By - Jim Vess

NREL study finds battery storage expensive, but future prospects bright

Energize Weekly, April 5, 2017

A new federal study seeking to get beyond “the hype” on residential energy storage and set baseline costs puts the price of including a home battery with a solar photovoltaic (PV) installation at $12,000 to $14,000.

“There has been a lot interest recently and a lot of hype,” said Kristen Ardani, principal author of the study and an analyst at the Golden, Colorado-based National Renewable Energy Laboratory (NREL). Ardani noted, for example, that the Tesla Powerwall is being marketed for $5,500. “The question is what is included in that price and what isn’t,” she said.

The aim of the NREL report is to set a baseline identifying and breaking down the cost elements in residential energy storage. Researchers from the Rocky Mountain Institute and the U.S. Department of Energy also worked on the study. NREL has a similar benchmarking series on PV installation costs.

“It is a comprehensive view of a nascent technology,” Ardani said.

The battery cost study is the first of a three-part series looking at the economics of storage. A second report will focus on rate structures and payback periods. The third will look at specific distributed energy resource aggregation schemes, such as the approach of New York-based Consolidated Edison Inc.

The cost analysis calculates that the price tag of a 5.6-kilowatt (kW) PV system is about $15,581, including a 3-kW/6-kilowatt-hour (kWh) battery would add another $12,100 for a DC-coupled system and $14,000 for an AC-coupled system.

These are the prices for installing a solar array and battery together. Retrofitting an existing AC-coupled system with a 3-kW/6-kWh battery would cost an additional $3,200.

Those figures mean that for the moment, widespread dissemination of residential batteries is unlikely, Ardani said. “It doesn’t mean it doesn’t make makes sense in some areas, that there are early adopters, but on a nationwide average, the cost is very high.”

Still, the likely decline in the cost curve for residential storage has “a lot of corollaries to the PV market 10 years ago,” Ardani said.

The current study, Ardani said, “reflects the state of the technology today, but we fully believe the cost will come down dramatically over the next 10 years.”

The report notes that residential storage has lagged behind the deployment in commercial, industrial and utility-scale sectors with only 4 megawatts of residential storage out of 226 MW installed in 2015.

“There has been lot of interest in the commercial market because they see a value proposition,” Ardani said. Commercial and industrial customers, in addition to paying for the kilowatt-hours they consume, are charged a “peak demand rate,” which accounts for the maximum peak they use. Batteries can be used to lower that peak.

An analysis by GTM Research, a cleantech research and marketing firm, projects that by 2021, almost half the annual storage installations will be behind the meter, including 463 MW in the residential sector.

“What is going to drive the value of PV and batteries is rate structure,” Ardani said. Utilities are experimenting with changing their residential rates, including things such as adding a peak-demand rate and switching to time-of-use rates, in which customers are charged more for kilowatt-hours during high-demand periods and less in low-demand hours.

Batteries could aid a residential customer to better manage time-of-use rates and “tap into a value stream,” Ardani said. “In the future, batteries are going to make a lot of sense.”

Some utilities are also moving to reduce the net-metering credit, which customers with PV units get for each kilowatt-hour they put onto the grid. As the value of net-metering declines, it may be worth more to store and use the kilowatt-hours to reduce monthly bills.

“As net metering goes away, PV and storage becomes more viable,” Ardani said.

Batteries may also get a boost on the wholesale markets, Ardani said. Both the PJM and California Independent System Operator, two of the largest U.S. wholesale markets, are moving to include storage as an energy source.

The Federal Energy Regulatory Commission (FERC) has also proposed a rulemaking to enable storage to be used as an energy source in the deregulated markets, which cover about two-thirds of the country. (See Energize’s Batteries seen as a $2 billion market by 2020.)

The benchmarking study found that about half the cost of a PV-battery system came from equipment, and when labor for installation was added, that accounted for 59 percent of costs. The remainder were things such as permitting, overhead, marketing and supply chain, as well as taxes.

The price premium for AC-coupled systems is the result of higher hardware, labor, and sales and marketing expenses incurred by more complex system design and engineering, as well as a grid-tied inverter.

The question of which type of storage to use is based on the question of how the stored energy is to be used. “AC-coupled systems are more efficient in applications where PV energy is generally used at the time of generation, and DC-coupled systems are more efficient in applications where PV energy is stored and used later,” the report said.

While the benchmark study only looks at costs, the next study in the series will look at benefits and payback periods. Preliminary figures put the payback range at roughly five to 10 years for an AC-coupled solar array with a battery.

“One key message in this discussion is that batteries are as much about value as about cost,” Ardani said. “There is a value in dealing with blackouts, peak-load shifting, so we have to measure those.”

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