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Batteries that Store Sun's Energy Commonplace in 5 Years?

Adding batteries to rooftop solar energy systems has “huge” potential to reshape the industry.

(TNS) --SolarCity CEO Lyndon Rive thinks today’s rooftop solar energy systems will be out of date within five years. Not because the systems won’t still be generating electricity. They will.

And not because Rive thinks solar power will fall out of favor. He doesn’t.

Instead, Rive predicts that the rooftop solar systems of the future won’t just generate electricity. They will come with sophisticated batteries that also will store it, allowing consumers to tap into the electricity their solar panels produced even when it’s dark outside.

“Within five years, around that time frame, every solar system we deploy will have a storage system tied to it,” Rive said.

“I think that’s going to be the big game changer.”

SolarCity took its first step in that direction this spring, when it began offering to pair its rooftop solar systems with batteries made by electric car maker Tesla Motors. Rive’s cousin, entrepreneur Elon Musk, is the CEO of Tesla and SolarCity’s chairman and biggest shareholder. Tesla is building a $5 billion battery “gigafactory” in Nevada.

To Rive, adding batteries to rooftop solar energy systems has “huge” potential to reshape an industry that, in most places, still isn’t able to compete with utility-generated electricity without hefty government subsidies. It also would alter the relationship between homeowners, utilities and the companies that sell and install them.

But not right away. For now, the batteries are too expensive.

“It’s like solar in 2001. It’s nothing,” Rive said.

“Everyone talks about what storage can do. It’s not a secret. But it’s not been applied yet.”

The way rooftop solar energy systems work today is simple: When the sun is out, solar panels convert the energy from sunlight into electricity. That electricity helps power the televisions, lights and other electrical devices in the host home when there is enough sunlight for the solar panels to generate electricity. Any electricity over and above the needs of the house is sold to the utility and sent onto the region’s power grid, where it is used to power other homes and businesses. Those credits help reduce the consumer’s conventional electric bill.

Battery benefits

But when the sun isn’t shining, consumers still have to rely on power generated by their local utility to keep the lights on. Adding the ability to store a solar energy system’s power in a battery would radically change all that – allowing consumers to store the electricity their solar energy systems generate while they’re gone during the day and use it when they turn on the lights to read a book that evening, after the sun has gone down.

That’s important because, for typical residential customers, electricity use rises in the morning before they go to work, drops sharply while they’re away, and then peaks in the early evening, once consumers are back home, cooking dinner, watching TV and turning on more lights.

Adding batteries to a solar energy system could mean that, if there is enough sunshine and the solar energy system is big enough, homeowners could be able to disconnect from the power grid entirely, or just use utility-produced electricity as a backup for cloudy days.

“Combining rooftop solar and battery storage also could allow a customer to rely on the utility only for cheap, off-peak electricity,” said Andrew Bischof, a Morningstar Inc. analyst.

“The mainstreaming of storage solutions may ultimately spur a transformation in how electricity is produced,” Pavel Molchanov, an analyst at Raymond James Financial in Houston, said in a note to clients.

“In contrast to the century-old model of centralized power plants and long-distance transmission lines, the rise of distributed generation” can in the “very long run lead to the obsolescence of the traditional utility model,” Molchanov said.

Still costly

Battery costs, while falling rapidly, still are too high for them to be adopted widely. Tesla’s Powerwall battery costs $3,500 for 10 kilowatt-hours worth of energy or $3,000 for 7 kilowatt-hours. That’s what suppliers pay, and it doesn’t include the cost of installation and a power inverter, so the cost to consumers is higher.

SolarCity offers to bundle battery storage with a rooftop solar system for an extra $5,000 – an offering aimed mostly at consumers who are mainly interested in having a source of backup power during a power outage. The company describes its battery offering as a “battery backup service” that can replace “noisy, dirty fossil fuel generators with zero-emission storage technology.” It’s not designed to store and discharge electricity on a daily basis.

But the potential of battery storage still has excited early adopters. After Tesla unveiled its two new battery storage products in May, one for homeowners and the other for utilities – the response was electric. Within a week, Tesla sold a year’s worth of batteries, with orders for 38,000 of its Powerwall residential batteries and 2,500 for its Powerpack, the utility-scale batteries.

Rive expects battery prices to keep falling rapidly.

“Storage over the last two years has reduced by more than 50 percent. Over the next two years, it will reduce by another 50 percent,” he said. “That’s when it hits the game-changing outcome.”

The Tesla batteries now bundled with SolarCity’s rooftop solar systems cost about $350 per kilowatt-hour – about 60 percent less than prior systems, said Patrick Jobin, an analyst at Credit Suisse.

That’s still too high for most solar energy consumers. But with Tesla building a massive battery “gigafactory” east of Reno, Nev., the company is hoping that bigger scale and continued improvements in technology will keep driving down costs. By the end of the decade, the price of Tesla’s Powerwall battery system could drop to $100 to $150 per kilowatt-hour, said J.B. Straubel, Tesla’s chief technology officer and co-founder, during an energy conference in Washington, D.C., during June.

Cutting pay for power

The changing relationship between the solar energy industry and utilities also will play a big role in how quickly battery storage is adopted.

Most states, including New York, have rules that allow homeowners to sell the excess electricity generated by their rooftop solar systems back to their local utility – usually at the same price that consumers pay for the power.

But many utilities across the country say it’s unfair to make them pay retail prices to solar energy producers when they can purchase power from power plants at lower, wholesale prices.

That has led to a push by utilities across the country to revise so-called “net metering” policies that could lead to consumers with rooftop solar systems receiving lower prices for their surplus electricity.

That matters because the attractiveness of adding battery storage depends largely on the difference between the profit consumers can make by selling their excess electricity to utilities during the day, when demand is higher, and the savings that they can reap by storing the power in a battery system and not having to buy electricity from the utility at night, when their use is highest.

If the price at which consumers can sell their surplus power to utilities is high enough, it may not make sense for them to install battery storage because they can make more money by doing what they do now – sending their excess electricity straight to the grid. That’s why SolarCity isn’t offering the smaller, 7-kilowatt-hour battery.

But if the price paid by utilities drops, then adding battery storage becomes even more attractive.

If utility regulators adopt “time of use” pricing for consumers, charging more for power during times of peak demand and less during off-peak times, storage becomes even more attractive. Consumers could tap into their batteries during times of high prices and rely on utility power, if needed, when rates are lower.

That type of system also would help utilities by reducing the demand for electricity during peak times, making it easier to balance supply and demand on the power grid.

Large-scale storage

For the moment, storage is mostly a niche product – albeit a fast-growing one. The storage market grew by 40 percent last year and was valued at $128 million, according to a study earlier this year by GTM Research and the Energy Storage Association.

But installations are expected to triple this year as prices come down, and by 2019, the storage market is expected to reach $1.5 billion, with almost four times more storage capacity being installed in 2019 than the report projects for this year.

While much of the attention has been focused on batteries installed in homes, the far bigger market for storage is likely to be tied to huge solar arrays that can produce enough power for thousands of homes from a single site. These so-called utility-scale projects currently account for 90 percent of the current storage market, the GTM Research study found.

But as the market grows and prices drop, the report predicts that homes and businesses could account for 45 percent of the battery storage market by 2019.

SolarCity’s battery system costs, for instance, have come down by a third during the past year, said Peter Rive, the company’s chief technology officer, during a conference call.

“We expect costs to decline further as manufacturing scales, and over the next five to 10 years, these cost reductions will make it feasible to deploy the battery by default with all of our solar power systems,” he said.

Peter Rive also said he sees battery storage as a hedge for SolarCity and other solar energy system installers against what he calls “bad policy outcomes,” such as a reduction in the prices consumers are paid when they sell their surplus electricity and the imposition of high fixed charges for solar system owners as a way of maintaining utility revenues. Either of those policies would make solar energy less economical for homeowners.

©2015 The Buffalo News (Buffalo, N.Y.) Distributed by Tribune Content Agency, LLC.