.

    This is why a “no money down financing” option is gaining traction. In this model, a storage company offers to install batteries for businesses at no upfront cost. Instead of owning the asset, the business housing the batteries pays for energy storage as a service through a longterm contract. Storage offered through this financing mechanism helps businesses reduce their demand charges (charges levied on large electricity consumers for the right to have large volumes of capacity available to them). Storage helps reduce these bills during periods of high demand – similar to the leasing model that has proven to be successful with solar.

    To date, a small number of companies have secured funding to allow them to finance the initial cost of the storage…

    “Several battery storage technology companies have raised funds intended to finance 100% of the actual storage unit through the use of shared savings or power purchase agreements,” said Mark Hooley, CPA, Office Managing Partner – San Diego, CohnReznick. “If you take the capital investment decision and long-term maintenance cost out of the sales discussion, the value proposition is very compelling and will promote aggressive adoption.”

    Establishing Consistent Regulatory Frameworks Is Key

    Another challenge to storage reaching its full potential is an inconsistent regulatory structure. In some markets, regulatory change has enabled the full value of storage to be realized. FERC Order 755, enacted in 2011, is a prime example. Until the Order was enacted, frequency regulation in PJM, which is part of the Eastern Interconnection grid, was sold as a capacity resource, with providers receiving a certain price for each MW provided during a certain period, regardless of how fast or effectively that service was delivered.

    Realizing that frequency regulation sources such as batteries, flywheels, and demand response can respond much quicker to grid signals than centralized generators, FERC Order 755 increased payments for faster sources. ‘Fast’ frequency regulation tripled in the year after this regulatory change was enacted.

    “The fastest growing markets for storage will be driven by policy,” said Victor Babbitt, Vice President Energy Storage, RES Americas. “PJM has been very proactive in adjusting its policies in a way that allows energy storage to compete fairly. Other markets are headed that way but haven’t come as far.”

    Regulation has also slowed the development of storage in an emerging, but potentially huge, market – the co-location of residential solar with storage. Many utilities have demanded that battery-backed solar panels undergo a lengthy and costly assessment for safety reasons. They want to ensure that batteries don’t store grid power before feeding it back to the grid through net metering under the guise of solar power.

    In some markets, regulators are overruling utilities that adopt this stance. For example, in April 2014, the California Public Utilities Commission issued a proposed decision that exempted combined solar and battery installations from additional fees and studies (subject to certain requirements)…

    Who Is Entering The Storage Market?

    From utilities and independent power producers (IPPs) to electric vehicle companies such as Tesla, many different businesses are exploring ways to enter the storage market. Some companies have entered the market by developing new storage products. Others have acquired, invested in, or formed partnerships with storage companies.

    One of the most high profile entrants to the residential storage market is Tesla. In April 2015, Tesla launched Powerwall—a 130cm by 86cm rechargeable battery for the home. Priced at $3,000 for the 7KWh unit, the battery provides load shifting, power backup, and stores excess solar energy. The system is closely based on Tesla’s electric vehicle battery. The company has enlisted SolarCity to help distribute its batteries.

    In addition, utilities and IPPs have acquired, invested in, and partnered with storage companies to broaden their product offerings. A few notable transactions have already been completed:

    • In March 2015, SunEdison acquired the team and assets of Solar Grid Storage, a provider of combined energy storage and solar PV systems, for an undisclosed sum.

    • In May 2015, NRG participated in the $23 million Series C funding round of Eos Energy Storage, a manufacturer of grid-scale battery technology.

    • In December 2014, leading solar company SunPower entered into an exclusive partnership with storage and solar business Sunverge Energy to offer a joint solution to residential customers and utilities in the US.

    “I expect M&A activity to pick up for storage companies,” said Anton Cohen, CPA, Partner, Renewable Energy Industry Co-National Director, CohnReznick. “It will be driven by companies seeking a full vertically integrated, solution. Whether it’s from unregulated utilities or developers, we will see an increase in M&A.”

    M&A activity will also be driven by the fact that most storage companies are small and venture-backed. As such, they will need to align themselves with larger companies capable of funding project construction. “The storage market is at an early stage so the companies building projects are quite young and often venturebacked,” explains Fennema. “It’s hard for them to finance projects themselves, so it’s become attractive for those companies to merge with an IPP or utility. If they can get the economics of the merger right, it’s very attractive for them as it can provide an established customer base. So, we expect M&A activity to continue for some time.”

    What Does CohnReznick Think?

    There is no doubt that explosive growth in the US energy storage market is imminent. The size of the market is projected to expand 250% in 2015 and, with the right conditions in place, could be worth $1.5 billion by 2019. This is 11 times the size of the market in 2014. While the potential is clear, many regulatory and financial obstacles need to be overcome to make storage commercially attractive.

    Increased adoption will be primarily driven by policy. PJM and California, two storage trailblazers, demonstrate the importance of adequate regulations and incentives. PJM housed two-thirds of all storage capacity installed in the US in 2014, and California plans to procure over 1.3 GW of energy storage over the next five years.

    Private sector investment in storage will increase as the industry matures and technology advances further. However, financing structures are still relatively unsophisticated so access to funding is limited. Innovation in funding models is crucial because the large upfront costs of installing a system mean storage is not possible for many consumers.

    Despite the challenges, we are confident that the energy storage market will successfully demonstrate significant growth in the next five years…

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