Without Tesla's batteries, the power grid could fail

Backflow from distributed power systems is challenging an antiquated power grid

An inverter on a free-standing solar plant

As the number of solar panels on business and home rooftops multiply, America's power grid is bearing an electrical load that it was never designed to handle: bidirectional power transfer.

"There's no grid system in the world designed for that," said Anise Dehamna, principal research analyst at Navigant Research. "Every grid has been designed for unidirectional flow of energy -- from transmission to distribution to the end user."

With bidirectional power transfer, the utility still sends power to the customer, but with solar panels, the customer can then send excess power back to the utility.

Because power grids evolved organically in a bottom-up manner, as opposed to a centrally coordinated master plan, they were not designed to take on bidirectional power loads. America's utilities are now facing a costly region-by-region infrastructure upgrade as new energy technology, such as smart meters, emerges. Battery storage offers some relief as it can reduce peak load demand on the grid while improving overall system efficiency, according to Dehamna.

The Edison Electric Institute estimated in 2008 that by 2030 the U.S. electric utility industry would need to make a total infrastructure investment of $1.5 trillion to $2 trillion, of which electrical transmission and distribution are expected to account for about $900 billion.

Lithium-ion battery systems, which have become the de facto standard for homes and utilities, like the ones Tesla is planning to announce this week, will enable electricity generated through renewable power, such as wind and solar, to be stored on site.

Lithium-ion battery growth Navigant Research

The growth of energy storage will be lead by lithium-ion battery technology, which has become the de facto standard.

The power stored in battery systems can be used during peak load hours during the business day in order to reduce draw on the grid. Battery capacity can also be used when power isn't being generated by renewable systems, such as at night and during inclement weather. That also reduces grid demand.

Regions are already suffering from backflow issues

Emerging technologies on the power distribution grid, which include digital “smart” meters, distributed energy resources such as solar power, and greater overall customer engagement, present both technical and policy challenges.

Utilities in regions where solar and wind has grown faster than others are already grappling with the consequences of "backflow," or electricity that's sold back to grid utilities from distributed renewable power generation systems.

The first-ever "Quadrennial Energy Review" report released last week by the White House called for "significant change" to America's aging energy infrastructure, including long overdue upgrades to the U.S. electrical grid to keep up with changing energy needs.

In 2014, renewable energy sources accounted for half of new installed electric-generation capacity, and natural gas units made up most of the remainder. Coal and petroleum consumption was flat. Electricity generation from wind grew 3.3-fold between 2008 and 2014, and electricity generation from solar energy grew more than 20-fold.

In Hawaii, for example, 12% of homes have photovoltaic, or solar, panels -- by far the greatest number for any U.S. state. Residents are dumping so much extra electricity onto the grid that it's struggling to handle the increased capacity. The Hawaiian Electric Company said backflow can destabilize the system.

Germany, where residential customers consume distributed renewable energy 80% of the time and use grid power 20% of the time, is also struggling with backflow issues on an antiquated utility grid.

Solar states Solar Energy Industry Association

Top 10 states that deployed new solar capacity in 2014.

The U.S. installed 6,201 megawatts (MW) of solar photovoltaics (PV) in 2014 and 767MW of concentrated solar power to reach 20 gigawatts (GW) of total installed capacity, enough to power 4 million American homes. Thirty-two percent of new electric generating capacity came from solar in 2014, and the industry now employs nearly 175,000 workers, according to the National Solar Jobs Census 2014.

Energy demand on the grid could drop by more than 15% due to new energy technologies by 2025, according to a report from Accenture.

Tesla has already been piloting its consumer batteries in 330 homes, mainly in California. The batteries, which were displayed at a conference last year, hold 10 kilowatt hours (kWh) of electricity. Tesla also showed a 400kWh battery for businesses. The average U.S. household uses about 900kWh of electricity per month, according to the U.S. Energy Information Administration.

Tesla's home batteries, which are 2.5-feet wide and 3 feet tall, have a starting retail price of $13,000. However, state energy efficiency rebates can cut that cost in half.

solarcity tesla energy storage edit edited 2 100580756 primary.idge Tesla

Tesla's battery system, which consists of the battery unit on the left, and next to it an inverter and appliance to monitor and manage power.

Tesla's advantage in offering batteries for renewable power storage

Tesla is in a unique position to offer battery technology for homes and businesses because its CEO, Elon Musk, is also chairman of SolarCity, the largest provider of residential solar systems in the U.S. SolarCity can offer a bundled package of photovoltaic and battery systems. And, Tesla already has systems to regulate power output in its cars, a critical function in distributed power storage systems.

SolarCity already has experience offering financing options to customers, including helping them find government subsidies and setting up lease contracts, since Tesla's residential battery systems prices are expected to be steep, at least initially.

The average cost of consumer-grade battery systems ranges from $13,000 to $20,000, according to Dehamna.

SolarCity has a partnership with Panasonic to produce its lithium-ion batteries and it just entered into a partnership with Nest labs, maker of the Nest Learning Thermostat, which regulates power based on homeowner or business use patterns.

The first 10,000 new customers in California who sign up with SolarCity will receive a Nest Thermostat installed at no additional cost.

Tesla has also been targeting the commercial sector, signing up customers such as Wal-Mart and Cargill, for its battery power systems.

energy storage management graphic 03 GTM Research

Tesla and others hoping to corner a $1.3B energy storage market won't just be selling batteries. Energy storage systems consist of gateway appliances, power inverters, as well as monitoring and managment software.

Tesla is far from being the only company entering the energy storage market. Last year, SolarEdge Technologies and Enphase both announced plans to bring a lithium-ion home battery to their solar power management systems.

GTM Research estimates that the U.S. market for energy storage management systems will grow tenfold through 2019, creating a significant opportunity for players in the space.

By 2019, the renewable energy market will be worth $1.5 billion, about 11 times as much as in 2014, according to a March report from GTM Research.

Market research firm Technavio, released a report this week stating that the thermal energy storage market is expected to grow 18.7% every year over the next four years. By 2019, it expects the energy storage market, lead by the U.S. and Spain, to reach $1.3 billion.

Enphase's lithium-ion battery, which will be produced by Japanese-based ELIIY Power, is expected to be available in the second half of this year. The batteries will be roughly one cubic foot in size and offer 1.2 kilowatts hours of power (kWh). In contrast, reports peg Tesla's consumer-grade batteries at 10kWh of capacity with up to 200kWh for utility-grade models.

enphase battery Enphase

Enphase's 1.2 kWH batteries will go on sale in the second half of this year.

Enphase has made its bones in the solar power market by selling microinverters. The company has shipped 7.2 million microconverters that are installed alongside photovoltaic systems. Microconverters, like inverters, are used to change direct current (DC) from solar panels to safer alternating current (AC) used by household and business systems.

And, while the focus lately has been on the battery technology, power management is as key to any distributed renewable energy system as anything else, according to Greg Wolfson, senior director of Enphase's storage product line.

As power is produced by rooftop solar panels, it must be balanced with power coming in from the utility grid. Along with a battery and an inverter, battery systems will include hardware appliances running sophisticated power monitoring and management software.

"It's a system approach," Wolfson said. Enphase plans to sell its batteries as part of a modular system that can expand as needs grow. For example, a home could start with one battery, and expand to two, three, even five batteries over time.

"As a home add more photovoltaics, utility rates increase or the homeowner adds a hot tub, they can increase the number of batteries," Wolfson said.

Copyright © 2015 IDG Communications, Inc.

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