Residential batteries surpassed other segments of the US battery energy storage market in first-quarter installations, said energy consultant firm Wood MacKenzie (WoodMac).
According to the latest edition of Energy Storage Monitor released by WoodMac and the US Energy Storage Association, installations of residential batteries in the US for the first quarter of 2020 (1Q20) grew 10% from 4Q19 to a total of 44MW/102MWh. The figure marks another record high for the fourth consecutive quarter.
This development is remarkable because a residential battery storage system tends to complement a residential solar system (e.g., a rooftop solar panel), and the first quarter is the traditional off-season for the installation of the latter. However, 2020 began rather atypically for the US battery energy storage market. Last fall, PG&E and other utilities operating in California carried out preemptive grid shutdowns when a series of wildfires ravaged the state. Their actions were especially disastrous for the people living in the Bay Area, and Californians came to the realization that they cannot depend on the grid during the heatwave months and have to look for ways to achieve energy self-sufficiency.
Following those wildfires and grid shutdowns, the government of California has provided additional incentives for solar and battery installations. In fact, the cost of residential battery storage systems is almost completely defrayed for households that are designated as being very vulnerable to grid shutdowns. The pairing of photovoltaic generation and battery storage has been proven to be able to provide clean backup power for critical loads. This solution therefore can meet the electricity need of a whole house of any size if customers are willing to pay for sufficient storage capacity.
Brett Simon, senior analyst at WoodMac, said that the strong demand growth for residential batteries is not only limited to California. Reports from battery installers nationwide indicate a general increase in the share of solar customers adding batteries (also known as the attachment rate) across the country over the past year. Simon also said that even though the recent COVID-19 outbreak has impacted the residential battery market, the attachment rate has flattened out rather than declining.
Installations of residential battery storage systems significantly surpassed installations of front-of-the-meter battery storage systems in 1Q20, but whether the growth streak can continue in 2Q20 is uncertain due to the enforcement of measures for suppressing COVID-19 (e.g., shelter-in-place orders). Installers have had to adjust their sales strategies and postpone projects in accordance with local rules.
Progress has slowed for the development of utility-scale battery storage projects
Recent weeks have brought many announcements of utility-scale energy storage contracts. Southern California Edison has procured 770MW of energy storage capacity that will be distributed among seven battery storage plants. PG&E, too, has signed deals to add 420MW to its energy storage portfolio. Outside California, Hawaiian Electric has contracted 460MW of photovoltaic generation and 3GWh of energy storage. These examples actually took place last month.
However, there was not much progress in installations of front-of-the-meter battery storage systems during 1Q20. A 10MW/10MWh project in Texas was the main growth contributor for the period. The remaining additional capacity came from several smaller projects in other states.
WoodMac analysts believe that installations of front-of-the-meter battery storage systems will increase more rapidly later this year. After all, the first quarter is the traditional off-season for this market segment. Moreover, the measures for fighting COVID-19 have not tangibly affected the construction of the major battery plants such as the 400MWh AES Alamitos in California. This is because state governments have exempted critical energy infrastructure from the lockdown rules.
In contrast to the residential segment, the commercial and industrial segments are in a much more challenging situation. The COVID-19 outbreak has resulted in closures of many businesses. Since venues and facilities have fallen into disuse, enterprises have little need of battery storage systems for demand-charge management.
On the other hand, battery installations related to community solar and storage projects that the report regards as outside the residential segment have increased. The growth is especially apparent in Massachusetts and New York. Just a few projects made up the majority of their first-quarter installations. The two states also follow closely behind California as the leading states for this type of project. Looking ahead, the report cautions that the COVID-19 outbreak and delays in project development schedules due to local policies could weaken the markets of these three states.
Installation forecast has been corrected down due to the impact of the COVID-19 outbreak
WoodMac analysts currently forecast that the newly installed battery storage capacity in the US will double over year for 2020 and nearly triple over year for 2021, but they also recognize that the COVID-19 outbreak will result in delays for some major energy storage projects.
The latest edition of Energy Storage Monitor lowers the projection of the five-year cumulative installed capacity for battery storage systems in the US by 6% compared with the projection made last quarter. This revision translates into a decrease of around 500MWh (or 12.4%) for the 2020 forecast.
Simon said that the recent demand drop caused by the outbreak mostly affects behind-the-meter battery storage systems because sales of these products are traditionally made through face-to-face interactions with customers. The forecasts of the residential and non-residential portions of the US battery energy storage market have been lowered by 44% and 39% respectively. The sudden market downturn will be a “pain point” for manufacturers of battery storage systems, noted Simon.
Going forward, the actual magnitude of the decline in installations of battery storage systems in the US will depend on many factors. Obviously, the course of the COVID-19 outbreak has a major influence. Installation schedules will be affected by how long the local measures for suppressing the disease will be in place and the “comfort level” of individual customers (i.e., households and enterprises). The duration and severity of the wider economic recession that is triggered by the outbreak will sway future developments in the battery energy storage market as well.
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