2018 Stationary Storage Outlook: Home Battery Storage Systems Fully Charged
-Market fundamentals for advanced lithium based residential energy storage systems remain strong.
-North American and Caribbean figures are pegged at 12,000 to 15,000 systems in CY2018.
-Steep increases in global manufacturing capacity of automotive grade batteries is driving down pricing for stationary energy storage systems.
-Market drivers for new demand in the business; Review of the impact on the lithium supply chain in 2018-19.
In the past year, automakers have moved to grab headlines surrounding the release of new energy vehicles, which has diminished the news coming out of the stationary energy storage market. Despite the lack of blockbuster headlines in 2017, the industry continued to grow. There have been some strong industry announcements, especially from Tesla (NASDAQ:TSLA), on the utility side of the business, including a 4MWh system at the University of Massachusetts, 12MWh at Cal State University, 4MWh at Marin College, and the 100MWh Battery Park in Australia. In the residential market, Germany continues to lead the global industry while the Italian market gained significant traction in the past two years. Both of these key markets are being driven by reductions in value of exported electricity for individuals who produce more power from a renewable energy source than they consume. Advanced residential energy storage assets allow homeowners to store excess energy that can then be used at a later point. This energy model, called “self-consumption,” is the current driving demand in the European residential market. An upcoming trend in Germany is presented by the expiration of the initial feed-in tariff contracts, which were executed around 20 years ago. The initial batch of FIT contracts will expire in the next few years, providing no guarantees for homeowners that they can export excess electricity into the power grid or that they will be compensated for the exported power. The installation of home battery storage systems would quickly and cost-effectively assist in overcoming these challenges. Further, electricity from the solar PV array that is held in advanced energy storage systems can be used to power new energy vehicles, especially for homeowners who are able to store power during the day and discharge in the evening. The general outlook for both the Italian and German markets continues to remain positive as the cost for renewable energy technologies and batteries decreases on the backdrop of increasing retail electricity rates.
Looking into 2018, there are a number of growth drivers in place that will assist in building demand for home storage systems in the North American and Caribbean markets. In California, the Self Generation Incentive Program has gradually been building momentum and will likely contribute to meaningful demand in 2018. Hawaii has once again closed the grid supply option for new residential solar PV systems; this means that all new solar PV systems must demonstrate the ability to contain and consume all of the electricity generated on site rather than export excess capacity into the electrical grid. Utilities such as Green Mountain Power in Vermont and Southern California Edison continue to be leaders in creating market mechanisms that lead to large scale deployments of distributed energy storage assets. Their activities in the space have added pressure on other utilities to pilot such technologies to determine how it can be integrated into electrical networks. Along the Atlantic coast, there is significant momentum building amongst homeowners who are looking to utilize energy storage systems in conjunction with solar PV arrays to act as a perpetual clean backup power source. This overall trend has heightened since the hurricanes ripped across the Caribbean region in Q4 2017. Further, the solar installer community is now fully trained on selling, installing, and servicing energy storage systems. Other emerging opportunities include the implementation of residential energy storage technologies during the construction stage of new homes. Homebuilders across the continent have begun to announce the integration of these technologies into large communities to assist in meeting new energy efficient building codes.
It is in my personal opinion that 2018 will mark the turning point for the North American home battery storage industry as various demand factors begin to take flight, leading to a significantly higher number of installed capacity across North America and the Caribbean region. The home battery storage industry is at a tipping point as technology matures and the price for batteries and power electronics continues to decline, while policies and consumer behavior support the widespread adoption of these new technologies. Based on information presented herein, I expect the North American market to see a total of up to 12,000 to 15,000 new residential installations occur in CY 2018, representing an increase from around 5,000 systems in CY 2017. The spread between the 2018 demand figures is caused by the lack of bankable, cost-effective solutions available in the North American market. If new supply options enter the market in the second half of the year, then the demand figures could easily hit the higher end of the forecasted figures.