When cost-effective is not enough: Creative financing needed to bolster small-scale grid storage
By Brian Warshay
According to Lux Research's recent report "Grid Storage Under the Microscope: Using Local Knowledge to Forecast Global Demand," grid storage for commercial and residential applications will be cost-effective for 22% and 19%, respectively, of the global market by 2017.
Grid storage projects are evaluated based upon their internal rate of return (IRR) and their levelized cost of electricity (LCOE). These metrics provide investors with a way to compare a grid storage investment to that of an alternative, such as a rooftop photovoltaic array or an energy management system. However, cost-effectiveness does not guarantee competitiveness.
Grid storage projects, especially in regions without subsidies or other regulatory incentives, carry high capital costs that are slowly recuperated over the lifetime of the project. Commercial and residential customers have relatively short tolerances for their expected return on investment.