US energy storage market set to grow to 7GW in 2025

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The United States energy storage sector saw a strong first quarter, with residential storage setting another record while the non-residential market had its third-strongest quarter on record.

According to Wood Mackenzie and the U.S. Energy Storage Association’s (ESA) latest report, residential deployments hit 44.4 MW, up 10% from final quarter of 2019, as markets such as California and Hawaii remained strong and customers in emerging markets looked to storage for resilience.

Non-residential deployments sat at 31.6 MW, down 25% on Q4 2019 but nevertheless placing in the top three quarters for the segment.

Though California led in non-residential storage, Massachusetts and New York staked a strong claim on the storage map with a few large community solar-plus-storage projects. These accounted for most of the capacity installed in Massachusetts and New York in Q1 2020.

While a total of 97.5 MW was deployed in Q1 2020, a 48% reduction quarter-over-quarter and a 39% drop year-over-year, the decline was primarily due to a slow front-of-the-meter (FTM) segment which dropped 79% in MW terms quarter-over-quarter. However, FTM deployments are expected to bounce back significantly in upcoming quarters as larger, longer-duration systems come online thanks in large part to utility procurements.

The effects of the coronavirus did not hit the US market until late March, therefore the impact in Q1 was muted. However, Q2 2020 has already seen challenges relating to customer acquisition, installation and interconnection.

Kelly Speakes-Backman, CEO of ESA stated that, the first quarter numbers indicated that despite dampening effects of the coronavirus crisis, energy storage would ultimately experience a positive growth trajectory in 2020. That is evidenced by increases in both capacity and deployments of the residential and non-residential sectors.While the ongoing pandemic would more seriously affect Q2, the company anticipates year-over-year growth as states had continued to pass regulations and legislation to encourage energy storage deployments.

Q1 2020 posted a strong quarter for behind-the-meter (BTM) deployments in the US. However, that was the calm before the storm for the BTM market: preliminary conversations with market players in April and May indicated strong impacts from the coronavirus, commented Brett Simon, Wood Mackenzie Senior Analyst.

Utilities have reported as much as a 40% decline in residential storage applications from March to April 2020. Furthermore, the decline in storage deal flow will have reverberations for the non-residential market into next year given the timelines of such projects.

On the bright side, installers and developers report few issues securing product they need, as much of their supply comes from Asian factories that have ramped back up production over the last couple months. Additionally, the pivot to virtual sales, while not seamless, has fared better than initially expected with installers reporting early success in securing deals through this format.

With a ground-breaking final quarter in 2019 and a strong opening to 2020, Wood Mackenzie and ESA forecast the US energy storage market to grow significantly over the next six years. 

Market value will cross the $1 billion annual threshold in 2020 despite the impacts of the coronavirus. By 2025, annual market value is expected to sit at $6.9 billion, with annual deployments hitting nearly 7 GW.

The FTM segment will continue to make up the bulk of the market, driven by massive investment from vertically integrated utilities in regulated markets and developers taking advantage of wholesale market opportunities and incentives in key markets.

The residential segment is expected to continue its upward trend, beating its 2020 numbers six-fold in 2025.

The non-residential space will grow at a slower pace. A significant amount of non-residential upside is tied to community solar-plus-storage, which is concentrated in Massachusetts and New York and driven by those states’ strong incentive programs and access to wholesale markets. However, as these markets are relatively small, even a slight delay or cancellation of a single project could prompt a wild swing in a year’s expected upside.

Key findings from the report:

  • In Q1 2020, residential deployments were up 10% QOQ and sat at 44.4 MW
  • In Q1 2020, FTM storage deployments decreased 79% QOQ (MW terms)
  • In Q1 2020, the non-residential space had its third-strongest quarter ever with 31.6 MW deployed
  • 97.5 MW of energy storage was deployed in the United States in Q1 2020, declining 39% YOY
  • Coronavirus impacts muted in Q1 2020, however heavy market impacts in Q2 2020
  • The US energy storage market is set to grow to 7GW in 2025

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