Page 62 - North American Clean Energy July August 2015

energy storage

Challenges of Energy Storage

Developing Financing and Market Structures

by Richard Brody and Brendan Harney

he stationary energy storage market has attracted increased attention as prices decline and new use cases arise. Many
market observers have noted that stationary energy storage is “where solar was ten years ago” and project a similar growth

path. Industry participants are hoping for the same, or even better, trajectory. But the path for energy storage is not without

obstacles.

Financing
solar panel will perform over twenty years. here are a number of diferent panel types
he turning point for solar was the introduction of third-party ownership through the and chemical compositions but the relationship between how often the sun is shining and

commercial, and then residential, power purchase agreement (PPA). Previously used only the electricity produced as a result is fairly well understood. Stationary energy storage
in large power generation contracts, the commercial PPA allowed solar customers to spread does not yet have the same degree of certainty. In addition to established technologies
the cost of a PV system over a twenty-year term, buying only the electricity produced by such as Li-ion and lead-acid, there are many companies developing new batteries and
the solar panels at a given price. hird-parties, primarily inancial institutions, owned the other storage technologies, making it hard to standardize. In addition, temperature,

solar panels and received a portion of the customer payments and federal tax beneits in elevation, age, and use can all have an impact on how a single battery will perform. It
return. his arrangement reduced the upfront cost for the customer and opened up an can be diicult for inanciers to incorporate that variability for one technology let alone
enormous amount of demand for solar, particularly in states with market structures and multiple battery types.

incentives for solar production.
Energy storage does not yet have an analogous inancial structure. To inance energy Market structures
generation or savings, project inance providers need predictable cash lows upon which to Solar also enjoyed the beneit of utility structures that encouraged its development. State
model their expected returns. Stationary energy storage can provide a variety of beneits, renewable portfolio standards (RPS) compelled utilities to purchase or develop solar and

from utility bill management to grid services, but the use cases and value propositions can public utility commissions (PUCs) provided tarif pressure, through mechanisms like net
vary widely. In addition, the beneits that stationary energy storage can ofer do not always metering, that further encouraged the growth of distributed solar. While energy storage
accrue to the same user. For example, energy storage at a factory can reduce the energy
does have a mandate in California, where the PUC has called on utilities to procure 1.3
bill for the factory’s owner while also providing a service to the utility or grid operator. he gigawatts of energy storage by 2020, it is the only state to have mandated energy storage

savings, or cash lows, for the factory may be relatively straightforward but the services for the grid. here are innovative programs for customer-sited energy storage, such as
ofered to the grid, while certainly valuable, can be less predictable and harder to monetize. SGIP or NYSERDA, but these are only active in California and New York.
Providing a variety of beneits to diferent end users may not seem like an obstacle. But To take full advantage of the beneits that energy storage can provide, utility rate
third-party owners may view it as such—they generally like to be paid for the use of their structures and regulation will need to change. At present, there are few mechanisms that

asset.
allow a stationary energy storage system to monetize all of the beneits it can provide to
he other obstacle to inancing options for stationary energy storage is the variety of a system host and the utility. he lack of energy storage policies is understandable—most
technologies in development. In solar, one can predict with reasonable certainty how a
utility or customer assets either generate electricity or consume it. But energy storage

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