Mercedes-Benz*, SolarMax Technology and sonnen investments in residential storage are a testament to their belief in the market’s future
Last year, U.S. grid-tied residential battery storage system deployments outnumbered new off-grid and grid-independent systems for the first time, according to GTM Research’s U.S. Residential Battery Storage Playbook 2017. By the end of 2017, grid-connected installations were expected to make up 57% of annual residential storage deployments, and a whopping 99% by 2022.
High solar penetration and storage programs make Hawaii and California leading states for storage, but areas with high electricity rates and need for backup power like the Caribbean hold potential for storage too. Maryland is taking a step toward storage with a new tax credit, and Nevada is working on an incentive program for storage as well. Utility programs could also encourage storage in areas like Georgia, Alabama, Utah, New York and Vermont.
Market potential attracts manufacturers
With so much opportunity, manufacturers are entering the storage market to get a piece of the pie. In late 2016, automotive giant Mercedes-Benz announced it was expanding its stationary energy storage business to the U.S. market. Boris von Bormann, CEO of Mercedes-Benz Energy Americas, explained that the company was already heavily investing in EVs, so it made sense to offer residential storage.
“We saw an opportunity for second-life batteries, batteries that are no longer suitable for EVs but can still be used in residential storage,” von Bormann said. “Energy storage prolongs the use of the battery and reduces the economies of batteries because we can use them again, and also reduces the environmental footprint of the battery.”
Mercedes also felt it could offer competitive advantages in storage in terms of its brand reputation and focus on quality.
“There’s a lot of companies entering the energy storage market—a lot of startups or dynamic companies where you’re not 100% sure how long they will be in business,” von Bormann said. “Hopefully a lot of them will make it because there’s going to be a huge opportunity, but you know Mercedes is going to be around to service your system no matter what because we’re a global business that’s been around now for more than 100 years. Testing and requirements for our systems are also very stringent so you know you’re getting that Mercedes-Benz quality. Still, we’re not looking to be the most expensive system in the market. We’re a premium brand, but we like to compete on a cost perspective with supreme quality.”
Mercedes-Benz Energy started with residential storage in Germany before setting its eyes on the U.S. market. It initially focused on California but is seeing opportunities in other areas across the country. However, the move hasn’t been without challenges.
“In Germany you have various utilities, but the main drivers, in terms of rate, are the same and also the regulations in terms of what you can interconnect,” von Bormann said. “One of the key differences in the United States is that markets can be different state to state, county to county or even city to city, depending on the utilities operating in that area. That’s very unique to the U.S. market. That obviously makes it a little more challenging because what happens on one side of the street may not be the same on the other.”
Mercedes is looking for partners to help navigate the market.
So far Mercedes has done a limited release and continues to explore the market and various channels to ensure its technology meets market expectations. While it’s dipping its toes in the water, SolarMax Technology has a whole foot in. The residential and commercial solar installer started in 2008 and has since diversified to offer LEDs, financing and finally its own storage product two years ago.
“Ten years ago when we started doing solar, the first customers we tried to approach were those who bought electric cars,” said David Hsu, SolarMax’s CEO. “And we’re finding many of the people who have solar want to have battery storage units.”
Hsu said SolarMax’s installation experience and California manufacturing location has its competitive advantages.
“We’re one or two steps ahead of other companies in that we have launched the product and have the technology and want to make sure it will be the best, most affordable product in the market.”
SolarMax has done many installations in Southern California but is looking to expand through a dealer network, training contractors to sell and install storage products in other states.
“We purposely designed the product so anyone with an electrician license can install it in a couple of hours,” he said.
But Hsu said SolarMax faces challenges too, mainly educating customers and a making better, higher-quality product while controlling costs.
Why consumers add storage
Mercedes is looking to expand in areas where storage makes sense, which can mean financial or emotional sense to the consumer.
“There’re some early adopters that really want it,” von Bormann said. “For some of them, it may not make 100% economic sense, but there’s a lot of areas people invest money in—such as smart homes or alarm systems—which may not have real, ongoing economic value, but there’s a convenience or security factor. It’s the same with a storage backup system. If the power goes out, it’s that 100% return on investment, and in between you have the peace of mind.”
Hsu finds his customers add storage for similar reasons.
“Many of our customers are well-educated early adopters,” he said. “It’s something they feel like they should have. But there’s a lot of people who say they’re working from home or have medical devices and they worry about black outs hurting their work or their health. Battery storage is perfect for them to make sure those things won’t happen.”
With more than a decade of intelligent energy storage, sonnen has two feet in the water and a more specific breakdown of its target customers. Blake Richetta, sonnen senior vice president and head of U.S. operations, explained that individuals most interested in a sonnenBatterie can be categorized under two personality types:
Prepper Petes are seeking a reliable and clean source of backup power in case of emergency. They typically live in bad weather areas or are connected to a grid that experiences frequent outages. They’re usually more interested in the reliability and peace-of-mind that comes with stored energy and are less drawn to environmental benefits or contributing to a greener Earth.
Sunny Sues are eco-minded earlier adopters of clean technology, simply because it’s the right thing to do. They tend to be affluent and willing to invest in premium products when it concerns a cause in which they’re passionate. Owning a solar+storage system is about using “locally grown energy” and playing an active role in the country’s clean energy future.
Whether Sue or Pete, Richetta said that storage is primarily an emotional decision for many customers.
“Investing in an intelligent storage system isn’t about immediate financial returns; in many cases it is emotional, whether they’re emotional about the environmental future of the earth, the fear of losing power or just being the first adopter in their neighborhood,” he said.
Advice for installers
Beyond personal passion, there are many factors to consider when assessing whether an energy storage system is right for a home.
“Contractors must be able to navigate the regulatory landscape with their clients and identify which, if any, incentives and credits they may be able to take advantage of by installing a storage system.” Richetta said.
Knowing the rules of the jurisdiction of the installation is also important, von Bormann cautioned.
“Storage is a very different animal,” he said. “Before you install, obviously make sure the utility or jurisdiction in which you’re installing is storage-friendly and you know the stipulations around the installation so there’s not a surprise after the fact.”
Contractors should also take time to understand each homeowner’s goals and how storage may benefit them.
“The key to properly designing an energy storage system is understanding the energy usage of the home and knowing the homeowner’s goals when it comes to energy storage,” Richetta said. “Consider if the end-user is just looking for backup power or for daily use to power the home. Initially identifying needs and objectives will help determine what product lifespan, model and size/capacity will be the perfect fit.”
Hsu cautioned against pressuring the customer to add storage.
“We don’t push the customer to get storage,” he said. “It depends on their situation and electricity use, but we offer it as an option.”
Another piece of advice for contractors interested in adding solar services is to get training. Most manufacturers sell through installation partners and require training and certification classes. This is to ensure the contractor has a solid understanding of the technology and use cases for storage, but also to ensure quality from the manufacturing side carries over to installation.
SolarMax and sonnen both offer storage training and Mercedes is launching a training program in 2018.
Outlook for 2018 and beyond
All three manufacturers are confident about the growth of residential storage. For example, von Bormann sees the proliferation of electric transportation, decreasing solar prices and increasing electricity costs really driving the need for storage.
“There’re certain uncertainties that we always have to deal with, but as a midterm and short-term trend I really see the growth in storage,” he said.
“One day, intelligent storage will become standard in every home—just like a water heater or a refrigerator,” Richetta said. “Proof of this concept is already happening with new developments, such as Mandalay Homes’ Jasper Community being built in Prescott Valley, Arizona. These developments offer new homebuyers a chance to purchase homes that are already outfitted with solar plus a sonnenBatterie system at only a slight price increase.”
Hsu said increasing volume and making labor more efficient will help further reduce storage cost.
“Ten years ago, why no one was talking about battery storage is because the battery quality wasn’t there and the cost was too expensive,” he said. “Now, the battery cost is probably only about 20% of what it was. It will continue to get cheaper and cheaper, just like solar. That will make the market wide open. Storage is going to be the new wave in the three, five, 10 years—no questions asked.”
Jim Petersen, president and CEO, PetersenDean Roofing & Solar
About 25% of all PetersenDean’s residential solar sales include a battery element, but president and CEO Jim Petersen said he expects that number to grow another 25% in 2018.
“With advanced digital technology, new storage options and supportive partnerships, I believe the prospects for storage battery technology get brighter every day,” he said.
Petersen said reliability and independence from the utility are the main reasons his customers add storage. His company offers it as an option to every solar customer.
Some of the selling points his team uses are:
- Storage can provide emergency power backup for peace of mind, and when the grid goes down customers will still have power (for essential loads) and their solar systems will continue to work and recharge.
- Self-consumption is a way to protect their investment. Storage allows customers to store excess solar (at full value) and draw from it as soon as their usage exceeds production, avoiding unnecessary fees and taxes that are now added to exported PV power.
- Customers’ electric bills are protected from high time-of-use rates, which gives them flexibility in an ever-changing utility landscape. When the utilities change their rates and TOU timeframes, customers can adjust the battery’s discharge times at the touch of a button.
Petersen said his company likes to offer LG Chem and SolarEdge’s storage solution because it gives customers a choice of using their backup power only when the grid goes down or to help limit future grid use when their solar system is not producing the amount of energy needed to power their home.
“We are indeed at the start of a new generation of energy, and hopefully we will continue down the road,” he said.
*Mercedes Benz exited the residential storage market in April 2018.