Navigant: Commercial and Industrial Energy Storage Market to Hit $10.8B in 2025

The commercial and industrial (C&I) energy storage market in the United States, led by California, is growing, according to Navigant Research.

The firm predicts that the sector will grow from $968.4 million this year to $10.8 billion in 2025. Capacity will expand from 499.4 MW this year to 9.1 GW by the end of the study period.

The market will change as it grows, according to the executive summary of the report, which was released last week:

North America is expected to be the largest regional market in 2016, with an estimated 306.9 MW of new installations. However, it is anticipated that Asia Pacific will take over as the largest world market around 2021. Asia Pacific is also expected to be the fastest growing regional market, with annual deployments forecast to increase from 93.7 MW in 2016 to 3,700.9 MW by 2025, representing a compound annual growth rate (CAGR) of 50.5%.

Alex Eller, a Research Analyst at Navigant Research and author of the report, said that California is out in front because of the method used to compute charges. California uses peak demand charging. This approach combines a rate based on consumption with a charge determined by the amount of energy used during the busiest time (often, the peak 15 minute interval of the month). This leads to high costs. End users thus are incorporating storage as a strategy to keep lower the high consumption points.

This form of rate structuring – along with subsidies and rebates aimed at promoting storage – makes California the leading state for C&I storage. “Most of the systems in use today are being used to reduce peak demand and keep charges below a certain level,” Eller said.

Commercial and Industrial Energy Storage Growth, 2016-2025. Source: Navigant Research

Eller said that both customers and utilities are driving the growth of C&I storage. Customers see it as a way to cut costs and utilities to reduce demand on their networks, which can groan under the load during extreme use periods. Indeed, storage can delay or even eliminate the need for utility expansion. The key is the ratepayers, however. "For the most part this is taking place outside of the utilities," Eller said. "Customers see the opportunity and as it is becoming more economical now that battery prices have come down so much.”

Another driver of C&I is a model that the ecosystem has made projects very enticing to end users. “Several companies now offer 'no money down' plans,” Eller said. “Companies own and install the equipment and save the customer as much as they can. They operate and maintain the equipment. The customer and provider split the savings. There is basically no risk, no upfront investment on the part of the building owners.”

California leads, but is not the only area in which C&I storage is growing. Eller says California represents about two-thirds of the North American market. New York is becoming active and the rest of the northeastern states are considered good prospects. Hawaii also is a growth area. The island has high energy costs and plenty of solar capacity. Until recently, net metering rules enabled building owners to get the retail rate on energy returned to the grid. That program is over, but the many solar panels that were installed remained. Now, Eller said, is more economical for that energy to be stored than it is to sent back to the grid. This will drive the business on the islands, he said.

A category is especially primed to grow if there is a strong second rationale for organizations to sign on. In the case of C&I storage, there is: Resiliency in case of significant grid outages. For now, this is far off as the most practical form of energy storage now is to inject electrons to even out the voltage and to prevent a momentary lapse of power.

However, having energy stored on sight can save the day if there is a grid failure. This is a top of mind item for many energy managers in the wake of Superstorm Sandy and other serious weather events of the past few years. “Probably one of the biggest things to think about is the impact of losing power,” Eller said. “That can be a huge driver even if the economics does not line up in terms of saving money on bill. There a lot of systems going in just to get that backup power.”