Last year I wrote a blog about “Waves of Disruption” [Feb 22, 2014] sweeping through the energy sector.
It appears the next wave is ready to roll ashore: energy storage.
The past 18 months were dominated by policy battles designed to slow the tide toward a solar future in the name of "fairness to non-solar customers." The next 18 months will be dominated by efforts to crack the code on these new rules through innovative solutions to continue this market transformation.
Energy storage is part of that solution.
A host of upstart tech-savvy companies have spent the past 18 months figuring out how much value storage is worth now that a new playing field has been established. Demand charges and solar fees--that a month ago were obstacles--have accelerated the grouping of solar and energy storage that has the potential to provide additional cost savings to customers while lessening any perceived impact to non-solar customers.
Energy storage utilizes smart inverters to shave a home’s demand during peak-rate pricing time periods by using traditional energy stored during off-peak time at off-peak prices, supplemented by rooftop solar generation.
What was a single technology disruption a year ago will become several technology disruptions tomorrow. Whereas rooftop solar was the digital camera of the energy sector last year, energy storage is the Facebook or Instagram in this technological revolution this year.
In the wake of the explosive growth of rooftop solar since 2010, our utilities--many of whom were pioneers in the solar field themselves--have come to realize that their traditional centralized service/business model is now at significant risk. The utilities understand this better than most, and yet so far their best answer to deal with the economic challenge of rooftop solar has been to implement a peak demand charge--a tactic that has only driven this emerging industry to quickly move onto the next innovation to lower the overall energy cost for consumers.
The solar industry is now operating on Moore’s Law (doubling performance every two years), which means it is improving at a very fast rate that the regulatory process can’t match.
Stanford University Professor Tony Seba, a clean disruption expert, predicts we will see more changes in the next decade than we have seen in the last century, and that the companies and the countries leading this market transformation will lead the 21st century.
Generation, storage and intelligence
Battery technologies are improving at an incredible rate in terms of performance, speed, size and lowered cost. And just as we witnessed with third-party financing in the rooftop solar industry, financial innovation will help unlock the storage market potential as evidenced by companies beginning to offer storage as a service. Zero percent down and 10-year contracts that offer the customer a positive cash flow starting from day one. This business model has already proven to be an effective strategy in the commercial marketplace independent of solar, where companies are offering storage and management software to better manage consumption of energy to reduce high peak-demand charges.
Storage is poised to become a part of every solar installation from here on out. With storage you can essentially buy when energy prices are low (off-peak), store that cheaper energy, and then use it during the time of day when prices are high (on-peak).
Yesterday it was rooftop solar. Today it is energy storage. Tomorrow smart devices and artificial intelligence--the future is your own generation, your own storage, and your own energy management system right at home.
Happy Earth Day!
Jim Arwood
Communications Director
Arizona Solar Center
Question: How will distributed generation evolve in the next decade?
