Battery energy storage systems have proven to be profitable for commercial and industrial (C&I) customers in the U.S., but a lack of understanding of regulations and a shortage of battery supply for some customers could still hinder the growth of the energy storage market.
This conclusion was reached by a panel of experts at the recent Solar Media-sponsored "U.S. Energy Storage Summit 2021. One of the topics they discussed at the conference was how the U.S. customer-side battery energy storage market will grow.
Chloe Holzinger, senior analyst for energy storage at research firm IHS Markit, said electricity demand and other economic factors are providing a stronger case for U.S. commercial and industrial (C&I) customers to adopt battery storage solutions.
Automakers and the battery value chain and market demand for lithium-ion batteries have led to a tightening of their supply
While much depends on customer load profiles and electricity prices, Holzinger said that in some cases, energy storage solutions have proven "profitable" for commercial and industrial (C&I) customers, with payback periods of less than two years. This is largely achievable for customers who have regular significant load peaks (coinciding with grid demand during peak periods), where a two-hour duration is considered the most suitable duration.
Ian Blakely, chief technology officer at Texas-based power resiliency systems provider Enchanted Rock, said the company's customers have responded quickly to recent outages in the state, where grid load loss posed a threat to their business operations, further driving deployment of customer-side energy storage systems.
Blakely cited H-E-B, a Texas grocery store chain that uses Enchanted Rock's microgrid solutions built with solar power generation facilities and battery storage systems. He says the microgrid kept several of H-E-B's stores up and running during power outages during the Category 4 Harvey hurricane that hit Texas in 2017. And it allowed H-E-B to move some goods from other stores to these stores for storage, thereby reducing spoilage and preventing widespread business interruptions during severe weather events.
Suparna Kadam, senior director of business development at Pivot Energy, a provider of commercial solar and energy storage systems, added that economic incentives and other market demands are largely driving the growth of the customer-side energy storage market. In particular, she noted the strong regulatory support for energy storage deployment in California.
However, commercial and industrial (C&I) customers need to be better informed about federal and state regulations that support energy storage deployment in the U.S. Kadam said that while Pivot Energy's customers in California are clearly better informed than those in other states. The panel noted that Massachusetts and New York's Commercial and Industrial (C&I) [title track are more interested in energy storage deployment than other states, and they are more aware of U.S. federal energy storage policies, particularly FERC Order 2222.
Last September, the Federal Energy Regulatory Commission issued Order No. 2222, which enables distributed energy sources such as C&I battery storage solutions to participate in regional organized wholesale capacity, energy and ancillary services markets, potentially providing additional revenue streams for battery storage systems deployed by C&I industry customers, thus further improving the economics of energy storage projects. The approval of the order was widely hailed by the industry as a "victory for grid reliability," but was also seen as a potential boon to the energy storage market. Research firm Wood Mackenzie said in December 2020 that efforts to increase participation in the energy storage market have set the stage for "exponential growth" in U.S. energy storage systems.
The growth of the U.S. energy storage market may also be hampered by battery supply constraints due to demand from multiple high-growth industries, particularly the extremely high demand from the automotive market. And the deployment of stationary energy storage systems has also been affected by the battery shortage.
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