US to quadruple installed base of residential storage
By Camron Barati, senior analyst, solar and energy storage, IHS Markit
Less than 200 megawatts (MW) of residential battery energy storage was installed in the United States prior to 2018. The installed base of residential energy storage is forecast to quadruple by 2022, as more than 850 megawatts (MW) is deployed in the market.
Residential energy storage is already economically attractive in some markets when paired with solar photovoltaics (PV).
The market has historically grown due to demand for off-grid and backup systems, but grid-connected systems that can intelligently interact with the grid will become a primary driver of growth in the future.
Residential energy storage growth in the United States will be led by intelligent grid-connected systems
Historically driven by off-grid and back-up applications, intelligent grid-connected systems that can optimize rate structures, improve self-consumption of PV and participate in grid services will become the preferred system type in the United States in the future.
California and Hawaii are forecast to be the largest state markets during the period, but Massachusetts, New York and Arizona will also experience strong growth. The following market drivers will accelerate growth:
- Modification or elimination of retail net metering
- Introduction of new rate structures such as time-of-us
- Supportive energy storage policies and incentives
- High cost of electricity
- Demand for resiliency and reliability in vulnerable markets
Lithium-ion (Li-ion) is the dominant battery storage technology in the United States. Li-ion is currently the technology to beat in the residential sector, but stakeholders are looking to create competition among various Li-ion technologies, and lead acid vendors continue to innovate their products, to improve their viability for both backup and grid-connected applications.
Economic viability improves, but net metering is a key barrier
Residential energy storage is already economically attractive in some markets, when paired with solar PV. The long-term value of solar and energy storage over a 10- to 20-year period can compare favourably to retail electricity costs over the same period.
The most economically attractive market for residential energy storage in the United States is Hawaii, due to the state's limits on exporting PV generation to the grid, and expensive rates for electricity. Existing time-of-use rates also provide attractive opportunities for customers to offset retail energy purchases, by combining solar PV with battery energy storage.
Where retail net metering for solar PV is available, in most cases energy storage will not provide an economic benefit. Other factors influencing the economic value of battery storage include prevailing prices for electricity, the structure of electricity rates (i.e., tiered versus time-of-use), and energy storage incentive programs.
In the absence of net metering, the continued introduction time-of-use rates in new markets, rising retail electricity prices and new incentives will improve the economic value of residential energy storage throughout the United States.
