The commercial sector is steadily adopting energy storage solutions in response to technological advances in the storage sector and extreme weather events that have knocked out power to large areas, resulting in million- or billion-dollar losses.
Back-up power is appealing
All of a sudden, back-up power looks increasingly appealing to the energy-intensive commercial sector. This growing interest has caused the market to become the largest source of revenue for stationary energy storage firms.
The robust uninterruptible power supply (UPS) industry needs an energy storage component and this segment alone was estimated to generate US$3.7 billion in global sales in 2013.
There is also a relatively healthy market for thermal energy systems, which use thermal mass (either ice or ceramic bricks) to store energy for later use in climate control in a building. Navigant Research estimated the value of this market to be worth US$89.6 million in 2013.
Finally, an emerging segment of electrical energy storage systems is beginning to be established in parts of the world.
Energy storage firms have responded to this market opportunity and many technologies are being marketed directly to commercial customers. A good example of this is Silicon Valley firm, Stem-a manufacturer of sophisticated storage systems that bundle lithium-ion batteries with sophisticated analytics that optimize decisions about when to retrieve power from the grid and when to draw on the battery.
Stem created a no-money-down finance option to make its behind-the-meter storage solution cost effective for commercial customers. One of its customers, InterContinental Hotels, installed the technology at its Mark Hopkins hotel in San Francisco before installing the batteries at 16 other California hotels.
InterContinental is not the only commercial business that sees significant business value in energy storage. So do a growing number of other property owners. Grid-hardened buildings are expected to command premium prices because they can offer reliable service delivery regardless of the grid’s status.
California is a hot spot for energy storage since it released a mandate in 2013 which instructs California's investor-owned utilities to expand their electricity storage capacity and procure 1,325 MW of electricity and thermal storage by 2020. [Read our article: California’s Energy Storage Mandate-Will Others Follow?]
It is expected that other states will follow California's lead, thereby accelerating market demand and technology innovation for energy storage.
Another more recent and exciting development is SolarCity’s announcement to install lithium-ion batteries, made by Tesla Motors, alongside photovoltaic panels. In our article, Will Tesla’s “Gigafactory” Crack the Energy Storage Market?, we discuss Tesla’s plans to develop its stationary energy storage systems. Business customers sign a 10-year contract with monthly fees, rather than purchase the batteries and solar panels. The batteries are the same used in Telsa's electric cars, but are packaged with power electronics to store solar energy, provide power to a building and connect to the grid. The entire system is remotely monitored by Solar City.
The regulatory environment
The future growth of energy storage systems for commercial buildings is heavily dependent on the local regulatory environment, both from the perspective of the electric utility’s rate structure and government incentives for energy storage systems.
In regions where energy storage is incentivized through utility rebates, time-of-use rates with high differentials, or government mandates, growth is expected to be much higher.
Navigant Research forecasts the market for commercial building energy systems to grow from US$3.9 billion in revenue in 2013 to more than US$7.5 billion in 2022.