Jose Colom, applications engineer manager with SMA America, forecasts the most compelling trends and developments he expects to see in 2024.
As the world continues its transition toward cleaner and more renewable energy sources, the trends in solar storage technology are poised to play a pivotal role in shaping the future of our energy infrastructure. Factors like federal legislation including the Inflation Reduction Act, net metering, government incentives, utility rate increases, and extreme weather are impacting the market in real time.
The Inflation Reduction Act (IRA)
The IRA adds Section 48(a)(3)(A)(ix) to create an investment tax credit for standalone energy storage technology with a minimum capacity of 3 kWh. Energy storage technology includes batteries, but it also applies more broadly to any energy storage technology that receives, stores, and delivers energy for conversion to electricity, or to most technology that thermally stores energy.
The bill specifically addresses the Residential Clean Energy Credit for “qualified battery storage technology expenditure.”
Additionally, the IRA established the 45X MPTC and expanded the 48C ITC to support clean energy manufacturing, which has the potential to increase supply and lower the cost of solar and storage technologies. The 45X MPTC provides tax credits for clean energy components domestically produced, and the 48C ITC offers tax credits to purchase a property to build a manufacturing facility.
State and utility incentives
In 2024, the solar storage market is poised for significant growth, largely driven by state government incentives aimed at fostering renewable energy adoption. These incentives will play a pivotal role in accelerating the transition to a more sustainable energy landscape.
States and utility companies across the United States are expected to continue rolling out a variety of programs, such as tax credits, and rebates making it increasingly attractive for homeowners and businesses to invest in solar storage systems.
As a result, the market can anticipate a surge in demand for energy storage solutions, not only for environmental reasons but also for the financial benefits that these incentives provide. This upswing in demand is expected to foster innovation in the solar storage industry, driving down costs and making renewable energy sources even more accessible to a wider range of consumers.
State level net-metering reforms and utility rate increases
State-level net metering policies can have a significant impact on the solar storage market. Net metering is a billing arrangement that allows solar system owners to receive credit for any excess electricity they generate and feed back into the grid. Policies that incentivize solar adoption offer fair compensation for excess energy. On the flip side, a change and increase in utility rate are significant for storage adoption.
Markets with the highest electricity prices and where utilities offer full retail rate credit for all solar energy exported to the grid see the highest solar PV adoption rates. Conversely, markets with the lowest electricity prices and value for solar export tend to have the lowest solar adoption rates. In some cases, utilities and regulators may respond to the growth of solar and storage by changing policies and rate structures (e.g., net metering reform, time of use, etc.). This can have both positive and negative effects on the solar storage market.
To put it in perspective, increased utility rates and time of use rate structure adoption have an impact on solar plus storage adoption rates. Recently passed net metering policies (e.g., NEM 3.0) may hinder the growth of solar adoption; still, high electricity rates and dynamic electricity pricing are expected to increase the energy storage adoption rate significantly. This is due to the economic advantage energy storage systems provide to solar PV owners who can store excess solar energy rather than export it to the grid at lower rates and then use the stored energy later rather than importing at retail rates.
This trend of higher storage attach rates and stand-alone storage will be even further boosted in markets adopting dynamic, time-of-use electricity pricing rates that incentivize off-peak consumption. These changes can drive greater demand for solar storage, leading to a more competitive market and making solar storage systems more accessible to a broader range of consumers.
Extreme weather events
Extreme weather events are poised to have a profound impact on the solar storage market. As climate change intensifies, the frequency and severity of extreme weather events, such as hurricanes, wildfires, and prolonged heatwaves, are on the rise. These events can disrupt the reliable operation of solar power systems, potentially causing damage to solar panels and related infrastructure.
On the flip side, they also highlight the crucial role of energy storage solutions. Battery storage systems can help mitigate the effects of intermittent solar generation caused by extreme weather by providing a reliable backup power source.
Additionally, the growing demand for resilience and grid stability is driving investments in advanced storage technologies and microgrid solutions, which are essential for ensuring uninterrupted energy supply in the face of extreme weather.
The solar storage market is not only adapting to these challenges but also stands to benefit from the increasing need for reliable energy storage in a changing climate landscape.
Installer education gap
In 2024, installers will address an education gap caused by shifts to energy storage from standalone PV. These installers, who have long been at the forefront of the renewable energy revolution, must adapt to the evolving landscape. To harness the full potential of solar energy, they must acquire the skills and knowledge necessary to sell, design, install, maintain, and optimize energy storage systems effectively.
Installers will need to help customers consider:
- Is my customer eligible for any state, regional, or utility incentive programs?
- Which are the utility rates applicable to a storage system? Can we be competitive?
- Which product offerings should I provide?
- How do I model the financial benefits of solar + storage to my customer?
- How do I properly size the battery for self-consumption, battery backup, or both?
- Is battery backup needed? Which backup option is more attractive?
These forecasted factors working in tandem are expected to foster innovation in the solar storage industry, driving down costs and making renewable energy sources even more accessible to a wider range of consumers. As a result, 2024 holds great promise for the solar storage market.
With the mass adoption of storage systems, utilities and power producers would like to control the systems as one for grid services and to maximize revenue. This practice is known in the industry as the virtual power plant. The end user owns the system, but the utilities and power producers can control the battery assets.
Recently, the industry has seen an increase in third-party platforms that connect different distributed energy resources to the energy markets to earn revenue and help support the grid. Ultimately, the storage system brings value to the customer and the utility companies.
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