Navigant Research Blog

Sizing Up the Community and Residential Energy Storage Market

Anissa Dehamna — June 8, 2012

In an earlier blog post, I explained that the community and residential energy storage sector may be exactly what the storage industry needs for widespread adoption: a market that expects more from storage, and hopefully, is willing to pay for it.  So what is this market worth, realistically?

There are three key characteristics that make the CRES market distinct from the rest of the storage market.  First, the CRES market will require new business models, different from those we’ve seen to date in the storage industry.  This is partly because the residential side of the CRES market will mean selling directly to consumers, instead of to businesses.  It also has to do with the size of the storage units participating in this market.  Most units are between 1 kilowatt (kW) and 25 kW; even with hundreds of units, that’s a drop in the bucket compared to the total generation capacity of a system (by way of comparison, Korea, Texas, and the United Kingdom each have a generation capacity of about 70 GW).  Will a home-based system supply power back to the grid? It should, it would make sense, but how does the grid operator compensate the residential customer?

Second, we’re now seeing pilots and demonstrations in Asia Pacific, North America, and Europe.  Each case has slightly different goals, but nevertheless key utilities in each of these regions is trying to understand the value of CRES.

The third key characteristics that makes the CRES market unique is the importance of dynamic pricing – at least for the residential portion of the CRES market.  Why will residential electricity consumers install a battery in their homes? To save themselves money.  In markets without dynamic pricing (by which I mean any pricing structure that is not flat-rate) there is no differentiation between consuming electricity in the dead of night or during peak time in the late afternoon.  Unfortunately for the market, many dynamic pricing programs, like the Tempo program offered by EDF in France, are opt-in.  This program sends very clear pricing signals to residential customers.

Given all of these challenges, our forecasts for the CRES market are fairly modest compared the markets for long-duration storage or energy storage for ancillary services.

While these figures are not perhaps what the industry would like to see, I fully expect we will be revising our forecasts for the CRES sector upwards as these key market issues resolve in the next two years.

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