Corporate energy storage investment reached a record high of $659.8 million for the third quarter, as the U.S. moves toward eight-fold installations growth by 2021, according to a report released today by the Energy Storage Association and GTM Research.
The latest U.S. Energy Storage Monitor Energy puts investment for Q32016 at five times that of Q32015. By year’s end venture capital and project finance should reach $812 million.
The big bump came from behind-the-meter projects – a record 86 percent of the total megawatts deployed – and were largely residential.
Ravi Manghani, GTM Research’s director of energy storage, said that the quarter is noteworthy not just because of the scale, but also because project financing comprised a significant portion of the total.
“While one quarter alone doesn’t constitute a trend, growth in project financing, especially in the residential segment, is a harbinger for further strengthening of deployment business models,” Manghani said.
A couple of major project financing deals boosted energy storage investment for the third quarter. They include $300 million directed to Tabuchi Electric from the Electric & Gas Industries Association and $200 million to Advanced Microgrid Solutions from Macquarie Capital.
The report forecasts that the industry will expand eight times by 2021, putting installations at 2 GW, up from 260 MW expected for 2016.
“In 2016 we are seeing a critical trend in energy storage deployment – a wider range of competitive applications is becoming available to storage systems, and as a result demand for longer duration systems is increasing,” said Matt Roberts, Executive Director of the Energy Storage Association.
Measured in megawatt hours, the industry is projected to grow by more than 284 percent by the end of the year, according to Roberts.
Energy storage investment and the new White House
But the report also cautions that its findings are based on the current regulatory and policy landscape.
“With the pending White House administration change, our outlook may be revised if the incoming administration puts forward regressive policy measures in 2017,” the report said.
But states play a bigger role than the federal government in energy storage policy, so White House influence is limited. Federal areas to watch include renewable policies, the Grid Modernization Initiative and White House Summit on Scaling Renewable Energy and Storage With Smart Markets.
The report highlighted several noteworthy state programs that could drive energy storage growth. These include the recent town center microgrid plan put forward last week by the New Jersey Board of Public Utilities.
The report also cited recent policy moves in California, Oregon, Nevada, Washington, Massachusetts and New York.
California and PJM (minus New Jersey) dominant the market, as the source of 81 percent of energy storage deployment since 2013.
PJM accounts for 74 percent of the utility-scale installation, due largely to its frequency regulation market. But GTM Research sees that changing, as several California utility projects come on line over the next two quarters related to A
California already dominates in the other categories listed by GTM Research — residential and non-residential storage.
The report wasn’t all good news. Utility activity was slow with with no front-of-meter projects above one megawatt brought on-line.
Front-of-the-meter deployments dropped 96 percent from Q32015, which drove a decline in overall energy storage installations quarter over quarter.
However, GTM Research sees the decline as temporary.
As utility procurements come on-line in the coming months, we expect the front-of-the-meters egment to regain a significant market share,” the report said.
Other key findings from the latest Energy Storage Monitor include:
- The U.S. deployed 16.4 megawatts of energy storage in Q3 2016
- Lithium-ion batteries dominated the energy storage market for the eighth straight quarter, representing 96.2 percent of the market in Q3 2016
- Total closed the company’s acquisition of Saft in July 2016
- SCE and SDG&E have contracted 84.5 megawatts of energy storage as part of AlisovCanyon procurement
The full report is available for a fee. A free executive summary is here.