Energy Storage: A Potential Disruptive Force in Residential Solar

By Anonymous

Early in the semester the class discussed the rapidly growing residential solar industry in relation to the case Verengo Solar Plus! The case noted that the U.S. had a total of 1,370 MW of installed residential solar capacity in 2010, representing an increase of 615 MW since 2009. This growth has been driven by declining prices for solar panels, government incentives, and regulations supporting net metering. Net metering has encouraged solar panel installation by allowing consumers that generate electricity to receive compensation for excess capacity they export back to the grid. This additional compensation, often at the average retail utility energy rate, has helped created the favorable economics of solar panel installation.

Despite the recent growth of residential solar, potential regulatory changes have the potential to disrupt the delicate economic balance. The federal solar investment tax credit, which provided a 30% tax credit for solar systems on residential and commercial properties, is set to expire at the end of 2016.1 Additionally, the utility industry is beginning to push for reduced net metering rates. For example, the Wisconsin Public Service Commission voted on November 14th, 2014 to reduce the price credited for excess generation exported back to the grid from the current 14 c/kWh (cents per kilowatt hour) to 3 c/kWh.2

Based on potential changes on the horizon, it may be worth asking if residential solar can remain viable in a world with reduced government incentives and net metering rates. While further reductions in the price of solar panels will undoubtedly aid the economics, the current residential solar model may need additional innovations to survive. One such innovation may be the pairing of energy storage with residential solar systems. This combination has the potential to negate the impact of changes in net metering rates by allowing homes to save excess capacity (instead of selling it back to the grid) and utilize that stored electricity during periods of diminished sunlight.

While adding energy storage to solar systems will be sure to increase costs, there is reason to be hopeful that the increase may be manageable. James Martin II, in an article for CleanTechnica, estimates that a 7 KW solar power system in Hartford, CT would have a payback period under 7 years based on the current rate of 17 c/kWh of power exported to the grid.3 In a scenario with rates for power exported to the grid of 6 c/kWh and added costs for 3 kWhs of energy storage, a payback period of around 10 years could still be achieved. Additionally, there is reason to believe that the payback period for solar coupled with energy storage could be radically reduced by planned efforts to increase the production of lithium-ion batteries.

Tesla has already confirmed plans to build a $5 billion Giga factory in Nevada capable of producing 50 gigawatt-hours of lithium-ion batteries. While the majority of this capacity will be used in electric vehicles, Tesla also plans to devote 15 gigawatt-hours of capacity per year to stationary energy storage.4 Additionally, Tesla has already partnered with SolarCity to begin pairing their batteries with residential solar systems.

As the manufacturing of solar panels and energy storage continues to scale and prices decline, the combined technology has the potential to achieve a level of operational and cost effectiveness capable of challenging the current system of electrical generation and delivery. How politicians, regulators, customers, and utilities respond to this changing dynamic will ultimately determine the outcome.

1 http://www.seia.org/policy/finance-tax/solar-investment-tax-credit

2 http://www.greentechmedia.com/articles/read/wisconsin-regulators-vote-to-raise-fixed-charges-and-add-solar-fees

3 http://cleantechnica.com/2013/10/09/point-will-small-scale-solar-energy-storage-become-viable/

4 http://www.greentechmedia.com/articles/read/The-Local-and-Global-Impact-of-Teslas-Giga-Factory

Advertisements

About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

No comments yet... Be the first to leave a reply!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: