Energy storage markets in the United States continued their path of rapid growth during Q1, as documented in the latest quarterly edition of GTM Research and the Energy Storage Alliance’s (ESA) Energy Storage Monitor. Overall 71 MW of energy storage – almost entirely lithium-ion batteries – were deployed during the quarter, a 276% increase over the first quarter of 2016 roughly half the volume of the previous quarter.
However, when measured by duration – megawatt-hours (MWh) – the increast is much more dramatic. During the quarter 234 MWh of energy storage was deployed, more than any quarter in memory and nearly 10x as much as a year ago.
Both Q4 2015 and Q1 2016 were boosted by battery deployments to meet the urgent needs of California’s grid in the aftermath of Aliso Canyon gas leak, which decimated gas storage in Southern California. Similar to Q4 front-of-the meter installations represented the large majority of deployments during the quarter at 91%.
However, the difference from Q4 to Q1 also shows another trend, which is the move to longer-duration energy storage. The short-duration batteries deployed in previous quarters and years can meet needs such as frequency regulation, which was well-compensated in the PJM Interconnection market. Longer-duration batteries can be used to meet needs including load shifting and peak shaving.
This has been demonstrated by Tesla’s solar and battery project on the island Kaua’i, which allows a PV plant paired to meet evening peak demand on the island.
Unsurprisingly, California dominated front-of-the meter energy storage during the quarter, and remained the undisputed leader in the commercial and industrial (C&I) segment as well. However, the state’s residential and C&I markets contracted during Q1 due to a pause in the Self-Generation Incentive Program (SGIP), which lead to a 27% decline nationally in the behind-the-meter segment.
Q2 saw another two rounds of SGIP funding, with $50 million awarded in the first round, which almost entirely subscribed within 24 hours. But while SGIP is expected to revive behind-the-meter storage, front-of-the-meter is another matter.
“The industry shouldn’t get too comfortable, as with fulfillment of Aliso Canyon deployments, there aren’t that many 10+ megawatt-hour projects in the 2017 pipeline, indicating that the first quarter may be the largest quarter this year,” warns GTM Research Director of Energy Storage Ravi Manghani.
Overall GTM Research expects the U.S. energy storage market to grow to roughly 2.6 GW/7.2 GWh in 2022, nearly 12x the size of the 2016 market. This market will be worth an estimated $3.2 billion.