GTM Research finds that commercial energy storage will be economic in a growing number of states

Written By: Stratton Report
July 13, 2016

On July 13, GTM Research announced that based on its analysis of rate structures across 51 utilities, the economics of demand charge management for commercial energy storage customers are attractive today in seven U.S. states, and that number is expected to grow to 19 states by 2021.

According to GTM, U.S. commercial energy storage deployments grew fourteen-times between 2013 and 2015, making it the fastest-expanding segment of the U.S. energy storage market.

Adoption of demand charge management for commercial energy storage customers today is limited to a handful of states with local incentives and high retail electricity rates. However, as storage costs continue to decline, more markets will emerge as offering attractive economics.

Having modeled the internal rate of return for 1-hour and 2-hour storage systems for both the small/medium-sized and large commercial customer segments, GTM found that demand-charge rates of at least $15 per kilowatt per month are necessary to achieve favorable economics for energy storage today. By 2021, commercial storage economics will be favorable for certain utility tariffs with demand charges as low as $11 per kilowatt per month.

The firm notes that energy storage can provide multiple benefits but that most of the commercial storage deployed today is used to provide demand-charge-related bill savings.

Ravi Manghani, GTM Research’s director of energy storage observed:

“In this report, we wanted to provide an outlook for demand-charge-based economics of commercial storage, treating storage as a one-trick pony. In reality, policy and market structures are evolving to help storage owners capitalize on other value streams as well. Effectively, this analysis should be viewed as the floor for commercial storage potential. The results establishing attractive economics in over a third of the states by 2021 is a promising sign for the future of commercial storage in the U.S.”