Back in April 2015, Rocky Mountain Institute and partners including Global X and HOMER Energy published a study, The Economics of Load Defection, that examined how grid-connected solar-plus-battery systems will compete with traditional electric service.
The findings showed that declining costs for such systems, combined with retail price hikes for grid electricity, would make grid-connected solar-plus-battery systems economically optimal for customers in many parts of the country by 2030. Furthermore, solar-plus-battery systems can offer other important benefits to customers, such as backup power for critical loads in the event of a grid outage and cost savings via peak-demand shaving and time-of-use shifting. However, at the time, RMI’s study did not detail the exact nature of energy storage costs.
Figuring out how to compare apples to apples
To break down the installed costs of PV-plus-storage systems today, RMI and NREL first analyzed data across a variety of existing studies from sources including Lazard and GTM, in addition to our own experience in the RMI Innovation Center.
One challenge to analyzing component costs and system prices for PV-plus-storage installations is choosing an appropriate metric. Unlike standalone PV, energy storage lacks a standard set of widely accepted benchmarking metrics, such as dollars-per-watt of installed capacity or levelized cost of energy. Energy storage costs can vary both by the total energy capacity of the system — expressed in $/kilowatt-hour (kWh) — and the rate at which it charges or discharges — expressed in $/kilowatt (kW).
Some consumers may prefer to optimize their system for longer-duration discharge, while others may have high peak demand and want to optimize their storage solution for power (kW) rather than energy capacity (kWh). Given the diversity of household preferences and load profiles, using a single metric can artificially distort reported costs, making it difficult to compare across varying systems. Therefore, we used the total installed price as our primary metric, rather than using a metric normalized to system size.
To analyze component costs and system prices for PV-plus-storage installed in the first quarter of 2016, we adapted NREL’s component- and system-level bottom-up cost-modeling approach for standalone PV. Our methodology includes accounting for all component and project-development costs incurred when installing residential systems, and it models the cash purchase price for such systems, excluding the federal Investment Tax Credit (ITC).
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