Finally, a new study in Nature Climate Change documented that there has been a steep decline in the cost of lithium ion batteries for electric vehicles like Teslas – 14 percent per year plunge since 2007.
All of which is being hailed as pretty revolutionary. “Solar-plus-batteries is set to begin a dramatic transformation of human civilization,” wrote Bloomberg commentator Noah Smith recently, commenting not only on the declining price of batteries for electric vehicles, but also the potential for more batteries in homes.
But there’s a need for caution. People with home battery systems paired with solar panels certainly exist, but are quite rare for the moment. One problem is that right now, there just aren’t many ways to make a home energy storage system investment pay off.
So why do some analysts nonetheless think that solar plus battery systems could become quite prevalent in homes, and maybe sooner than we think? Here are some reasons:
- Cost declines for solar are already a done deal. Batteries could be analogous.
The first reason is that rooftop solar has pretty much already arrived. The Solar Energy Industries Association found that rooftop solar grew by over 50 percent in each of the last three years (2012, 2013, and 2014), and a new report from Bloomberg New Energy Finance forecasts record growth for the market in 2015.
In-home batteries are definitely a lot further off for most people, but many analogies have been noted. The recent Energy Policy paper observes, for instance, that “it is anticipated that battery technology may follow the rapid downward price trajectory of PV [solar photovoltaic] as manufacturing scale increases.”
“Storage is kind of 10 years from where PV is today,” says Bodhi Rader of the Rocky Mountain Institute. “It’s along that same trend, and there’s constant innovations being made, but there’s still a bit of a battleground over what might be the technology or the chemistry that wins out.”
- The utility industry is taking this seriously.
The Rocky Mountain Institute report makes the case that the home solar plus battery combo, when it arrives, may challenge the traditional business model of many utilities. And is worth noting that voices from the industry itself have shown some concern.
In 2013, for instance, the Edison Electric Institute, the utility industry trade group, published a report on “disruptive challenges” to the industry, which noted:
…one can imagine a day when battery storage technology or micro turbines could allow customers to be electric grid independent. To put this into perspective, who would have believed 10 years ago that traditional wire line telephone customers could economically “cut the cord?”
Or listen to David Crane, the CEO of energy behemoth NRG, who says his company is headed “down the path towards a distributed generation-centric, clean energy future featuring individual choice and the empowerment of the American energy consumer.”
- Tesla as the potential game changer.
Perhaps the biggest driver of battery enthusiasm, though, is the company that already sells sleek battery-powered electric vehicles – Tesla.
Not only has Tesla seen the cost of vehicle batteries decline, per the Nature Climate Change study cited above. That could be just the beginning, once the company, teaming up with Panasonic, opens its battery-building “Gigafactory” in Nevada.
The company says this will further drive down battery costs – and thus, electric vehicle costs. And this could then spill over to home batteries as well. “Consumer electronics and EV, they’re the two industries that have been making storage economical,” said Bodhi Rader, “and continued consumer adoption in these related industries is going to continue to drive cost reductions.”
There is also a sense in which Teslas represent a kind of proof of principle for in home batteries. “It’s actually a lot easier to put it in a house than in a car. In a stationary application, weight doesn’t really matter that much,” said Peter Lilienthal of Homer Energy, which co-authored the Rocky Mountain Institute report.
Finally, there’s much talk about Tesla’s plans to introduce a home battery unit. If there’s anything like the amount of attention to such a product as there is currently to Tesla’s vehicles, then that adds another major, if somewhat more intangible factor – coolness.
The Rocky Mountain Institute’s Rader notes that in this case, people might be willing to pay quite a lot of money for home batteries, even before prices come down to levels where it would be “economically rational” to do so, in light of the expected return they would get on their investment (in the form of lower electricity bills).
“If companies can start presenting that coolness factor,” he said, “that I think would change the conversation completely.”
Such, then, is the optimistic case.
Lest we get too far out on skis, though, let us once again note that there are still many concerns and uncertainties. First, there are plenty of Tesla skeptics out there, including one commentator at the Energy Collective who noted,
Selling batteries to homeowners is not going to be easy. There’s a good reason why so few of us have large battery banks in our homes, and it’s not because there aren’t any for sale. Batteries are expensive, and the advantages they offer homeowners are few. The majority of homeowners with PV panels get most of the benefits of batteries by hooking up their panels to the grid at little or no cost. For homeowners without solar panels, the grid in most locations is sufficiently reliable that there’s little to gain from having battery backup. If Musk is going to sell those customers batteries, he’s going to have to sell them much more cheaply than current prices, and it’s not clear that a 30 percent cost reduction is going to be enough.
And besides technological pessimism about batteries themselves — or about whether their costs will come down enough to make them a viable option for most homeowners — one key question involves what a profusion of batteries does to the electrical grid.
The Rocky Mountain Institute report notes that widespread adoption of solar plus battery systems in homes could be a blow to grid upkeep. The reason is that we need a huge amount of investment in the grid, and customers whose electricity loads “defect” won’t be paying as much for electricity, and so won’t be contributing as much to the cost of these infrastructure improvements.
Basically, if utilities make less money because customers pay them less, then utilities may invest less. And a grid that’s less modernized could be less reliable.
But there’s also an argument that this trend could help with strengthening the grid. First, in addition to going into homes, much larger batteries could help back up the grid itself. James Mandel, of the Rocky Mountain Institute, noted that batteries could “do a lot of balancing and grid management services more cheaply.”
Moreover, added Homer Energy’s Lilienthal, solar plus battery homeowners might actually be able to help the grid in a crisis by temporarily ceasing to draw power from it. After all, at a time of power outage, they’d presumably still have charged home batteries. “When the grid can’t handle the demand, they could drop off,” said Lilienthal.
He added, though, that this might require putting these homeowners on what he calls an “interruptable rate,” meaning they’d be charged less for power from the grid but with the understanding that their service might stop at certain key times.
In summary, it is a heady time for battery forecasters, and there are a lot of trends that are getting people excited. But we can only know one thing for certain about the future — that it probably won’t look like anybody’s present day forecast.