Can the Storage Industry Avoid the Same Mistakes as the Solar Industry?
Battery storage is roughly where the PV industry was in the early 2000s: a tiny but exploding market, rapidly evolving economics, standards changing like quicksand, and investor funds pouring in.
The hockey-stick growth of the energy storage industry is likely to surpass thesolarindustry. All the pieces are in place for battery companies to proliferate.
But as with the solar industry, there will be spectacular train wrecks and quiet failures along the way.
How much have we learned from riding the solar coaster over the last 20 years? Here are eight mistakes from the solar industry that storage companies should avoid.
Mistake #1: Constraints on critical upstream components (Li or Co = Si?)
There was a worldwide shortage of semiconductor-grade silicon starting in 2004. Silicon manufacturers required take or pay contracts to deliver this critical raw material for solar wafers. Some companies purchased wisely, matching their actual requirements. Other companies over-bought or reneged on contracts. Litigation took years and bankrupted some module manufacturers.
Similar dramatic swings in lithium and cobalt supplies are occurring now. As happened with silicon, will we see panic buying, chaotic supply ramp ups and a pricing crash with lithium and cobalt? The dynamics of commodities markets make this mistake almost impossible to avoid.
Mistake # 2: Live by incentives and die by incentives
Incentives in the solar industry are generally designed as a short-term bridge until customer economics are favorable enough so that businesses are self-sustaining (although there are some permanent incentives for certain energy industries).
When these incentives disappear suddenly (such as limited RPS requirements or sunsetting net metering policies) companies that depend on these incentives experience a sudden drop in sales – sometimes fatally. Will the storage industry manage to reduce costs quickly enough to grow sustainably without incentives?
Mistake # 3: Releasing half-baked products
Some of the early PV inverters experienced very high failure rates, were noisy (audio and EMI), did not function efficiently, or were missing key features that doomed them in the market. Solar installers have a long memory. As a result, these manufacturers were unable to recover from the customer ill will that these problems created.
I’m aware of anecdotal reports of storage system inverters/control systems that have severe reliability problems, lack critical software, or are simply missing the key “reason to buy” that customers demand. Will early entrants in the battery storage/inverter market be able to sell “good enough” products to capture sufficient market share, without burning their customer partners and running out of money?
Mistake #4: Ignoring software
Software is nice to have with solar, but is a critical part of all energy storage systems. Once upon a time there was a company that made a great microinverter, but skimped on the control system and software that was required by customers. Without this software there was no complete customer solution. The company ran out of money before it was able to develop the necessary control system and software that customers demanded.
Similar problems are now being encountered by battery storage system manufacturers. Although it is possible to electrically connect the necessary hardware components and put them in a box, getting the phone app, software and embedded firmware to work properly together is complicated. Will storage companies dedicate enough resources to make sure their software works as well as their hardware?
Mistake #5: Assuming electric rates will always go up
To reduce payback times and improve perceived economics, many solar companies assumed that electric rates would increase steadily into the future. This assumption was based on fairly good historical data (sometimes cherry-picked over favorable time frames), and was projected for the lifetime of the equipment. Unfortunately, some of these escalation rates were optimistic, and did not account for changes in electric rates structures.
For example, changes in time-of-use periods reduced the benefits of daytime solar production (the peak in CA used to be 10 AM to 2 PM; now it is 3 PM to 9 PM). To make matters worse for customers, some financing programs added a payment escalator. As a result of changing electric rates and escalated payments, some customers are discovering they are spending more with solar than without.