Large energy users not only have the ability to control their energy costs like never before, but they’re able to do it quickly and with ideal pay back periods. The options commercial energy users have to reduce their energy costs (and carbon footprint) started with overall reduction: energy efficiency measures that were driven by a myriad of technology advancements. The goal was to cut the amount of energy a facility uses in order to reduce the amount of energy a customer has to pay for.
The market then moved to on-site solar energy generation: install solar adjacent to or/and on top of a facility and the energy demand portion of a the utility bill was reduced or eliminated. The cost of solar has continued to fall. In fact, at $1.47/watt, the installed cost of solar is the lowest it has ever been despite tariffs, driven by various factors, including improved module efficiencies, standardization, market incentives and overall industry maturity.
However, there is a portion of energy costs that energy efficiency and solar generation can’t meaningfully control: demand charges and time of use rate hikes. Demand charges make up 50 precent of a C&I customer’s electricity bill in many cases.
This is where energy storage comes in.
Energy storage is now an economically viable option for energy users to meaningfully control energy costs beyond consumption charges. Energy storage is also being deployed on the utility side to smooth out supply when demand spikes in the mornings and evenings as well as various other functions to improve grid resilience and modernization.
Since 2014, non-residential storage system prices have declined by more than 15 percent in the U.S, according to Wood MacKenzie Research. The cost decline is forecasted to continue: Over the next five years, all-in costs are expected to fall by more than 27 percent. As expected, the reduction in cost has resulted in a growth of adoption. Falling costs will help drive more than 10x growth in the U.S. non-residential storage market by 2024.
With vendors realizing economies of scale, improvements in battery energy density and increasing market competition, battery prices will come down much more rapidly in 2019. Wood MacKenzie forecast predicts that over the next five years, battery rack prices will drop below $159/kWh.
Greentech Media, “Balance of Systems Costs Falling for Non-Residential Storage”
Wood MacKenzie Energy Storage Monitor Q2 and Q3 2019