Residential Solar-Plus-Storage Systems

While interactive PV system designs are relatively straightforward for most homes, residential solar-plus-storage designs are inherently more challenging. Contractors need to educate customers and understand their project goals, navigate additional design considerations and make informed technology decisions—and all of this must take place in an evolving regulatory environment.

Here I provide residential solar contractors with some guidelines and best practices for designing solar-plus-storage systems that meet or exceed customers’ expectations. Though I focus on residential applications, much of the information also applies to commercial projects.

Define Customer Goals

As for any PV system, contractors need to design solar-plus-storage systems with their customers’ goals in mind. While this point may seem obvious, it is too often overlooked in energy storage applications, whose functional versatility is a potential trap for designers.

Residential energy storage systems can provide secure backup power, allow time-of-use bill management or increased PV self-consumption, or even moderate residential demand charges. However, no one battery or battery-based inverter is the ideal tool for every application. To select the best energy storage components, technologies and system architectures, designers must identify and focus on their customers’ project goals as early as possible.

Some customers want to add batteries to improve service reliability. They may have experienced a prolonged grid outage in the past, have loads that require secure power, or simply wish to avoid the inconvenience of an outage, even in circumstances where service interruptions rarely occur. When backup power is the primary goal, contractors are designing for peace of mind rather than ROI. While these customers may only realize the value of their energy storage investment on rare occasions, they may be willing to oversize a solar-plus-storage system so they can back up critical loads for a period of days.

More commonly, customers are interested in a solar-plus-storage system as an investment strategy. In these scenarios, service providers need to determine whether customers are looking to maximize the internal rate of return (IRR) or avoided utility costs. These are two very different goals with meaningful design implications. In a time-of-use bill management scenario, for example, large-capacity batteries tend to maximize revenue available from energy arbitrage while diminishing the IRR, because the equipment costs are high. By comparison, smaller-capacity batteries tend to maximize the IRR, because the equipment costs are low, but offer relatively modest utility savings since they cannot shift much energy in time.

Understand the Market

Many customers want to have their cake and eat it too—they want a solar-plus-storage system that provides energy security while generating a positive ROI. Though residential energy storage markets in the US are expanding, the market needs to provide the right combination of policies, incentives and rate structures to allow customers to save money while improving service reliability.

Service providers play an important role in determining project feasibility and setting customer expectations. This requires an understanding of utility incentives, rate structures and interconnection requirements; operating cost obligations; risks associated with potential utility policy changes; and any factors that impact a payback analysis, such as cash flows or future cost savings. Understanding fluctuating market conditions is as complicated as it sounds. However, it is essential to determine final up-front costs and ongoing costs over time.

Anyone who has worked in solar sales knows that many customers who start off interested in PV systems with backup power capabilities ultimately decide to go with a simpler interactive system after considering the costs and financial returns. However, the opposite is true in some states with high levels of solar penetration. In Hawaii and California, for example, some prospective customers become interested in energy storage when they learn it can actually improve PV system economics due to changes in utility rate structures or interconnection policies.

Customers in California, for example, may have access to a Self-Generation Incentive Program (SGIP) for residential energy storage, depending on their utility provider and SGIP reservations. Net Metering 2.0 also requires that solar customers switch to a time-of-use (TOU) rate schedule. Even in situations where incentive program funds are unavailable, this structure may tilt the balance in favor of adding energy storage to an interactive solar system so that it can shift solar production in time to offset energy use during peak pricing periods. Since rate structures vary by utility, solar providers working across multiple service territories also need to adapt project designs to optimize system performance based on each utility’s rates and interconnection standards.

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