Rooftop Storage Costs

Coping with challenges in the US residential rooftop segment

The deployment of solar photovoltaic (PV) and wind technologies has grown rapidly in recent years in the US. With this, the various stakeholders have become increasingly interested in enhancing the value of these variable-generation resources by deploying energy storage systems. For example, California, Massachusetts, Oregon, Washington and New York City have set energy storage procurement targets or have supported the deployment of storage.

The deployment of storage systems has been far greater in the commercial, industrial and utility-scale sectors as compared to the residential sector. Of the total 226 MW of energy storage deployed in 2015, less than 35 MW was behind the meter (BTM) and only about 4 MW was residential. However, analysts believe this ratio will change, estimating that 49 per cent of the total annual storage installations by 2021 will be BTM, including 463 MW in the residential sector. Further, the percentage of residential PV systems coupled with storage is projected to grow from 0.11 per cent in 2014 to 3 per cent in 2018.

The cost of lithium-ion batteries, which are common in grid-tied residential storage systems, fell by 23 per cent on average per year from 2010 to 2015. While continued cost reductions contribute to the projections of higher storage deployment in the future, the costs of residential storage systems remain high considering the value proposition of these systems, due to various regulatory and market barriers that impede deployment.

The National Renewable Energy Laboratory recently released a paper, “Installed Cost Benchmarks and Deployment Barriers for Residential Solar Photovoltaics with Energy Storage”, which looks  at the cost economics and barriers pertaining to the residential rooftop segment. The following are the key points made in the report…

Cost economics

Customer preferences for specific characteristics are based on several factors, including cost, load profile and planned use of the system for load shifting. Storing energy during one period for use during a later period forms an important aspect. A PV array, a battery and a battery-based inverter are the fundamental components of all PV-based storage systems. Additional component requirements are determined by whether the system is DC- or AC-coupled.

AC versus DC system

A DC-coupled system often requires a charge controller to step down the PV output voltage to a level that is safe for the battery, whereas an AC-coupled system requires a grid-tied inverter to feed PV output directly to the customer’s load or the grid. Therefore, AC-coupled systems typically achieve higher PV system efficiency than DC-coupled systems in applications where the customer will more frequently consume PV output directly at the time of generation. However, DC-coupled systems require a single power conversion to store energy, whereas AC-coupled systems require two power conversions. Thus, based on the current state of the technology, AC-coupled systems are generally more efficient in applications where PV energy is mostly used at the time of generation, and DC-coupled systems are more efficient in applications where PV energy is mostly stored and used at a later time.

Hardware cost comparison

Hardware costs constitute about half the total price of modelled small battery systems. The largest hardware cost for this system is of the battery-based inverter, followed by the PV array and the lithium-ion battery. For large battery systems, hardware costs constitute about 60 per cent of the total price, with the battery dominating the hardware cost contribution, followed by electrical balance of system (BoS) and then the battery-based inverter. Thus, these two components define the cost economics of the PV-plus-storage system.

Benchmarking results

System configuration is highly dependent on the unique characteristics of each residence and the intended use of the PV-plus-storage system. For the modelled small-battery system, it is assumed in the report that a 5.6 kW PV array and a 3 kW/6 kWh lithium-ion battery are being used. An analysis of DC- and AC-coupled configurations is done when the PV array and storage are installed simultaneously. An analysis of AC-coupled configurations is done when the battery is added later to an existing PV system. The assumption of the PV array size (5.6 kW) and battery size (3 kW/6 kWh) is based on common residential system sizes in the US.

According to market report, the DC-coupled system price of $27,703 is lower than the AC-coupled system price of $29,568 for a new simultaneous PV-plus-storage installation. The price premium for AC-coupled systems is mainly due to the higher hardware, labour, and sales and marketing costs associated with the additional grid-tied inverter and more complex system design and engineering requirements.

Cost barriers

Energy storage deployment has been impeded by value and cost barriers, the foremost being permission. Obtaining permission to install and operate an energy storage device can be a complicated, expensive and uncertain process in many jurisdictions. According to the report, permission, inspection and interconnection  costs add between $700 and $1,200 to the installed price of a stand-alone PV system, depending on the configuration. The permiting burden is due in part to the lack of cohesive industry-accepted codes, standards and best practices. Further, as with stand-alone PV systems, storage permitting requirements vary considerably across states.

Second, the complexity of PV plus storage systems has resulted in a variety of interconnection and net metering-related barriers. These, when compared to stand-alone PV processes, generally add to the cost of installing the system, reduce the value of the system, or both. For example, both California and New York have additional interconnection procedures for the storage component of a PV-plus-storage system, rather than allowing it simply to be added to a stand-alone PV interconnection.

Third, in the US deregulated electricity markets, generation, capacity and ancillary services are bought and sold in wholesale markets, whereas transmission and distribution services are generally rate based. Energy storage can technically provide several of these services, but current regulatory structures require prospective storage utilities to make a choice between selling generation services in wholesale markets or rate-basing energy storage investments to provide transmission services. This structure prevents prospective utilities from realising the full potential value of aggregated energy storage devices and passing this value on to residential customers.

Fourth, the federal government and states have some incentives applicable to PV-plus-storage, often on the commercial and utility scale. The design of some incentives, however, can present a barrier to obtaining the incentives, realising the full value of energy storage systems that receive the incentives, or both. For example, the US Internal Revenue Service determined in a Private Letter Ruling that storage devices used in PV-plus-storage applications are eligible for up to a 30 per cent tax credit under the federal solar investment tax credit (ITC). The amount of the ITC is prorated according to the system’s solar utilisation rate, which is the percentage of stored electricity derived from solar power over a given period. However, if solar utilisation falls below 75 per cent in the first year, the system owner is no longer eligible for ITC. This acts as a disincentive.

Finally, utility rates in general can be a challenge. Flat electricity rates reduce the potential value from load shifting provided by residential PV-plus-storage systems, notably when net energy metering (NEM) is available, because there is no incentive to shift excess PV generation from one time of day to another. A properly designed, mandatory residential time-of-use rates could improve the load-shifting value proposition for PV-plus-storage systems. The PV tariff design can also have direct implications for PV-plus-storage. For example, by eliminating NEM for new PV customers, Hawaii’s recently adopted “self-supply” programme discourages stand-alone PV while incentivising the use of storage to maximise PV self-consumption.

Conclusion

There are various factors such as installation costs that act as barriers to the deployment of PV-plus-storage systems in the residential segment. If cost reduction opportunities such as using DC-based rather than AC-based systems are identified and awareness created about the regulatory, policy and market scenario, there would be increased installation of storage-based solar plants in the residential segment.

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