Local solar installation companies have faced a number of challenges in recent years, from the decline of state net metering policies to the Trump administration's import tariffs. Now, a potentially significant opportunity is coming into focus for them: home battery systems.
2019 was a big year for both residential solar and home storage in the U.S. Power shutoffs in California and demand pull-in from the soon-to-decline federal Investment Tax Credit helped both industries log new records.
Yet while much of the attention on solar-plus-storage has focused on leading national installers — SunPower unveiled its in-house residential storage product in September — conversations with local solar installers across the country show that, heading into 2020, interest in storage is trickling into many more sales conversations. It’s a trend that underscores the growing interconnect between the two sectors.
Rooftop solar remains a vastly larger market than home storage systems. U.S. homes added about 1.9 gigawatts of solar capacity through the first three quarters of 2019, compared to just 98.3 megawatts of storage.
But the storage market is expected to show steadier growth over the coming years. The growth will come from both established solar markets like California as well as newer ones, such as Texas and Florida.
“I bet you we’ll look at 2020 in retrospect a year from now and say, ‘Oh, 2020 was the year we started to see some serious residential storage deployment,’” said Ben Mayer, vice president of residential at Arlington, Massachusetts-based SunBug Solar, of his state market.
The national impact of PG&E's crisis
Much of the new demand can be attributed to circumstances in California, the country’s largest market for both solar and storage, where utility Pacific Gas & Electric’s preemptive power shutoffs last year affected millions of residents.
The impact of those events on the state's solar and storage markets is still mostly measured anecdotally, although California’s home storage market grew 18 percent between Q2 and Q3, according to WoodMac.
Publicity around those shutoffs, however, has floated far afield, impacting markets as distant as Texas and Florida, industry executives say. In newer markets, interest in batteries may mean higher attachment rates, or just more customers asking about the technology, even if it hasn't directly equated to sales yet.
“The fires in California and the blackouts...hit the national news cycle,” said Stephen Irvin, president and CEO at Amicus Solar, a member-owned cooperative of 55 independent, local solar companies installing in all 50 states plus Washington, D.C., Puerto Rico and Canada. “There was an uptick in interest in storage across the country.”
Florida, long a laggard in residential solar, has turned a corner, and ranked second only to California for new installations in the third quarter. But the sales proposition for solar-plus-storage can be trickier, said Daren Goldin, CEO at Goldin Solar, an installer with three offices in Florida.
Though Floridians use a lot of energy, they don’t pay much for it. And due to the high demand for air conditioning, partial backup that supports “critical loads” like refrigerators or lights isn’t sufficient for most customers in the Sunshine State.
“In Florida, the air conditioner is baseline,” Goldin told GTM. Enough storage to support that system is expensive, which is “what makes storage really challenging.”
But Florida is also a region often impacted by hurricanes. Buying batteries brings “peace of mind” that solar on its own can’t provide. Goldin’s company — with business concentrated between Orlando and the Florida Keys — began offering Tesla Powerwalls about six months ago. So far, Goldin Solar has sold close to 300 systems.
“My key selling point, because a lot of people really have generators on their minds after the hurricanes in the last two decades: If you already have solar, then adding batteries to that mix is like buying a generation that is free fuel for life and no maintenance,” said Goldin.
Analysts say concerns about energy resilience are encouraging the pairing of solar panels and home batteries in other Southeastern states as well. In Georgia, Creative Solar CEO and founder Russell Seifert claims storage attachment rates of around 64 percent for his residential customers. While the volume that Seifert’s company has installed so far is low, about 1 megawatt per year, Seifert said a lack of solar-friendly programs in the state pushes consumers to store and self-consume solar energy. Creative Solar also works on projects in the Carolinas and Florida and is moving into Alabama.
Texas is another state where hurricane-related questions could mean an increase in solar-plus-storage installations. Freedom Solar, an Austin-based installer, now sells generators and Powerwalls with a pitch focused on backup power, said Kyle Frazier, director of sales.
Meanwhile, a local solar company in Iowa has seen "huge uptick in demand," said Amicus' Irvin, likely tied to flooding and power outages in the Midwest.
“The economics obviously look a lot better in California and the Northeast,” said Irvin. “That said, there’s still pickup and interest in demand for it, even when the economics aren’t that great.”
Still, the economics of home batteries do deter some interested customers, Irvin said. The average U.S. home solar system costs around $18,000, in a cash sale, and analysts say attaching storage can add more than $8,000. The price tag is still top of mind for many solar installers when it comes to selling storage.
“We usually dissuade customers from getting it,” said Barklie Estes, president of Nova Solar, an installer based in Virginia, a state that saw a notable increase in residential solar installations in the third quarter. Nova Solar itself, which also works in Maryland and D.C., grew 200 percent year-over-year for the last three years, according to Estes.
Storage deployments haven’t matched that expansion. Since Nova’s markets don’t have time-of-use rates or feed-in tariffs, Estes said the value proposition isn’t there for battery systems. For backup concerns, Estes views generators as cheaper and more reliable. That’ll likely remain the case, Estes said, until policies boost the return on investment.
“It’s easier to sell systems when the ROI is higher, and the ROI is higher when the incentives are better,” he said.
For local solar installers, the lift required to incorporate storage sales "is not insubstantial" either, said Michelle Davis, a senior solar analyst at Wood Mackenzie Power & Renewables. Davis said most storage installations require an upgrade to the home's breaker box, meaning a solar company needs to have that electrical expertise plus the ability to highlight storage's complex value proposition.
Virtual power plants and state storage mandates
In more mature solar markets, national installers are increasingly experimenting with virtual power plants and energy services that require residential battery systems. One example of this is the demonstration partnerships between installers such as Sunrun and Tesla and utility National Grid in Massachusetts and New York.
In 2020, changes to the Solar Massachusetts Renewable Target that require solar systems larger than 500 kilowatts be paired with storage could mean 212 megawatts, or 424 megawatt-hours, of storage upside if the proposal gets the final approval, according to WoodMac.
Unlike California, Massachusetts doesn’t offer customers value for rate-shifting. But Mayer at SunBug expects both the SMART Incentive plus a virtual-power-plant-esque model called Connected Solutions, where National Grid and Eversource pay customers to discharge their battery to the grid, will help kick off a more significant market.
“Right now, the adopters are the early adopters. They’re the techies who want a cool backup thing, and they’re really into Tesla,” said Mayer, adding that the market could move beyond those initial customers once new incentives take hold in 2020.
“We’re seeing the market for residential storage start to materialize,” said Mayer.
Eventually, Goldin sees the possibility for a similar format taking root in Florida, with the utility and customers sharing costs for distributed battery deployment that the utility can then leverage for peak demand and resilience uses.
A version of that setup already exists in Vermont, with a pilot utility Green Mountain Power initiated in 2017 to offer customers Tesla Powerwalls for $15 a month over 10 years or a $1,500 one-time charge.
Not all of those Green Mountain Power systems come with solar. But appetite across the country is increasing as more solar sales include storage add-ons.
“The more drastic weather events are driving the interest,” said Irvin. “That’s not just happening in places like California anymore — it’s happening all across the U.S.”