Why Tesla’s announcement is such a big deal: The coming revolution in energy storage

Tesla CEO Elon Musk presented his new Powerwall solar batteries on April 30, 2015. Musk says the batteries could dramatically reduce the use of fossil fuels by replacing use of the power grid. (AP)

Late Thursday, the glitzy electric car company Tesla Motors, run by billionaire Elon Musk, ceased to be just a car company. As was widely expected, Tesla announced that it is offering a home battery product, which people can use to store energy from their solar panels or to backstop their homes against blackouts, and also larger scale versions that could perform similar roles for companies or even parts of the grid.

The anticipation leading up to the announcement has been intense — words like “zeitgeist” are being used — which itself is one reason why the moment for “energy storage,” as energy wonks put it to describe batteries and other technologies that save energy for later use, may finally be arriving. Prices for batteries have already been dropping, but if Tesla adds a “coolness factor” to the equation, people might even be willing to stretch their finances to buy one.

The truth, though, is Tesla isn’t the only company in the battery game, and whatever happens with Tesla, this market is expected to grow. A study by GTM Research and the Energy Storage Association earlier this year found that while storage remains relatively niche — the market was sized at just $128 million in 2014 — it also grew 40 percent last year, and three times as many installations are expected this year.

By 2019, GTM Research forecasts, the overall market will have reached a size of $ 1.5 billion.

“The trend is more and more players being interested in the storage market,” says GTM Research’s Ravi Manghani. Tesla, he says, has two unique advantages — it is building a massive battery-making “gigafactory” which should drive down prices, and it is partnered with solar installer Solar City (Musk is Solar City’s chairman), which “gives Tesla access to a bigger pool of customers, both residential and commercial, who are looking to deploy storage with or without solar.”

The major upshot of more and cheaper batteries and much more widespread energy storage could, in the long term, be a true energy revolution — as well as a much greener planet. Here are just a few ways that storage can dramatically change — and green — the way we get power:

Almost everybody focusing the Tesla story has homed in on home batteries – but in truth, the biggest impact of storage could occur at the level of the electricity grid as a whole. Indeed, GTM Research’s survey of the storage market found that 90 percent of deployments are currently at the utility scale, rather than in homes and businesses.

That’s probably just the beginning: A late 2014 study by the Brattle Group, prepared for mega-Texas utility Oncor, found that energy storage “appears to be on the verge of becoming quite economically attractive” and that the benefits of deploying storage across Texas would “significantly exceed costs” thanks to improved energy grid reliability. Oncor has proposed spending as much as $ 5.2 billion on storage investments in the state. California, too, has directed state utilities to start developing storage capacity – for specifically environmental reasons.

For more power storage doesn’t just hold out the promise of a more reliable grid — it means one that can rely less on fossil fuels and more on renewable energy sources like wind and, especially, solar, which vary based on the time of day or the weather. Or as a 2013 Department of Energy report put it, “storage can ‘smooth’ the delivery of power generated from wind and solar technologies, in effect, increasing the value of renewable power.”

“Storage is a game changer,” said Tom Kimbis, vice president of executive affairs at the Solar Energy Industries Association, in a statement. That’s for many reasons, according to Kimbis, but one of them is that “grid-tied storage helps system operators manage shifting peak loads, renewable integration, and grid operations.” (In fairness, the wind industry questions how much storage will be needed to add more wind onto the grid.)

Consider how this might work using the example of California, a state that currently ramps up natural gas plants when power demand increases at peak times, explains Gavin Purchas, head of the Environmental Defense Fund’s California clean energy program.

In California, “renewable energy creates a load of energy in the day, then it drops off in the evening, and that leaves you with a big gap that you need to fill,” says Purchas. “If you had a plenitude of storage devices, way down the road, then you essentially would be able to charge up those storage devices during the day, and then dispatch them during the night, when the sun goes down. Essentially it allows you to defer when the solar power is used.”

This will be appealing to power companies, notes Purchas, because “gas is very quick to respond, but it’s not anywhere near as quick as battery, which can be done in seconds, as opposed to minutes with gas.” The consequences of adding large amounts of storage to the grid, then, could be not only a lot fewer greenhouse gas emissions, but also better performance.

2. Greening suburban homes and, maybe, their electric cars, too.

Shifting away from the grid to the home, batteries or other forms of storage have an equally profound potential, especially when paired with rooftop solar panels.

Currently, rooftop solar users are able to draw power during the day and, under net metering arrangements, return some of it to the grid and thus lower their bills. This has led to a great boom in individual solar installations, but there’s the same problem here as there is with the grid as a whole: Solar tapers off with the sun, but you still need a lot of power throughout the evening and overnight.

But storing excess solar power with batteries, and then switching them on once the solar panels stop drawing from the sun, makes a dramatic difference. Homes could shift even further away from reliance on the grid, while also using much more green power.

Moreover, they’d also be using it at a time of day when its environmental impact is greater. “If you think about solar, when it’s producing in the middle of the day, the environmental footprint is relatively modest,” explains Dartmouth College business professor Erin Mansur. That’s because at this time of day, Mansur explains, solar is more likely to be displacing electricity generated from less carbon intensive natural gas. “But if you can shift some of that to the evening … if you can save some to the middle of the night, it’s more likely to be displacing coal,” says Mansur.

Some day, perhaps, some of the sun-sourced and power could even be widely used to recharge electric vehicles like Teslas — which would solve another problem. According to a much discussed 2012 paper by Mansur and two colleagues, electric vehicles can have a surprisingly high energy footprint despite their lack of tailpipe emissions because they are often charged over night, a time when the power provided to the grid (said to be “on the margin”) often comes from coal.

But if electric vehicles could be charged overnight using stored power from the sun, that problem also goes away.

All of which contributes to a larger vision outlined recently by a team of researchers at the University of California at Los Angeles’s Institute of the Environment and Sustainability in which suburban homeowners, who can install rooftop solar combined with batteries and drive electric vehicles, start to dramatically reduce their carbon footprints — which have long tended to be bigger in suburbia, due in part to the need for long commutes — and also their home energy bills.

Granted, it’s still a vision right now, rather than a reality for the overwhelming number of suburbanites — but energy storage is a key part of that vision.

3. Helping adjust to smart energy pricing

And there’s another factor to add into the equation, which shows how energy storage could further help homeowners save money.

For a long time, economists have said that we need “smart” or “dynamic” electricity pricing — that people should be charged more for power at times of high energy demand, such as in the afternoon and early evening, when the actual electricity itself costs more on wholesale markets. This would lead to lower prices overall, but higher prices during peak periods. And slowly, such smart pricing schemes are being introduced to the grid (largely on a voluntary basis).

But if you combine “smart” pricing with solar and energy storage, then homeowners have another potential benefit, explains Ravi Manghani of GTM Research. They could store excess power from their solar panels during the day, and then actually use it in the evening when prices for electricity go up — and avoid the higher cost. “There’s an economic case to store the excess solar generation and use it during evening hours,” explains Manghani by email. (For more explanation, see here.)

Notably, if there are future reductions in how much money solar panel owners can make selling excess power back to the grid — and that’s one thing the current pushback against net metering wants to achieve — then energy storage comes in and gives panel owners a new way for using that power.

“Storage increases the options,” explains Sean Gallagher, vice president of state affairs at the Solar Energy Industries Association. “It’s an enabling technology for solar. It allows customers to meet more scenarios economically.”

So in sum — cheaper, more easily available energy storage helps at the scale of the power grid, and also at the level of our homes, to further advantage cleaner, renewable energy. So if the economics of storage are finally starting to line up — and its business side to ramp up — that can only be good news for the planet. More