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Solar-Plus-Storage Cost Drivers


According to GTM Research, last year less than one-tenth of one percent of solar PV installations included battery storage. These stats may suggest that the market isn’t ready for storage yet, but the reality could not be more different.

Early visionaries and advocates for the solar-plus-storage combination have generated a high level of industry attention and activity. The result is that users looking to augment their PV systems for better performance and value are signing on as technologies improve and costs fall.

One reason for this heightened interest is the rapidly declining costs of not only batteries, but of the entire solar-plus-storage system. Balance of system (BOS) components are relatively mature and suppliers are leveraging advanced materials and efficiencies in production and supply chains to keep costs down. Energy storage inverters, including solar plus storage inverters, from Dynapower, for example, are third-generation technologies that, like many high-tech products, offer increasingly superior capabilities and performance at very competitive prices.

A closer look reveals that costs for storage-plus-solar systems are also driven by the applications they’re used for. In low C-rate (high-energy, longer-duration) applications, batteries dominate the cost, increasing total project cost. On the other hand, in high C-rate applications, such as frequency regulation, peak shaving and other services, the cost for batteries is relatively small in proportion to BOS, resulting in a lower cost system.

The high and low C-rate cost breakdown is illustrated here:

A bar chart comparing the costs of a 2C and 0.5C solar plus storage projects.

Comparison of solar plus storage project costs at 2C and 0.5C for microgrid and grid tied applications.


The variable in this equation is the energy storage integration/EMS software. Pricing for this system element varies based on the complexity of the job – and is relatively independent from project size.

The solar plus storage market is growing – but what’s driving it?

GTM Research reported that solar-plus-storage deployments totaled 4 MW (DC) in 2014, but are expected to grow more than six-fold to 22 MW in 2015. By 2020, solar-plus-storage installations are projected to reach an astonishing 769 MW – nearly 200 times last year’s total. California is expected to be the biggest solar-plus-storage market, with 422 MW installed in 2020 alone.

Some of this expansion will be driven (as it often is) by declining costs, but there are other factors. Changes to net metering rate structures, for example, can tilt the market toward storage deployment for self-consumption of PV. For example, Hawaii, which has the highest percentage of PV on the grid in the country, recently overhauled its net metering policy to encourage self-consumption. This will, without a doubt, drive energy storage deployment.

Looking ahead, PV users will likely be able to offer a stack of services to the grid, such as frequency response, voltage support, and distribution upgrade deferral. A recent report from the Rocky Mountain Institute makes the case that the revenue associated with these additional services could further improve the economics of PV systems paired with smart controls and batteries.

Other factors helping to boost demand and lower costs are the growing emphasis on grid resiliency for energy security and independence, and the proven value of storage in smoothing intermittent renewable resources like PV (and wind).

Many observers have said that energy storage is where PV was six or seven years ago, and believe that the factors that brought PV to mass affordability will have a similar effect on storage. What do you think is the reason for market growth and lower costs?

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