Examining the Costs and Benefits of Residential Solar Plus Storage

NREL analyzes the costs, benefits, and obstacles related to residential solar with behind-the-meter storage.

The National Renewable Energy Laboratory (NREL) just released a study that provides a detailed analysis of the costs associated with residential photovoltaic (PV) systems with behind-the-meter energy storage. The report, which also highlights the most significant barriers to widespread adoption of solar plus storage, contributes valuable data to manufacturers, designers, installers, consumers, and policy-makers. Here are some of the key points.

Why Solar Plus Storage?

Net-metering laws have minimized the need for on-site storage; rather than paying for expensive batteries, customers can use the grid as a “virtual storage” system. But as rooftop solar grows, net-metering laws are changing, if not disappearing entirely. Furthermore, electricity rate structures are adjusting; many utilities are adopting time-of-use pricing and demand charges. These factors, coupled with the plummeting cost of Li-ion batteries (whose prices dropped 23% from 2010 to 2015), are making behind-the-meter storage a viable addition to PV systems.

Residential Solar + Storage Cost Analysis

NREL researchers analyzed two typical PV systems with behind-the-meter storage designed for residential use. The dollar figures include a standard profit margin for designers/installers, and do not factor in the federal tax credit subsidy. Both systems feature the same size PV array and different size battery banks, depending on the application.

Case 1: Small Battery

The smaller of the two systems consists of a 5.6 kW PV array and a 3 kW / 6 kWh Li-ion battery bank. This is a common size for the average American household. In the northern US, the array can deliver about 30 kWh of energy per day during the summer, covering roughly all of the home’s electricity requirements. In the summer, such a system would still be sending electricity to the grid via a net-metering agreement and purchasing electricity from the grid at night. This is because the storage system isn’t large enough for off-grid applications – it’s designed to improve self-consumption (using most of the locally generated electricity at the location itself) and assist with peak shaving and demand response. The battery can also serve as emergency backup power during a grid failure, but it’s only sized to deliver enough for critical loads.

The PV plus small battery system costs about $30k installed; roughly half of that is due to the storage system. (Again, this is without federal subsidies.) Here’s a breakdown of the price:

Case 2: Large Battery

Customers with deeper pockets may prefer a PV array with a larger storage system – one big enough to cover all of the home’s electricity needs. For this, NREL spec’d out a 5.6 kW PV array with a 5 kW / 20 kWh Li-ion battery bank. Given that the average home uses about 30 kWh of electricity each day, on a sunny summer day this system would provide all of a customer’s electricity. In the event of a power failure, the battery could power critical loads for several days. The beefier system comes at a premium, though: about $45k installed, two-thirds of which is attributed to the batteries and associated hardware. Here are the details of that price:

Barriers to Widespread Adoption

Although costs are steadily decreasing, there are still factors that make solar/storage less attractive. The lack of industry-wide codes and standards increases the time and cost of permitting, interconnection, and inspection. This is exacerbated by some Authorities Having Jurisdiction (AHJ) exhibiting a lack of knowledge about renewable energy systems. (Perhaps the authorities should see if their local community college offers courses on renewable energy.)

Net-metering rules vary from state to state, with some states requiring two separate agreements for PV and storage, even when the two are installed together.

Finally, utilities themselves haven’t grasped the benefits of residential solar plus storage. Distributed generation (DG) and self-consumption of energy, such as rooftop solar and storage, can reduce grid demand, which delays the cost of increasing the electrical infrastructure and decreases the likelihood of brownouts and blackouts. DG also supports the grid by providing voltage and frequency regulation.

What Does It Mean for the Future?

The good news is that the cost of hardware continues to drop. Li-ion batteries are becoming ubiquitous, not only for residential storage but also for grid-level storage and electric vehicles. As utilities abandon net-metering, behind-the-meter storage begins to make financial sense to the consumer.

The price of photovoltaic panels also continues to decline. In 2010 a PV panel cost roughly $2 per watt; today it’s less than $0.50/watt. Utility-scale solar is on the upswing, which will lower the price of panels even further.

On the other hand, I’m less than optimistic about streamlining the permitting/inspection process. It seems that local jurisdictions will continue to enforce their own rules, partly due to a lack of industry-wide standards. On the flip side, I don’t see industries adopting universal standards in the absence of consistent regulations. Joseph Heller is laughing from his grave…

You can read the entire 41-page report here.

Images courtesy of NREL


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