COVID-19 Impact on Solar Battery Market in the USA 0

How COVID-19 Is Spurring Increased Adoption Of Energy Storage

Back in 2019 the extended and widespread outages that occurred in Northern California was nationally televised. To protect the region against the potential damage of wildfires breaking out all across Northern California, PG&E had to shut down power to most of the Bay Area. Leaving people in the dark for 7 – 10 days with around 24 hours notice. 

This became one of the most popular topics to discuss within the sustainability community and renewables industry. Especially with California being among the most – if not the most – progressive states in the US when it comes to grid modernization and renewables adoption. The core focus was around how utilities like PG&E could deliver resilience and clean energy across the board – using the Power Safety Shut Offs that occurred as a motivator to do so. 

Whenever resilience comes into question energy storage systems (ESS) always comes into the picture.

As of today utilizing a cheap Costco gas powered generator could get those who need power through the countless days that they lose power. Utilities like PG&E are actually deploying community scale diesel generators to help keep the lights on when the wildfire season rolls around in 2020. 

However, this doesn’t fit into the sustainability and clean energy transition that the state of California or the US is looking for. Natural gas is even being banned or phased out entirely in certain states. Which drives us to Battery Storage. 

Towards the backend of 2019 we started to see a huge jump in demand for Batteries at every level, especially residential. 

car battery solar

Pairing batteries with solar just made sense. 

However, COVID-19 in Q12020 seemed like it was about to kill the potential explosive growth the space was going to see. That is far from the truth and in this post I intend to share how the timing for Energy Storage is right on the money and how Covid-19 has actually enabled for battery storage to truly break into the mass market.

Policy Is Heavily Subsidizing Energy Storage Investments

At this point every major automaker either has an Electric Vehicle or is releasing an Electric Vehicle offering to the market in the coming years. Because of the Electric Vehicle trend growing stronger every day, we have seen a rapid increase in understanding and growing comfortable with battery energy storage. In general the consumers have started to learn the best solutions to help address the global climate crisis.

Solar, Electric Vehicles & Batteries being the most prevalent. 

Your average consumer at this point is very aware of the benefit of going solar & pairing it with energy storage to keep the lights on during blackouts. However, the demand for battery energy storage solutions has still been something accessible by upper middle class families and larger businesses plagued by demand charges. 

When the justification for a battery energy storage system is backup power – a natural gas standby generator or portable gas/diesel generator is a far more economical alternative. 

So states have either phased out new developments for natural gas or have plans to phase it out completely. As for operating backup generators, exploring ways to drive the cost of operation up through some form of assumed “carbon tax” has been in the conversation for years. 

Policy is working on both fronts – attempting to create an artificial price floor for polluting equipment and at the same time driving the cost of battery energy storage down by subsidizing and opening new market opportunities for operators. 

In California, Sunrun, Tesla & Autogrid are working together on aggregating Sunrun’s distributed deployments of solar & storage to create Virtual Power Plants to provide added grid flexibility to PG&E to help with resilience driven efforts. In other locales small distributed systems under FERC 841 participate in the wholesale markets by aggregating these distributed energy resources.  

With all of these changes creating brand new economic models for energy storage as opposed to a simple “avoided Time of Use” calculation, paired with heavy federal + local incentives and the utilities getting involved in paying for flexible loads…Battery Energy Storage has just gotten to the point where people realize it IS the best option for backup power. 

COVID-19 Has Enabled A Large WFH Trend That Will Stick

But then Covid-19 happened…and the world got 2020’d (yes, that is now a verb).

For the majority of Q1 & the early part of Q2 2020 the solar markets were frozen to a standstill in the US. With quarantine and no understanding of the chaos caused from the rapid spread of Covid-19 all projections for growth in the renewables & especially the energy storage niche was thrown out the window. With unemployment rising, people now having to adjust to work from home and an election on the horizon the goal for most became “survive 2020 until a vaccine comes out”. 

The amazing thing about this chaos is that solar eventually got characterized as an essential business allowing solar salesmen to start hitting the phones to get more batteries and panels in people’s and businesses hands. 

This is where the idea of pushing out pre-existing projections for Battery Energy Storage adoption started to fall apart. 

The challenges of growing during Covid-19 & a Recession: 

  • GDP has been wiped by ~30% 
  • People are spending far less and conserving more money 
  • Tens of millions are unemployed
  • “Contactless” works to get some sales in the door, but overall makes people only buy essentials. So physical on-site labor is for the most part being pushed out. 

What most reports didn’t see:

  • The primary buyers persona for energy storage are upper middle class families (who weren’t as impacted by covid-19) 
  • Most of that demographic are working from home in turn driving utility bills up significantly

The Work From Home Movement Has Supercharged Energy Storage Economics

Just hop on to LinkedIn and scroll for 10 minutes – it is highly likely you will run into some Work from Home (WFH) announcement, guide or celebration. Companies across the country have adapted to remote culture and are seeing very little pushback, productivity losses or issues in general operating without having everyone in a centralized location. 

Even some of the major tech companies are offering employees to continue to Work From Home through the next year – in some cases making certain roles entirely remote or “office optional”. 

So for the demographic above – that has had sustainability & clean energy messaging blasted at them for some time now – it has become the perfect time to consider the investment into a solar + storage system. 

  1. Work From Home means less driving and commuting required – making it significantly cheaper to own an Electric Vehicle
  2. Owning an Electric Vehicle means charging at home – which drives up the utility bills
  3. Even without an EV, utility bills go up due to staying at home significantly longer
  4. Any form of downtime during the day now costs them the ability to work…making it critical to have resilient power – especially in places like Northern California where wildfire risk exist

These internal motivators change the conversation around solar + storage systems from “I am helping the environment” to “I need a resilient and affordable power source”. 

It has been this mindset shift that has spurred growth in the back half of the year for energy storage. A solar + storage system paired with incentives has become the best buy for people of the upper middle class that are working from home for the foreseeable future. 

Awareness + Policy + Improved Economics = ESS Boom Due To COVID-19

Let’s take a look at the market landscape and dynamics today. With this information I will be able to illustrate how the WFH trend as a result from Covid-19 is triggering a wave of adoption that is likely to be sustained by aggressive growth across the board for years to come. 

Progress in Utility Scale ESS

  1. Tesla & PG&E just broke ground on a 730 MWh battery system in California:
    This move shows how utilities are evaluating energy storage into their near term and long term strategy. As part of resilience efforts the investment into this jointly operated and utility owned system is among the many large scale energy storage projects going on across the US. San Diego is actively the leader in big batteries. I figure more RFPs will come out across the US allowing for more battery cell demand – in turn driving cost down.
  2. NY State Solicitation For 4,000 MW of renewable energy:
    Now this doesn’t directly include energy storage, but, without it managing that much energy being injected into the grid based on the weather outside will be unsustainable or impossible without including energy storage as a buffer within the system. Community solar in NY and the various incentives put in place drive even further demand for energy storage as more and more people register for the various programs offered in NY.
  3. Utilization of EV as portable grid energy storage:
    This report from RMI shows how utilities are beginning to implement energy storage from EVs which typically carry over 50 kWh of energy capacity. This uptick in owning energy storage actually provides the ability to implement energy storage at the grid scale. With utilities aiming to use this capacity it further reduces the cost of EVs and drives demand up. Allowing for economies of scale to be hit. 

Progress in ESS Incentives & Policy

  1. Federal ITC considering to be reinstated:
    As of right now Mitch McConnell has removed the federal ITC from the proposed $2 trillion dollar stimulus proposal to help keep the economy and society in the US afloat. This paired with the so far failed green new deal from AOC’s team shows that the conversation in politics has become significantly focused around renewables. With states passing legislation to demand more renewables and energy storage.
  2. Opportunity Zones & Low Income Housing:
    If you hang around the renewable’s space you have heard of opportunity zones and how the additional tax breaks for private investors is spurring economic growth in low income neighborhoods. Bringing solar and energy equity into these regions through opportunity zone financing and solar/renewable incentives makes investors drool at the thought of the tax shelter they can build when building in these areas. Opportunity zones are helping further accelerate the progress in ESS adoption rates.

Progress in Residential/Consumer ESS

  1. Additional utility incentives:
    Incentive structures like SGIP are providing major subsidies for properties located in wildfire risk zones in PG&E territory to get as much as their entire battery cost subsidized! Those wildfires really almost forced PG&E to be bought by a city to save it from bankruptcy…I think SGIP is a good start to incentivizing forward moving progress.
  2. Secondary monetization strategies for ESS:
    Specifically referring to FERC 841 that allows the aggregation of small scale independent generators to participate in the wholesale markets. Things of this nature actually help create the opportunity to introduce the private investors into owning and financing energy storage systems for homeowners. Aggregating these assets in states across the US could become the next big opportunity for solar finance companies.

As you can see the dynamics of the market moving towards WFH as a result of COVID-19 has pushed a huge demand in energy systems that include battery storage. The economics of investing into new infrastructure has finally clicked due to policy at a federal and state level providing the opportunity for banks & private investors to finance ESS in various ways that make them a huge asset on their books.

A lot of reports tend to show that we are headed towards a cost point that will “eventually” drive high demand for ESS 5 – 10 years down the line. With Covid-19 being considered something that we will need to learn to live with for a while until a vaccine is developed – demand will only continue to increase which will drive the cost down even faster as we quickly approach the point of diminishing returns when it comes to economies of scale. 

CONCLUSION

COVID-19 has caused a huge spike in demand for energy storage in the US and will likely continue on the trend as WFH is something many companies are now building into their entire organization. 

WFH has triggered energy patterns that make it difficult to sustain at a utility level.

Due to this and consumer buying patterns headed aggressively towards EVs and continuing WFH post COVID-19 utilities need to build resilience into their roadmap. The timing of COVID-19 has rapidly accelerated both policy, education and economics of energy storage across the board. 

As a whole market there is now the opportunity for private investors and banks to finance energy storage as a standalone offering due to the various markets “dispatchable energy” can be monetized in. 

Swarnav S Pujari – Swarnav is the CEO of TouchLight, an energy company that has developed load management software for residential and small commercial nanogrids that makes solar & storage more affordable by accelerating payback periods by 1 – 3 years. He also is a writer for the sustainability-tech focused newsletter – The Impact – that breaks down companies, news and policy to help people increase their climate positive impact. 

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