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Jonathan Matusky, Business Development Associate
24 Jun, 2012

The Price of Storing the Sun: Solar Incentives for Energy Storage

Energy storage is too expensive for use in grid-tied residential solar. At least, that’s the current thinking. Though installing distributed storage in each home would help mitigate solar’s intermittent power supply, preventing large local spikes and drops in power supplied to the grid, it’s a tough financial case to make with traditional energy storage. Unlike off-grid solar, where energy storage is necessary to guarantee constant power, grid-tied energy storage mitigates system level issues caused by high concentrations of distributed renewable generation. To incentivize consumers to adopt storage as a way to mitigate this issue, a mechanism must be put in place to pass some of the value created by distributed, grid-tied storage from the system operator to end users.

Greentech Media recently published an interesting article covering this topic. They broke down some of the avoided costs and subsidies associated with residential solar systems:

  1. SGIP: California’s Self-Generation Incentive Program (SGIP). SGIP offers $2 per watt for energy storage systems, which at a four hour discharge rate is equivalent to $500 per kWh.
  2. Federal Tax Credit: This 30% tax credit applies to solar systems, but the real question is whether this could include the battery system as well. This shaves off about a third of the system costs.
  3. Time of use benefits: In California, PG&E offers optional rate plans where users pay less if they reduce consumption during peak hours. Batteries can be combined with this plan to offer consumers substantial savings over time. According to the Greentech Media article, the benefits from this add up to about $500 per kWh over the lifetime of the batteries.

Theoretically, this would mean that a system could cost over $1400 per kWh, or $7000 for a 5 kWh system, and still provide a breakeven value proposition for consumers under the time of use pricing offered by the CA system. By installing the system, they would get the added benefit of having a backup power supply in the event of a blackout. It should be noted that these numbers assume the ITC benefits could apply to an energy storage system.

Residential energy storage has multiple value streams that benefit both the end users and the utilities. Incentives like SGIP are an attempt to capture these benefits, but storage must be cheap enough to stand on its own, or it must be supported by a system that charges those who receive the value. Energy storage must pay for itself or it will never be a long-lasting solution.