Power Breakfast Recap: Distributed Energy Storage – Where’s the Action?

On September 23, CTG in partnership with Silicon Valley Bank and Wilson Sonsini Goodrich & Rosati, co-hosted the latest in our Power Breakfast series, focusing on Distributed Energy Storage. For this event, our discussion was moderated by Randy Lewis, Partner at Wilson Sonsini Goodrich & Rosati, and we had the privilege of hearing from five industry veterans:

  • Michael Huerta, Program Manager, Energy Storage, Generate Capital
  • Audrey Lee, VP of Analytics & Design, Advanced Microgrid Solutions
  • Ken Munson, President & CEO, Sunverge
  • Andy Tang, SVP Business Development, Greensmith
  • Ryan Wartena, President, Geli

The morning discussion centered on how distributed energy storage has rolled out, success cases in utility-scale and transmission-tied storage installations, and opportunities for behind-the-meter systems as residential and distributed solar projects have been deployed. For those of you who weren’t able to join us, we have summarized some key takeaways below.

More opportunities for energy storage solutions

As more solar assets are brought online, especially at the distributed level, it is evident that there will be more applications and opportunities for energy storage solutions as a value-added product. For instance, the deployment of microgrids as connected assets would allow utilities to better manage the electricity grid, and thereby enabling new energy services and capturing additional revenue streams. In addition, energy storage solutions can be an alternative to traditional diesel generators at remote locations and localized settings. Regardless of the different opportunities ahead, the panel unanimously agreed that the economic case is the precursor to commercial adoption.

Motivations of the utilities

Utilities are no doubt closely monitoring and getting involved in the deployment of energy storage solutions and redrawing what is included in their assets. However, their roles vary depending on geography, which often dictates their objectives via regional policies and/or necessity. For example, for a densely populated urban area in Southern California, distributed energy storage is critical to meet the growing power demand, as there aren’t any available physical spaces for traditional power generation sources. Furthermore, as more devices become “connected,” creating more demand shifts, there is the need for more advanced distribution grid management systems through distributed energy storage.

State of financing

Start-ups and solar developers who place battery banks “behind-the-meter” at residential and commercial/industrial sites have recently had their model deemed “bankable” by major financial institutions like Starwood and Macquarie. The function of such bankability will depend on three main factors, including 1) safety, 2) performance, and 3) reliability.  On safety, factors such as temperature and charging management are critical to ensure continued safe operations, and any incident could set the industry backwards by a considerable amount. On performance, issues such as the lifecycle and degradation of the batteries are also key components of the underwriting requirement. Finally, on reliability, asset warranty is also critical to deem any project bankable. Batteries require proper control and management attention to address these factors.

Recent acquisitions and growth drivers

As the energy storage market begins to mature, we are also seeing several recent acquisitions – notably Engie’s purchase of GreenCharge Networks and TOTAL’s purchase of Saft. The panel commented that although these early success stories are significant, the industry is still at the beginning of the curve. In addition, ongoing industry development will involve not only the traditional players (i.e. utilities), but more importantly, nontraditional infrastructure players that are recognizing the applications of energy storage. For example, distributed energy storage would enable ‘smarter’ cities, benefiting applications such as smart traffic lights and the EV charging infrastructure. Growth opportunities also exist for private sector corporations and local governments  needing to meet aggressive renewable energy targets and goals.

In addition to meeting capacity needs from policy mandates, the industry should not rely solely on governmental mandates as its primary growth driver. Each panelist agreed that the industry should instead focus on pricing across the whole ecosystem. Finally, we also heard strong support for an energy storage federal Investment Tax Credit (ITC). Storage has been partially covered under the current ITC – under specific circumstances – when installed alongside solar or wind, but there is no ITC for stand-alone storage projects. A bill introduced in the US Congress in May has garnered bi-partisan support to award storage full stand-alone coverage under the program; however, it would not address full and consistent coverage of solar-plus-storage.

Distributed energy storage is certainly an exciting space to watch, and we expect more projects to be developed over the upcoming years. We will continue monitor this space through our subscription and our events portfolio.