Part II of an interview with Peter Kelly-Detwiler of NorthBridge Energy Partners : Opportunities in residential energy storage

Written By: Stratton Report
October 5, 2016

(See Part I of our coverage here.)

In August and September, there was a steady drumbeat of announcements about new residential energy storage products from companies including BYD Company Ltd. Axion Power, HOUZE Advanced Building Science, Sentinel Solar and SimpliPhi Power. In trying to understand where this market is going, we spoke to consultant Peter Kelly-Detwiler of NorthBridge Energy Partners, a recognized expert on distributed energy resources who moderated the plenary session at the Energy Storage Americas conference in Charlotte last spring with representatives from GE, RES Americas, and Alevo.

SR: How do you see residential (and small commercial) energy storage markets evolving?

PKD: Energy storage companies targeting residential storage are finding their first footholds in places like Germany, Australia and Hawaii where you have a significant energy price arbitrage opportunity between the cost to a homeowner with solar power who is buying utility power, and the price he or she will get paid for putting excess solar power back into the grid. In a place like Hawaii, you’re avoiding a cost of roughly 30 cents per kWh for utility power if you’re using your rooftop solar to power your house. But if you sell the solar you generated on the roof back to the utility, you’re only receiving something like 15 to 20 cents a kilowatt hour, depending on which utility’s service territory you’re in. So if you put storage on a site every kilowatt-hour, your save will be worth somewhere between ten and 15 cents a kilowatt hour. That starts to make the cost of residential solar look pretty reasonable. In Australia there are a million households with rooftop solar there and they have similar tariff issues. Locations with large gaps between the cost of power sold by the utility and the price of power bought by the utility will be early adopters of residential energy storage.

SR: Do you think we’ll see a trend away from retail net metering in the U.S. that will eventually push homeowners in many states into that situation?

PKD: As we see more utilities push back on net metering, taking the surplus solar and paying relatively little for it, you’re going to see more and more opportunities for energy storage. Solar companies will also be forced in that situation to add storage to their installations in order to make rooftop solar a cost effective solution for the customer.

SR: So you see rooftop solar companies as a strong marketing channel for residential energy storage?

PKD: In the very near future residential energy storage is going to be installed in tandem with solar most of the time. SolarCity has announced that they are going to be looking at solar with storage as their default option. And that’s certainly what’s going to happen in places like Hawaii where they simply can’t take in much more power onto the grid right now. And, of course, pairing solar with energy storage would permit solar rooftop companies to aggregate a lot of residential energy storage and form virtual power plants, as we see happening with SunPower in this project they’re doing with SunVerge for ConEdison Solutions.

SR: Will homebuilders be “early adopters” of residential energy storage? Will they see it as an obvious fit with installing solar panels to make net-zero homes?

PKD: Homebuilders trying to differentiate themselves in the housing market by “green” strategies are going to install not only solar on the roof but energy storage as well. There are huge advantages financially to installing solar and energy storage right when you build the home–not only is the installation a lot easier and cheaper, but the homeowner can then finance the solar panels and a battery at three and a half to four percent as part of their mortgage. I mean, the rate a homeowner can get on his mortgage will be half of what he would pay for a third party financing for solar right now. So I would not be surprised at all to see much more of an effort to build net zero homes coming out from these major housing companies because it makes all kinds of sense.

SR: When do you see penetration rates for residential energy storage starting to take off?

PKD: I think within five years you’re going to see energy storage take off the same way we saw solar emerge rather rapidly. As soon as third party financing gets comfortable with it–and it will–then I think you’re going to see storage booming in a very similar fashion. Eventually you’ll see a lot of players– Sharp, SolarCity, Tesla, LG Chem – all these different players will have something that you can pick up at Home Depot or buy in tandem with a solar installation. I think large companies will have an advantage here, and may buy up residential energy storage start-ups. Customer concern over things like warranties will come into play. You know, customers want to know they have a financially strong player to go after if their residential energy storage equipment doesn’t work.

SR: As the price of energy storage falls, and more households are exposed to time-of-use rates, do you expect to see people trying to do time-of-day arbitrage on electricity prices?

PKD: That depends on how big the variation in power prices are during the day. I would say that I doubt we’ll see time-of-day price arbitrage very soon, as the volatility in energy prices over a 24-hour cycle has actually fallen. In the old days utilities ran cheap coal plants for baseload at night and ran expensive natural gas peakers during peak load situations, but with natural gas so cheap right now in most markets natural gas is not only the fuel on the margin but it’s actually also used for base load generation. So we don’t see the same kind of volatility we saw pre-Marcellus Shale, with huge gaps between high daytime prices and very low nighttime prices. Now it generally tends to be flatter around the clock.

SR: So you see a bright future for residential energy storage?

PKD: I’d say, in summary, that energy storage costs are falling, customers are becoming more aware, regulators are starting to figure out that energy storage really does help us both strengthen the grid for resiliency and reliability purposes and permit the integration of a lot more renewables into the system so we can decarbonize our power supply.