NREL: Solar + storage costs twice as much as solar (with chart)

Despite ongoing cost declines for lithium-ion battery technology, residential battery storage systems still aren’t cheap. And with a wide range of products, system designs and soft costs, consumers and even many in the solar industry may not be clear as to how much the typical residential solar-plus-storage system should cost.

Until this week. On Tuesday, the U.S. Department of Energy’s (DOE) National Renewable Energy Laboratories (NREL), in collaboration with Rocky Mountain Institute and the DOE, released a report to look at typical costs of residential PV paired with energy storage, as well as barriers to deployment and opportunities for cost reduction.

To arrive at its cost figure, NREL used the bottom-up cost-modeling approach which has allowed it to provide definitive national figures for installed PV costs, and applied it to the solar-plus-storage landscape.

Some aspects of this approach had to be modified. Given that batteries are rated both on capacity (kilowatts or kW) and energy (kilowatt-hours or kWh), NREL had to scrap its cost-per-watt metric and settle on a typical PV system size of a 5.6 kW, paired with either a small (3 kW/6kWh) or a large (5 kW/20 kWh) battery. The report then further looks at a variety of cases, such as DC or AC coupling, and battery retrofits versus installing a PV system with storage.

The result is that adding even the small battery to a residential PV system nearly doubles its cost, from $15,600 to $27,700 to $29,600, depending on whether DC or AC coupling is used. Retrofits come in at $32,800 – meaning $17,200 to add a small battery.

For larger systems, the costs are even higher, with NREL modeling the typical 5.6 kW PV system with a 5 kW/20kWh battery at $45,200-$47,200 – again, depending on whether or DC or AC coupling is used. In both cases costs are pretty evenly split between “hard” or component costs and “soft” costs, with small batteries representing a roughly 50/50 split and the larger systems tilted 60/40 in favor of hardware.

nrel_solar_plus_storage_system_cost_breakdown_2017

Included in the report’s assumptions is a 17% profit margin for the installer, however NREL notes that profit margins and available incentives can vary widely.

The National Lab notes that this is one of the most detailed breakdowns of the cost of residential energy storage available to date and describes a gap in existing literature, particularly around soft costs.

“There is rapidly growing interest in pairing distributed PV with storage, but there’s a lack of publicly available cost data and analysis,” said Kristen Ardani, lead author of the report and a solar technology markets and policy analyst at NREL.

It is worth noting that while residential energy storage costs are high, they have not prevented a market from developing across the United States. Many analysts note that the choice by a homeowner to install a battery system is often not an economic one, but rather represents that homeowner’s desire to continue to have electricity in the event of an outage, which can be hard to quantify.

 

Missing valuation

In addition to examining costs, NREL also takes a look at barriers to the emergent PV-plus-storage market, describing “inconsistent permitting processes, complexity in adequately valuing the benefits of energy storage, and flat utility rates”.

The second of these – a failure to value the benefits of energy storage – is something that has been identified as a central challenge for both utility-scale and distributed energy storage markets. Many grid operators do not have mechanisms to provide compensation or even to value many of the services that energy storage can provide, particularly at the distributed level, as addressed in a recent report by City University of New York.

This is particularly true for the resiliency benefits that energy storage can provide in the event of outages, which is something that New York City became intimately familiar with in the aftermath of Hurricane Sandy.

And while in many places having battery power in the event of an outage is seen as something of a luxury, in some states batteries are becoming an essential part of residential PV systems. Hawaii’s new self-consumption regulations essentially require the pairing of PV plus storage, and time-of-use rates and other changes to rates and net metering programs are making storage more and more important.

This will not be NREL’s last look at this subject. Similar to its work with PV, the National Lab says that this is only the first in a planned series of solar-plus-storage reports to document progress in cost reductions for this emerging market segment.