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Energy Storage

Batteries Paired With Solar Panels Could Shake Up Electric Utility Sector

Energy storage emerging as a new force in power market

by Steven K. Gibb
March 16, 2015 | A version of this story appeared in Volume 93, Issue 11

Correction: On April 6, 2015, this article was changed to correctly describe Tesla’s battery pack technology. Tesla will be producing lithium-ion battery packs at a Sparks, Nev., facility.

Emerging plans to pair residential solar panels with mass-produced residential batteries are on the verge of confounding the electric power industry. Hoping to protect its business model, the industry is throwing support behind changes to state laws and public utility commission regulations that would limit the revenue homeowners with solar panels can receive by selling excess power to the grid. But decreasing solar revenue may spur households with solar panels to install batteries to store their excess electricity for their own use at night or when grid power is interrupted. Such a change could dramatically alter the shape of the U.S.’s electric power industry.

A person doing laundry in a room with large multicolored devices on the wall.
Credit: Courtesy of SMA, Inc.
In-home batteries could store solar-generated electricity for use during peak demand periods.

At the epicenter of this shake-up are thermally stable, long-lasting, and safe power-storing lithium-ion batteries. Entrepreneur Elon Musk, chief executive officer of electric car maker Tesla Motors, has committed to mass producing them in a gigantic “gigafactory” now under construction in Sparks, Nev. Tesla is partnering with Panasonic to ensure that more than 6,500 workers produce 500,000 lithium-ion battery packs annually. About a third of them, with a capacity of 60 kWh, are destined for homes. Tesla has announced that it will produce batteries for households even before the factory is complete, beginning in the fall of 2015.

Musk also chairs SolarCity, the photovoltaic panel installation company that controls 39% of the U.S. market for residential leases of solar equipment. SolarCity plans to include stationary batteries in every home at which it installs solar panels, starting in 2018, according to company officials. This will both create demand for the products of Tesla’s new factory and give solar-panel homeowners new options in ongoing disputes with power companies.

These feuds stem from a campaign by the utilities and their politically conservative allies to reduce the money homeowners with solar panels can make by selling to the grid any excess power that their photovoltaic installations generate. For instance, legislation introduced in January in Indiana would limit buyback rates, which are the prices utilities are required by state law to pay solar-powered homeowners for this excess electricity.

The Indiana bill (H.B. 1320) is supported by the state’s 14 investor-owned electric utilities and is similar to legislation pending in two dozen other states. The bills are based on model legislation crafted by the American Legislative Exchange Council, an organization of conservative state lawmakers that energy magnates David and Charles Koch are backing. Environmental and consumer groups—and many homeowners with solar panels—are hotly contesting the measures.

If power utilities succeed in whittling down buyback rates, more solar-panel homeowners may turn to residential battery storage for their excess power and help drive the grid toward what experts call “distributed energy.” This is distinct from the current electricity infrastructure with its hub-and-spoke design of central power plants and remote customers.

Renewable energy proponents say having networked battery storage at multiple points on the grid could make transmission and distribution more efficient and resilient. Electricity networks with hub-and-spoke infrastructure mean one breakdown along a distribution spoke creates outages for nearly all downstream users.

Industry analysts are taking notice of this trend. The economics consulting firm Navigant Research says the energy storage sector is gaining momentum and predicts it will have worldwide revenues of $16.5 billion a year by 2024.

In 2013, Edison Electric Institute, the trade group for investor-owned electric companies, issued a report warning of these upcoming changes. “One can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent,” the report says, likening the speed of the coming transition to the changeover from landlines to cell phones 10 years ago. The report warns power companies that their profits could take a major hit if current policies and market trends continue. If electric utility companies delay in fighting solar buyback rates and distributed energy, the report says, “it may be too late to repair the utility business model.”

Proponents of energy storage, however, see utilities as far from obsolete. Peter Rive, SolarCity’s chief technology officer, says the company has no interest in prompting mass defections from the grid. “When batteries are optimized across the grid, they can direct clean solar electricity where and when it is needed most, lowering costs for utilities and for all ratepayers,” he writes in a company blog. Utilities are in the best position to direct that electricity by providing grid services, Rive says, and invites power operators to contact him.

Tom Werner, CEO of solar-panel company SunPower, says in a recent interview with the publication PV Tech Storage: “Grid independence is naive. That’s not going to happen in the foreseeable future. There is a need for the grid, the grid plays an important role and will for the foreseeable future.”

For their part, Tesla and SolarCity representatives are treading carefully, bidding on multiple stationary storage contracts and talking to lots of utilities, according to SolarCity board member and Tesla Chief Technology Officer JB Straubel.

Even as they fight solar buyback rates, major power industry players are taking notice of the potential benefits of energy storage. “We’re cautiously excited about energy storage options, particularly since they can help manage peak load demand periods so coal and gas turbines can be run more efficiently, resulting in fewer environmental impacts,” says Thomas Golden, technology development manager with Duke Energy. Duke is also bidding on storage contracts, particularly in California, where the state has mandated that 1.3 gigawatts of energy storage be installed by 2020.

Department of Energy officials share Golden’s optimism for stored energy’s potential to benefit the environment by cutting carbon dioxide emissions from traditional power plants. “The grid is designed to support peak loads, so the ability to shave off those peaks using stored energy could have a positive impact on the environment,” says David Howell, DOE’s program manager for hybrid and electric vehicles.

Credit: Tesla
Tesla plans to make a half-million lithium-ion battery packs each year at a new factory in Nevada, shown in this rendering.
A rendering of a building covered in solar panels.
Credit: Tesla
Tesla plans to make a half-million lithium-ion battery packs each year at a new factory in Nevada, shown in this rendering.

Industry watchers point to solar installations at Walmart as evidence that distributed energy storage is building steam. SolarCity reports that it has installed 190 Tesla batteries paired with solar panels on Walmart stores, mostly in the Southwest, allowing the big-box chain to shave 20–30% off its power bills.

Industry observers say energy storage is a harbinger of change but stop short of predictions suggesting that Tesla’s Musk will restructure the electrical grid. In time, they say, storage could make a difference in how electric power is managed.

“I wouldn’t say it’s disruptive, but it could make a meaningful difference,” says Matt Roberts of the Energy Storage Association, an industry group. “It may not drive that many folks off the grid, but it could advance the development of distributed energy that enhances resilience and backup reliability.” But DOE Secretary Ernest Moniz goes even further, telling C&EN that “a 10-kW distributed home unit could be transformational.”

Technical breakthroughs in battery storage could accelerate the trend toward distributed power (see page 21). For his recent book “The Powerhouse: Inside the Invention of a Battery to Save the World,” Steve LeVine, of the political engagement think tank New America Foundation, was embedded in the DOE Argonne National Laboratory’s battery department. Argonne collaborates with private-sector and university partners to explore new technologies.

LeVine chronicles the race with Japan and China to advance battery storage technology and how it could lay the groundwork for major growth in U.S. manufacturing. Breakthroughs in battery storage capacity—paired with commercialization and manufacturing acumen—would allow winning countries to reap billions in revenue, high-tech jobs, and trade, according to LeVine.

The international implications of pairing solar with new battery storage capacity also extend to middle-income countries like Brazil, India, and China, where significant numbers of people lack access to consistent, modern energy supplies. Bridget Deveney of SAFT Batteries says her firm works “in India providing energy storage to the telecom sector and in remote island areas” in other countries.

As the campaign to trim solar buyback rates winds its way through state comissions and legislatures and Tesla’s stationary house battery becomes available this fall, movements toward distributed energy will be closely watched. The California storage mandate and other government policies could help manage peak loads by introducing power “inventory” into the balance between electric supply and demand.

An evolution toward distributed energy that coincides with new breakthroughs in battery storage technology could boost domestic manufacturing, cut carbon dioxide emissions, and improve access to resilient sources of energy here and abroad—addressing what many policy-makers have set as key priorities.  


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