2018 is shaping up to be the year of the battery! Industry reports suggest that the energy storage market in the U.S. is poised to triple in size this year due to a variety of factors, including state-level policies and noteworthy shifts from federal agencies like the IRS.

While many forward-looking customers have been including battery storage in their solar or wind energy systems, grid-connected PV panels have been the industry standard for years. That may be changing as broader markets embrace the model offered by distributed generation systems, in which homes or businesses may still be connected to the power grid but are no longer dependant on it. The surging battery market is a sign that important shifts are happening in the way consumers plan for and achieve energy security.

Energy Storage Market News

The U.S. Energy Storage Monitor, a quarterly report provided by Wood Mackenzie, recently released its 2017 Year-In-Review edition, offering a look at the current state of the industry and compelling data on what lies ahead for energy storage. As Reuters notes, the findings suggest that “U.S. deployments of energy storage systems will nearly triple this year thanks to sharply lower costs and state policies that support the case for installing batteries in homes, businesses and along the power grid.” This is encouraging news for the solar-plus-storage market and reflects a noteworthy change in the way consumers understand their solar system options.

Wood Mackenzie forecasts an increase of energy storage capacity from 431 megawatt hours to 1,233 MWh - a staggering 186 percent rate of growth. When compared to 2017’s 27 percent increase, this is major news. But what are the factors that make this growth possible?

First, there is the plummeting cost of energy storage batteries. Pioneering technology companies such as Tesla and LG Corp have been refining their efforts over the last decade to achieve more efficient batteries at ever lower prices. In fact, Reuters notes that “storage system costs have fallen by roughly two thirds in the last five years.” The market for energy storage batteries continues to snowball as they become available to greater numbers of consumers.

State Policies Drive Growth

Another major factor driving energy storage growth in 2018 is state-level policies that set (and in some cases mandate) energy storage targets. In December, New York state became the fourth state to pass an energy storage mandate, joining California, Oregon, and Massachusetts. As electrek reports, this is a major turning point in the implementation of energy storage nationwide, as these four states “represent 69 million people and 21% of the country. These people live in states that have legally defined energy storage to be integrated into the power grid.”

A statement from the New York State Energy Research and Development Authority notes that “New York has committed to accelerating the clean energy transition with promising technologies like energy storage,” and “will look to market participants to consider mechanisms that will maximize the benefits of energy storage for New Yorkers.” As more states add energy storage to their clean energy implementation plans, the market will continue to see promising growth. This influx of resources will ultimately benefit consumers in business and residential markets as well.

IRS Policy Encourages Homeowners

In addition to state-level actions, the battery storage sector has had encouraging news from federal agencies as well. A recent private-letter ruling from the IRS indicates that “federal solar tax credits extend to battery systems added as retrofits,” which Greentech Media says is “a policy that could ‘open the floodgates’ for residential solar installers eager to add energy storage to their mass-market offerings.”

While states such as California and Hawaii offer specific incentive programs for energy storage, most states have not caught on yet. This makes the private letter from the IRS an exciting indication of future policy changes that would encourage more homeowners to include battery storage as part of their alternative energy systems.

What This Means for Distributed Generation Systems

News that the battery storage market is poised for growth is a signal that public understanding of distributed generation systems is increasing. As consumers become educated about the possibilities offered by distributed generation, they are embracing solutions that increase their energy security and resiliency and limit their dependence on utility companies. “Pairing big batteries with renewable energy projects improves reliability without creating climate-changing emissions,” Reuters reveals, “and more homeowners and businesses are looking to batteries for backup power and to capture the excess energy from rooftop systems to use when the sun is not shining.”

At Solar Design Studio, we’re excited to be a part of the growth of energy storage systems in 2018. If you’d like to learn more about the possibilities distributed generation can offer for your home or business, contact us today!

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