Solar Energy Storage: Page 2 of 14

Emerging Technologies, Markets and Applications

In December 2013, SolarCity launched its DemandLogic energy storage system for businesses. How does this system operate, and what is the value proposition for the customer?

SolarCity DemandLogic, developed with advanced battery technology from Tesla Motors, allows businesses to cut energy costs by using stored electricity to reduce peak demand. The solution can also provide backup power to mission-critical systems such as cash registers and select lighting in storefronts during grid outages. DemandLogic storage includes learning software that automates the discharge of stored energy to optimize utility savings for customers.

We currently offer our DemandLogic product in areas of California serviced by Pacific Gas & Electric and Southern California Edison, areas of Massachusetts serviced by NSTAR and areas of Connecticut served by Connecticut Light & Power. We chose these markets due to the high costs of demand charges in those areas.

Why does SolarCity utilize lithium-ion batteries in its utility-interactive solar storage systems? What is the price premium compared to valve-regulated lead-acid (VRLA) batteries?

Lithium-ion battery technology provides many advantages over VRLA. First of all, lithium-ion energy storage systems are typically able to achieve a greater number of charge and discharge cycles during their lifetime. This is particularly important in commercial applications where the battery may be cycled frequently to reduce site demand or provide ancillary services to the grid.

Another consideration when designing storage products, for both residential and commercial markets, is the physical size of the system. For residential customers, a product that can be wall mounted is critical to ease of installation and permitting. Our residential systems are almost all mounted on garage walls. SolarCity gives customers backup power without taking up valuable space. Space constraints are also a concern for commercial customers. The lithium-ion products provide a compact and self-contained solution that can be located indoors or outdoors. Additionally, lithium-ion batteries do not require regular servicing, making them a convenient solution from a customer perspective and much less expensive to maintain.

Although there is a price premium to lithium-ion batteries in the short term, the longer life span and increased cycles, the greater energy density and the limited ongoing costs make them preferable to VRLA for both commercial and residential applications.

What policy shifts or utility cost-structure changes will significantly impact the projected growth of storage systems in the US?

Because we are in the nascent stages of the market, incentives like the Self-Generation Incentive Program in California are critically important to drive scale, which will in turn bring costs down. However, the biggest policy changes that will drive the market for energy storage are the reduction of regulatory barriers to building and interconnecting energy storage systems. This includes streamlining the interconnection process, reducing undue technical burdens on system designs—which do not exist for PV alone or for any other generating technology—and reducing the excess fees and charges that many utilities are attempting to apply to projects that involve energy storage. Once these barriers are reduced, opening up ancillary service markets to aggregated storage capacity is critical to enable storage to offer its full value to the grid and to end customers.

How will financing mechanisms such as leases and PPAs impact the deployment of solar storage?

Financing storage systems is crucial to widespread deployment. SolarCity pioneered the solar lease, and we rolled out our DemandLogic commercial storage system with a similar leasing structure. The lease simply makes it possible for more customers to adopt solar, and now storage, without the hefty up-front costs of purchasing a system outright.

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