Economics of Commercial Energy Storage in the U.S Will be Attractive by 2021: GTM Research

Over the last two year commercial energy storage has been the fastest-growing storage segment in the U.S. Bulk of this growth occurred in California, while other markets have started to crop up in recent months. GTM Research in its report named ‘The Economics of Commercial Energy Storage in the U.S’ breaks down the commercial end-customer electricity bill and provides a detailed economic analysis of demand-charge reduction across 51 utilities.  It also forecasts state-level economics through 2021 and describes storage opportunities beyond demand charge management. According to the report, commercial energy storage economics are attractive today in seven U.S. states. And that number is expected to grow to 19 states by 2021.
The Research firm analyzed rate structures across 51 utilities to determine the opportunity for demand charge management for commercial energy storage customers.

The commercial energy storage deployments in US grew fourteen-fold between 2013 and 2015, making it the fastest-expanding segment of the country’s energy storage market. The report notes that while growth rate is very high, the commercial storage market is expanding from a small base.

The report models the internal rate of return (IRR) for 1-hour and 2-hour storage systems for both the small/medium-sized and large commercial customer segments. GTM found that demand-charge rates of at least $15 per kilowatt per month are necessary to achieve favorable economics for energy storage today.

As pert GTM’s report the commercial storage economics will be favorable for certain utility tariffs with demand charges as low as $11 per kilowatt per month by 2021.

Large commercial customers in 17 U.S. states will have an internal rate of return of 5 percent or higher, which GTM Research identifies as “in the money.”

The firm in its report “The Economics of Commercial Energy Storage in the U.S” notes that, for small/medium-sized systems, 14 states will be economically attractive. Taken together, there will be 19 unique states primed for commercial storage adoption in 2021. GTM Research forecasts that storage costs drop 15 percent annually over the next five years. In this scenario, there could be as many as 26 states where commercial storage is economically attractive.

Most of the commercial storage deployed today is used to provide demand-charge-related bill savings.

“In this report, we wanted to provide an outlook for demand-charge-based economics of commercial storage, treating storage as a one-trick pony,” said Ravi Manghani, GTM Research’s director of energy storage and lead author of the report. “In reality, policy and market structures are evolving to help storage owners capitalize on other value streams as well. Effectively, this analysis should be viewed as the floor for commercial storage potential. The results establishing attractive economics in over a third of the states by 2021 is a promising sign for the future of commercial storage in the U.S.”