Demand for battery storage systems by Californian homes and businesses drove a 60% surge in U.S. energy storage additions in the second quarter of 2018 compared to a year ago, according to a new report from Wood Mackenzie Power & Renewables, formerly known as GTM Research, and the Energy Storage Association.
Strong growth in residential deployments brought deployments to 61.8 MW in the quarter, with behind-the-meter deployments accounting for 75% of the total U.S. market during the period, continuing a recent growth spurt for distributed energy storage.
Citing a shortage of lithium-ion battery cells, Wood Mackenzie Power & Renewables analysts slashed their 2018 forecast by almost 30% to 393 MW, but this would still equal strong growth from the 215 MW added in 2017. Also responsible for the revision were numerous large projects originally expected to come online in 2018 that have slipped to 2019, Brett Simon, senior energy storage analyst at Wood Mackenzie Power & Renewables, said in an email. Moreover, several energy storage programs, including in Massachusetts, "have seen implementation delays," he said.
Despite the slowed growth forecast for 2018, "a burst of newly announced [front-of-the-meter] projects" with targeted online dates of 2020 prompted the analysts to boost their near-term annual market estimate to more than 2,000 MW in 2020. The U.S. will add 3,890 MW annually by 2023, they forecast, up from a prior estimate of 3,688 MW by that time.
Among the recent announcements, PG&E Corp. utility Pacific Gas and Electric Co. in June revealed deals for 567.5 MW of battery storage with several vendors, including Tesla Inc. and Dynegy Marketing and Trade LLC, a subsidiary of Vistra Energy Corp. The California Public Utilities Commission is considering approval of the contracts, which came in response to the regulator's request for energy storage bids to "obviate the need" to renew reliability-must-run contracts for natural gas generation in capacity-constrained areas of PG&E's service territory.
Rising battery metals prices and a shortage of lithium-ion cells has slowed the pace of battery price declines, according to the report. Wood Mackenzie Power & Renewables increased its battery pack price forecast to $225/KWh in 2018, from $207/KWh previously, compared to $490/kWh in 2014. "However, as greater production capacity comes online over the next two years, the prices are expected to decline further," the analysts said.