Solar + Storage May Be Energy's Holy Grail, But Will Regulators Aid The Quest?

The energy industry is fast embracing the revolutionary potential of renewable energy combined with cheap battery storage, which together can obviate the need for new power plants.
"The combination of those two things—that is truly a killer app," said California Clean Energy Fund director Julie Blunden, who has experienced alternative and mainstream energy as a former executive for SunEdison, SunPower, Green Mountain Energy, AES, and others. "It's a phenomenal position we're now in."
Since Tesla Motors set a new low price for batteries this Spring, and since the EPA published the Clean Power Plan this summer, renewables and batteries have been showing up together in the strangest places.
"Even the folks who are kind of the laggards to the conversation, the folks who are incumbent coal or incumbent nuclear, are at the point where they’re thinking about it and saying, I can’t ignore this," Blunden said. "Solar is going to be a part of my portfolio."
Tesla CEO Elon Musk has said battery storage could eliminate the need for half of the world's existing power plants, but he's a battery manufacturer. A major utility CEO, Jim Robo of NextEra Energy, gave credence to such claims a month ago when he told an analyst conference that after 2020, there may never be another peaker plant built in the U.S.—"Very likely you'll be just building energy storage instead."
It was Robo who attached the term "holy grail" to renewables + storage this autumn as he announced NextEra's $100 million investment in batteries over the next year.
But the quest for the holy grail needs the aid of regulators, who can speed it up or slow it down as they hack a path through antiquated energy policies for batteries to enter the system.
Regulators will be responsible for key pieces of the puzzle—developing protocols for connecting storage devices to the grid, drafting regulations that allow utilities to recover the cost of batteries, creating markets that storage projects can sell electricity into. With battery storage perched on the cusp of a vast implementation, regulators have an opportunity to do it well.
"We don’t want to do this necessarily the same way we did solar policy, where every single state in the nation has a different framework," said Madeleine Klein of SoCore, a solar developer owned by Edison International, during an appearance this week at Greentech Media's U.S. Solar Market Insight conference on Coronado Island.
For solar developers to operate in 50 states, Klein said, they have to navigate 50 different markets, with 50 different sets of regulations.
"We want to try to avoid that for storage, so that you're looking at effectively the same market structure regardless of whether you're looking at a northeast project or a southwest project.
"I know that might be wishful thinking, but hopefully there can be work done at the federal level with FERC (Federal Energy Regulation Commission)," she said. "And some of the really forward looking discussions that are happening in places like New York and California will become the model rules that can be rolled out."
Should Klein's wishful thinking not come to pass, storage will roll out anyway. And that will happen not because of government incentives, said Ivo Steklac of SunPower, but because of economics.
"I’m a firm believer that these things are best settled through the laws of economics. If there are high prices there is a demand for alternatives and an open market for disruption of whatever exists for a cheaper and a better way," he said. "I actually think that works more in our favor.
"It does make it complex."
Steklac would rather see regulatory reform that better values prosumers—consumers who produce energy—than reform that harmonizes markets.
"Do we need uniformity? No. It would be wonderful, but that truly would be the holy grail of energy for all of us."
Even without regulatory reform, batteries seem to be finding a home already with residential, commercial and industrial customers.
"The residential application right now is primarily backup," said Peter Rive of SolarCity. "It’s important to realize that the market for people buying backup generators is larger than rooftop solar. So, there is a strong market for backup power, and you can do it cheaply. We’re basically selling backup power for $4,000 with a solar system."
Rive described seeing homeowners in new developments pondering whether to spend their discretionary money on granite countertops or battery backups.
But commercial and industrial customers are exercising a more imperative kind of choice.
"The biggest traction we’re seeing with solar and storage is actually on the commercial and utility scale," Rive said.
At that scale, SolarCity can offer customers electricity for 12¢/kWh in California, compared to a market price of 15¢ or more. And that 12¢ does not yet reflect the impact of Tesla's new low price for the utility-scale PowerPack. Those should begin flowing from Tesla's Gigafactory next year, Elon Musk said last week during Tesla's third-quarter earnings call.
"We are seeing very strong demand for Tesla Energy products globally, and particularly in Australia, Germany and South Africa," he said. "To respond to these opportunities, we are growing our worldwide Tesla Energy sales team and are continuing to sign new business partnerships with utilities and energy companies. There is also an exciting market opportunity for us in India with strong government alignment that we look forward to growing in 2016. Recent changes to feed-in tariff structures in Hawaii also create a large new storage market in that state."
One of Tesla's main competitors in the storage market, Sonnenbatterie, has also been busy in Hawaii. At the Solar Market Insight conference, a Sonnenbatterie executive reported a similar outlook.
"I really think the value proposition of solar-plus-storage so outweighs its negatives, that we’ll see a wide implementation not only throughout the United States but throughout the world," said Boris von Bormann of Sonnenbatterie.
"It’s not incentive driven. It’s truly value driven."

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