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GTM: Top two regions deployed 88% of all US storage over two years

Image: Flickr User: Andy Armstrong.
The two fastest moving regional markets for energy storage in the US have installed nearly 90% of the total deployed across the country for more than two years, according to GTM Research.

The research and analysis group launched the latest edition of its quarterly 'Energy Storage Monitor' today, which takes a quarterly look at the US in terms of storage deployment, pricing, policies, regulations and business models. The document, which covers the second quarter of this year, is produced in cooperation with the Energy Storage Association, although forecasts and predictions are strictly in GTM’s area.

According to the report, the storage market over the next five years will grow across the US until reaching 858MW by 2019, which GTM points out is 13 times bigger than the sector was in 2014 and around four times bigger than the analysis firm is expecting it to be worth over the course of this year.

The report’s author, Ravi Manghani, who heads up GTM’s storage division, explained briefly why just two markets pinpointed by the report as leaders in the US for storage, the state of California and the area served by regional transmission operator (RTO) PJM, have installed 88% of the total 156MW of storage deployed in the US in the last 10 quarters, in both in-front-of-the-meter (utility or centrally controlled) and behind-the-meter (customer-sited or distributed) segments.

PJM Interconnection is responsible for electricity transmission in and across more than a dozen states. Named after the Pennsylvania, New Jersey and Maryland area it originally served, in recent years, PJM has shot to prominence in energy storage reporting, due to its introduction of a market structure that recognises the ability of battery-based energy storage to efficiently and quickly provide power to keep the grid running at the right frequency to keep it stable. As might be expected, this means that the vast majority of storage installed in the PJM service area sits in front of the meter, meaning a large portion of all in-front-of-the-meter storage is in the PJM-controlled transmission network.

“The contributing factor to that is PJM’s adoption of Federal Energy Regulation Committee (FERC) Orders 755 and 784 that require independent system operators (ISOs) and RTOs to make rules for storage to participate in frequency regulation market,” Manghani said.

In particular, FERC Order 784 “went on to say ISOs and RTOs need to pay storage appropriately because of the better service that it can provide [compared to natural gas] and that has resulted in PJM adopting a pay-for-premium model. So this particular premium payment has made the economics of storage in PJM attractive.”

Contrasting drivers will meet falling costs

In California, Manghani said, the dynamics are completely different. The state is dominating the US market for behind-the-meter residential and non-residential segments by deployment. At present, Manghani said, this is being driven by the state’s self-generation incentive plan (SGIP) which subsidises the cost of deploying distributed resources, including solar and storage, by about 60%. There is also an overlay of other drivers, including the use of storage to reduce demand charges, applied to commercial and industrial customers.

“SGIP offers up to 60% of total project costs or US$1.46 per watt, whichever is higher. That in itself is a huge incentive and to top it all California has relatively high electricity prices. So, again for C&I customers especially, having storage to mitigate demand charges is a key use case. So those two factors have led to the growth of storage in California.”

The dynamics are likely to change for both regions over time – for instance Manghani agrees that it is likely that a saturation point for PJM’s competitive market will come possibly leading to it being replaced by a capacity market mechanism, while California will undoubtedly ramp up its own in-front-of-the-meter storage activities due to the influence of AB2514, the mandate which orders the state’s three investor owned utilities (IOUs) to procure 1.325GW of storage over the next few years.

The two leading regions therefore have specific, contrasting drivers behind each one’s relative success. Manghani says that while the rest of the US might well catch up, it is not an easy space in which to draw generalisations, in the same way that, for example, each regional market for solar in the US varies greatly. Ultimately, however, as costs fall, there will come a “crossover” point where the regions will be able to look at storage as a more economically feasible prospect.

“This is not going to be a single market for storage either. The policies are going to stem from the underlying needs in those individual states, those ISOs and RTOs,” Manghani said.

“You can talk about deferrals, capacities, renewable integration, power quality management. The fact that it’s so interesting for a lot of utilities as well as other market participants is because it’s so versatile in terms of the applications it can serve into.”

In New Jersey, for instance, power resiliency is the main topic, “whereas in California the famous duck curve has to be dealt with, in Hawaii, you have high renewable penetration that requires storage”, Manghani said.

“It will differ state-by-state but the overall theme is that storage will find a use wherever there are grid related issues.”

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