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9 June 2017

US storage soars as utilities scale smart grid battery deployments

By Jack Vernon

The U.S. Energy Storage Monitor, in conjunction with the Energy Storage Association, has published a report that found the United States had its largest ever quarter for energy storage installations – deploying 234 MWh worth of storage across the first quarter of this year. This was a fiftyfold growth compared to the first quarter of 2016 and a significant step up in the scale of deployments in the US.

Not only is this a record Q1 for any year in the US for deployments, it also marks a dramatic shift in the nature of deployments. In 2016, some 336 MWh of storage were deployed, this was achieved with 221 MW of storage deployed – meaning that for every 1 MW deployed, 1.5 MWh was the average scale of capacity.

In Q1 2017 some 71 MW were deployed, consequently for every MW of storage deployed in Q1 2017, on average 3.3x as many MWh of capacity were added to support the MW. If you take the same quarter in 2016, the number of MWh achieved for one MW of deployed energy storage came to 1.15 times. This signals that the scale of the projects has increased significantly in terms of the amount of energy stored.

MW deployments differ from MWh deployments, in that MW deployments represent the amount of electricity the storage system can provide at any given second. MWh deployments, by contrast, are a unit of energy which measures the number of hours a storage system can deliver that MW rated power capacity. A 1MW 4 MWh system can deliver 1 MW of electricity for 4 hours.

According to the report’s publishers, Greentech Media, much of this growth in MWh relative to installed MW can be attributed to a shift from short-duration projects to medium and long duration projects in the utility scale market. The economies of scale that can be achieved in a single deployment, with a focus on capacity over discharge rate, are clearly drawing increased amounts of investment.

The early surge in deployments can also be attributed to incidents like the Aliso Canyon natural gas leak. The leak was discovered in 2015 by SoCalGas employees, who found that gas was escaping form one of the wells within the Aliso Canyon’s underground storage facility. It took until February 2016 for the leak to be plugged, and in that time an estimated 97,100 tons of methane were released into the atmosphere.

The leaks had threatened to cause power outages across Southern California. The majority of the gas from the field had been used to supply fuel for heating and cooking, but a portion of the gas was being used to provide hourly peak electric generation demands. To plug the deficit, the California Public Utilities Commission ordered some 100 MW of battery storage in 2016, much of which was completed in Q1 2017.

These strong Q1 figures come as somewhat of a surprise for those in the storage sector, as Q1 typically tends to be weak as developer rush to finish projects and hit targets in Q4 of the previous year. This is perhaps further heightened by the fact that 2016 was record-breaking for the US storage industry, seeing deployments of 142 MW. In the past, the Q1 slowdown has been considerably more dramatic.

One might then infer that 2017 could be a particularly strong year for storage deployments. Although the early growth has been strong industry GTM analyst Ravi Manghani, believes there aren’t too many 10+ MWh projects in the 2017 pipeline – indicating that the first quarter might be the largest this year. But, as the Aliso Canyon incident shows, battery-based electricity storage could be the best option for plugging a gap in peak electricity supply in demand – and nobody knows when a new leak will be discovered.

California and Hawaii continued to lead the way in energy storage deployments. Front of the meter-of-meter energy storage deployments accounted for 91% of all deployments in the quarter, while behind the meter storage declined 27% year-on-year. Behind the meter storage (storage in the home or building) has been negatively affected by a slowdown in California’s Self-Generation Incentive Program.

The report supports an earlier forecast from Navigant Research, which said that the utility-scale advanced battery market alone will grow from $231.9m in global revenue for 2016 to $3.6bn by 2025. The report itself forecasts that energy storage will grow to 2.6 GW of storage by 2022 – but given that annual total peak demand was 786 GW in 2013, a modernized grid ready for renewable electricity production is still some way off.